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The charts are a factual historical record. But even complete and completely accurate knowledge of the past, offers zero insight into the future. It offers no insight into how to trade, or what trends to expect.
the truth is history never repeats itself , only historians do ... economic events never change , we have 4 major ones .
recession
depression
prosperity
high inflation / weak dollar ...
what causes them is just different enough each time as to make whatever caused it last time , different the next time and whatever you did to prepare is likely wrong .
which is why risk parity portfolio's bet on all 4 outcomes .
Have democrats ever looked at the breakdown of who is actually invested in the stock market when they attack publicly traded companies? 33% of the market is retirement funds(401ks, some pensions), another 25% is single stock purchases. That’s 60% of the market. Hurting corporations hurts working class people. I don’t get why more republicans don’t point this out.
the truth is history never repeats itself , only historians do ... economic events never change , we have 4 major ones .
recession
depression
prosperity
high inflation / weak dollar ...
what causes them is just different enough each time as to make whatever caused it last time , different the next time and whatever you did to prepare is likely wrong .
which is why risk parity portfolio's bet on all 4 outcomes .
Your general point is well-taken, but these are tired and tiresome generalizations, rooted and mired in bygone understanding. If history never repeats itself, then how could it be, that economic events never change? Or do economic events somehow stand outside of history?
Depression is all but impossible in the modern world. Recession comes and goes in unavoidable semi-cycles. High inflation is possible, but unlikely. And for a generation, the dollar has been overvalued. Meanwhile there's a new reality, unmentioned by these self-repeating historians: stagnation... a period of moderate or low inflation, but also low growth, where things are balance and humming along OK, but not really enough to constitute prosperity.
What you're enamored of calling "risk parity portfolios" should by your own definition be renamed "volatility parity portfolios". They ensure against catastrophic risk, but catastrophe is unlikely, and the insurance is expensive. Expensive insurance against unlikely events isn't worth buying. What these portfolios really do is tamp down on volatility, which is important if you’re in the “decumulation” stage. But they do nothing for long-term growth. What we need instead is a method of goosing moribund returns during long periods of stagnation and stasis. We need better and more systematic ways of speculating, to obtain, if you like, higher alpha. We need ways of earning in 2020-2040 what was perfectly normal and commonplace in 1980-2000.
don't misunderstand ...those economic scenarios always stand .... what triggers them each is always a bit different . one time the star may be gold , another time it may be long term treasuries , another time it may be cash .. we don't have many catastrophes , but we do have bear markets .
the risk parity portfolios are not catastrophe portfolios .. they just have the ability to own assets that can develop quite a lot of ooomph in those 4 outcomes when called upon . because history never repeats we just don't know which one will be the star so they own them all .
i said over and over , i would not use a risk parity portfolio for growth ...these are for capital preservation and growth and for a different objective .
the fact they beat a 60/40 mix for 20 years now is a bonus . although the butterfly has beaten 60/40 for 50 years so far so i would disagree about them being catastrophe portfolio's .
they just try to eliminate the violent swings and reduce the losing years while giving you about a 50/50 comparable return . even 50/50 can be a wild ride with no risk parity assets .. the last dip was a 300k ride for us which is pretty rich for my blood at this stage ... we have cut the daily swings in 1/2 .
Last edited by mathjak107; 03-19-2019 at 06:08 PM..
the truth is history never repeats itself , only historians do ... economic events never change , we have 4 major ones .
recession
depression
prosperity
high inflation / weak dollar ...
what causes them is just different enough each time as to make whatever caused it last time , different the next time and whatever you did to prepare is likely wrong .
which is why risk parity portfolio's bet on all 4 outcomes .
High inflation and depression are 2 EXTREMELY rare situations...very low probablity
If you look over the last 100 years prosperity is by far the most prevalent cycle we experience
High inflation and depression are 2 EXTREMELY rare situations...very low probablity
If you look over the last 100 years prosperity is by far the most prevalent cycle we experience
What's more probable is a fear cycle. The fear increases and the script is flip-flopped to avoidance. That lasts until greed takes hold and the pendulum swings back once again.
The best thing to do over the long term (long term defined as a time horizon of >10 years) is nothing at all. No avoidance, no trying to catch up and guess the timing of the pendulum. It's the simplest strategy of all and at the same time very few manage to stick to that strategy. Even people in retirement have timelines that range from 10 up to 30+ years so it's a strategy that is valid over most of one's investing life.
High inflation and depression are 2 EXTREMELY rare situations...very low probablity
If you look over the last 100 years prosperity is by far the most prevalent cycle we experience
yes they are rare , but they are still 2 of the 4 major economic outcomes .... all other situations harry brown said are transient like stagflation ,and end up culminating in one of the major 4 .
one of the reasons i don't like the permanent portfolio as opposed to the other versions is just because the PP bets equal amounts of money on scenarios that have had anything but equal chances of playing out . so i prefer the prosperity weighted versions like the GB.
looking at the number jrkliny and i are tracking since the last high still shows despite the great recovery the 60/40 is still lagging the models with less equities . been this way for 20 years now as a cycle completes . the higher equity models have had higher balances until the great equalizer comes along and rolls things back down where they spend 80% of the time between the last low and last high .
the 100k we started with is now :
permanent portfolio 101,832
butterfly 99,892.00
60/40 98,665
Last edited by mathjak107; 03-20-2019 at 01:51 AM..
What's more probable is a fear cycle. The fear increases and the script is flip-flopped to avoidance. That lasts until greed takes hold and the pendulum swings back once again.
The best thing to do over the long term (long term defined as a time horizon of >10 years) is nothing at all. No avoidance, no trying to catch up and guess the timing of the pendulum. It's the simplest strategy of all and at the same time very few manage to stick to that strategy. Even people in retirement have timelines that range from 10 up to 30+ years so it's a strategy that is valid over most of one's investing life.
i would say 10 years today is really not long term anymore ..you need to push pretty far out to clear much of the noise for shorter term money with any kind of certainty . we have had quite a few poor 10 year periods for equities . especially in real return .... we have had no losing years in 50/50 to date in nominal terms but not in real return .
i prefer to call the long term 15 years and longer .. we just needed 13 years to get a head from 2000 in real return .
we have had 3 fairly step declines in less then 20 years and with computerized trading and high leverage this may be a more frequent play out . . you can see starting 20 years ago the investing landscape shows a big change .
Last edited by mathjak107; 03-20-2019 at 01:52 AM..
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