"itulipians": contrarians or herd followers

[jk]

Re: "itulipians": contrarians or herd followers

I believe, as of today, it is possible the 30 year T-bond has outperformed the S and P since 1980. (All in with interest reinvested, etc.) Of course, risk- adjusted return is even better. Can any of you "quants" confirm this or set me straight if I am wrong?

i think you're right, but the question i was addressing was "what were people thinking when they didn't buy tbonds paying 15%?" what i wrote was what i, at least, was thinking, as i went into equities with leverage in late '82.

[allenjs]

Re: "itulipians": contrarians or herd followers

It may be more important in what Jurisdiction you hold your assets than what assets you hold. The United States is now proven to have committed War Crimes and there may be many other Crimes not yet revealed. And, from NYAG Cuomo at least, we have proof of Wall Street Crimes. So, what assets can be really protected from a Criminal Regime?

Thus, one might consider a change of Jurisdiction or at least making provision to do so. If this option is unavailable, one should try to have assets which it is the most difficult for this Regime and other Criminal Regimes to seize. And since, G8 and G20 countries seem to be aboard for the Reflation, the seizure of assets may occur on an International level, that is, No Place To Run, No Place To Hide.

You might want to read Victor Klemperer:
http://en.wikipedia.org/wiki/Victor_Klemperer

May you live in interesting times.

Thanks for this. I think that this scenario is more plausible than most people think. It's tragically ironic that so many Chinese people spent the last 20 years getting green cards and funneling money into American banks to protect it from any possible "confiscation" by Chinese central government -- and now the risk is of the Americans confiscating money. You may recall that something similar happened in Canada right after Hong Kong transferred to mainland control. Chinese had put billions of dollars in Canadian banks, and the Canadian government invented a bunch of new taxes to take a cut of it.

However, I don't think it is any safer to park money in RMB. I think you are correct about "nowhere to hide".

Finally, the odds are that the primary theft will be via inflation, which makes inflation-protected treasuries seem attractive (for amounts that you won't need for awhile). Supposing that all we are facing is sustained high inflation, is there anything safer?

If the social structure breaks down to the point that we have outright seizing of assets as we saw in Russia, I don't think money is going to matter as much anyway. Again, I think the scenario is more plausible than people assume, but my point is that all the rules are changed at that time anyway, and the last thing you're going to be worried about is the retirement account balance. 5-10% of assets in PM would be useful in a total social breakdown, but other non-monetary things are going to become far more important proportionally.

[jtabeb]

Re: "itulipians": contrarians or herd followers

But isn't everybody adding precious medals, oil, and other commodities to their portfolios? .

Ask yourself ONE QUESTION. How many people do you personally know that have ANY physical bullion for investment purposes? Bet you can't raise one finger can you?

Does it seem so mainstream in that context?

(And to answer your mainpoint, YES GO AND GET SOME PHYSICAL BULLION ALLREADY!!!)

EJ's take is it's fire insurance (he recommends a 30% allocation). DUDE, right now, you got ZERO insurance coverage, Capice? (e.g. you're the uninsured motorist, better not get in ANY accident. It won't matter if it's your fault or not, you are still going to be screwed)

Make sense?

[allenjs]

Re: "itulipians": contrarians or herd followers

if interest rates rise along the whole curve, every bond in your ladder will lose principle value. because they are in a mutual fund, you do not have the option of holding to maturity- they are always rolled over. you will still collect the interest, but the bonds themselves can certainly lose value.

Yeah, over the short term, NAV could go down, and I guess that is a virtual certainty, since it's not as if interest rates can go lower. But my understanding is that the "duration" where you are guaranteed to not lose principal is always less than the maturity. What's your take on this explanation from Bogleheads forum?

http://www.bogleheads.org/wiki/index...vs_a_Bond_Fund

It's useful to focus on the duration of your bond fund, such as the Vanguard TIPS Fund, which currently has a duration of 5.8 years. William Bernstein provides an insightful definition of duration as the "point of indifference" for the owner of a bond fund in dealing with interest rate changes. If interest rates rise after purchasing a bond fund, the NAV of the fund falls, which hurts the investor. However, the dividends that the bond fund throws off can now be reinvested at a higher rate. The duration is the length of time that an investor needs to hold the fund for the increased yields to compensate for the decrease in NAV. In that sense, the duration represents the length of time it could take, in the worst case, to break even on a bond fund. So, you should always hold bond funds with a duration shorter than the expected need for your money.

He's pointing to:

http://www.efficientfrontier.com/ef/999/duration.htm

Where the claim is made that:

Now consider a holder of a 30-year 5% treasury bond. If soon after purchase at par we see the same rise in yield to 10%, our hapless investor has received a financial kick in the solar plexus—the bond is now worth less than 53 cents on the dollar. (And, in fact, this is precisely what happened to bondholders between 1967 and 1979.) . However, a bond is a very different beast, as it throws off coupons that can be reinvested at the higher yield. Because of this the recovery from disaster takes considerably less than 30 years. In fact, it only takes our hapless bondholder 10.96 years to break even. This 10.96 year period is known in financial circles as the duration of the security, and for a coupon-bearing bond is always less than the maturity, sometimes considerably so. (For a zero-coupon bond, maturity and duration are the same.)

I am definitely NOT an expert on this stuff, though. I cannot figure out a way that money put in VIPSX (for example; or a TIPS bond fund in general) would not be preserved, with inflation adjustment, over a period of 5-6 years.

[touhy]

Re: "itulipians": contrarians or herd followers

Ask yourself ONE QUESTION. How many people do you personally know that have ANY physical bullion for investment purposes? Bet you can't raise one finger can you?

Does it seem so mainstream in that context?

(And to answer your mainpoint, YES GO AND GET SOME PHYSICAL BULLION ALLREADY!!!)

EJ's take is it's fire insurance (he recommends a 30% allocation). DUDE, right now, you got ZERO insurance coverage, Capice? (e.g. you're the uninsured motorist, better not get in ANY accident. It won't matter if it's your fault or not, you are still going to be screwed)

Make sense?

Yes it does.
T

[mcgurme]

Re: "itulipians": contrarians or herd followers

Anyone that want to be "cool", and not a herd follower should read this article, then buy an electric bike kit, you get them off ebay, buy a 30 A, 48V battery of the kind in the article, with a 1000 W motor kit. That's the most "cool" toy I have looked into lately. Just plug into your bike, and move around like a zombie.

It's just blows me away, the idea of just cruising around in a regular bike at 35 MPH, for around 40 miles.

http://www.metaefficient.com/recharg...-vehicles.html

As someone who is in the business of electric bikes (they are very cool), my one caution is you get what you pay for. Buying a supposedly 1000W kit on ebay might get you something, or it might not. There is no standard for "wattage" ratings on these. The battery business is even worse. Lifepo4 is great - but there are lots of vendors who make wild claims that aren't matched by reality. And there are few people who can repair them if something goes wrong outside of warranty (if there is a warranty). We have repaired multiple motors and batteries that came from other vendors who didn't back them up after sale. It's the Wild West.

YMMV, but I suggest buying from a reputable seller, even if it is one of my competitors, rather than an ebay seller.

Here is a list of some sellers I know who are reputable (one of which is my store but I won't tell which one, to avoid biasing the decision).

http://ebikes.ca
http://www.cycle9.com
http://www.acclivity.ca
http://www.e-bikekit.com

[Sharky]

Re: "itulipians": contrarians or herd followers

Now things are different and you should have a single goal: Don't get wiped out; don't be one of the poor bastards "in the line".

I completely agree. My only hesitation with rogermexico's recommendations on the investment side would be with commodities and commodity-related stocks. I do think the time for those investments is coming. In the face of what feels like a heavily juiced rally, I'm just not quite convinced that it's here yet.

I still think it's likely that we'll see at least one more big downturn in stock and commodity prices before they resume their climb. There is still a lot of very bad economic news hiding just out of sight. In fact, if prices get just a little higher, I'll probably end up going short.

[nero3]

Re: "itulipians": contrarians or herd followers

As someone who is in the business of electric bikes (they are very cool), my one caution is you get what you pay for. Buying a supposedly 1000W kit on ebay might get you something, or it might not. There is no standard for "wattage" ratings on these. The battery business is even worse. Lifepo4 is great - but there are lots of vendors who make wild claims that aren't matched by reality. And there are few people who can repair them if something goes wrong outside of warranty (if there is a warranty). We have repaired multiple motors and batteries that came from other vendors who didn't back them up after sale. It's the Wild West.

YMMV, but I suggest buying from a reputable seller, even if it is one of my competitors, rather than an ebay seller.

Here is a list of some sellers I know who are reputable (one of which is my store but I won't tell which one, to avoid biasing the decision).

http://ebikes.ca
http://www.cycle9.com
http://www.acclivity.ca
http://www.e-bikekit.com

Thanks for the links. I have barely glanced at the various options so far. I like to drive up to some mountains, and I ride bike before going to where I start to climb. It would be very fun to have an electrical bike to save energy on that first part. What would be really cool, would be to arrange an expedition using roll out solar panels, and actually just travel using solar energy, and a electrical bike. I don't know how realistic it would be, but it would certainly be a way to get in the spotlight. Travel across the world using only solar energy.

[rjwjr]

Re: "itulipians": contrarians or herd followers

The problem in the states with this type of bike is not the power, its the fact that you take your life into your own hands when you ride a bike on most roads. If the traffic doesn't kill you, the rednecks will throw bottles at you.

Lose the sandles and the white-nosed sunscreen look, sissy boy, and we won't use you for target practice. You better "Man Up" or we'll be coming for your gold WTSHTF.

[rjwjr]

Re: "itulipians": contrarians or herd followers

Finally, the odds are that the primary theft will be via inflation, which makes inflation-protected treasuries seem attractive (for amounts that you won't need for awhile). Supposing that all we are facing is sustained high inflation, is there anything safer?

I wouldn't get all excited about TIPS if I were you. Remember who is setting the inflation rate on which the yield is adjusted...Uncle Sam. Best case scenario...they are behind the curve and slow to adjust/increase the interest. Worst case...they are slow to adjust AND they report CPI (or whatever inflation rate is used) at an unrealistically low level. TIPS may slow the erosion of your wealth, but it ain't likely to stop it.

[rogermexico]

Re: "itulipians": contrarians or herd followers

I completely agree. My only hesitation with rogermexico's recommendations on the investment side would be with commodities and commodity-related stocks. I do think the time for those investments is coming. In the face of what feels like a heavily juiced rally, I'm just not quite convinced that it's here yet.

I still think it's likely that we'll see at least one more big downturn in stock and commodity prices before they resume their climb. There is still a lot of very bad economic news hiding just out of sight. In fact, if prices get just a little higher, I'll probably end up going short.

I guess I should have qualified my "recommendations" more. I was trying to emphasize that the outlook for stock indices was poor on a relative basis, but that some select shares are worth looking at. I totally agree that we may be early in the re-start of the commodities bull (although perhaps less so for oil). My own commodities allocation is much smaller than my PMs and my current stock holdings (although I am "looking") are zero.

I, too have threatened to go short futures again if S&P hits 900 (Uh-Oh, now I have said that at least three times)

I was just trying to give a list of alternatives to the broad market for shares and the bond market.