CNN’s Hologram? First Down Lines. Ponzi. Is fractional reserve banking a Ponzi scheme? Taleb makes money. Plastic Soul Band. Rolling Periods. Comments on MFT3K.
After ten months of this relentless bear market nonsense, the leader of the professional lazy portfolios has a return of -10.3%. That’s the Harry Browne Permanant Portfolio which bests the rest by at least 10% so far this miserable year. The secret to its “success?” It’s 25% each in Total US Stock Market, 20-year bonds, treasuries, and gold. The average of the 27 “professional” lazy portfolios is -28.5%.
Ah, but the leader of the individual entries? How about a positive 41.8%! Of course that’s our non-diversified, anti-china gambler mudfud with his china bear fund. The other winner is Mr. UltraShort himself, Tex Williams, with 80% of his portfolio in ultrashort ETF bets. Most everybody else is playing the game to go long the market for a long time, and is savagely to the down side where they are suppose to be. hahaha. The average of the individual entries is -28.0%
A reminder of what this game is all about for those of you who are new here. At the beginning of 2008, I asked people to design a portfolio of index funds or ETFs that will exhibit the highest Sharpe Ratio by the end of the year. (I didn’t put it in exactly those terms at the time, but now I realize that’s what I meant.) Winners in three risk bands (less than 8%, 8% to 16%, and 16% plus) get a free copy of Index Funds: The 12-Step Program for Active Investors by Mark Hebner. I’m hoping Foliodex.com will be working in early 2009 to help me compute the Sharpe Ratios. Otherwise, I have a handy spreadsheet ready.
Mon, November 3 2008 » Blog » Comments Off on Lazy Portfolio Smackdown Update for 31 Oct 2008
[An observant reader pointed out my mathmatical flaw in the article below. I have corrected it now. I had a feeling as I was adding percentages that I was doing something stupid. Doing the math properly makes a difference, but turns out it is not a major change to the result.]
The good folks at Index Funds Advisors have studied statistics about the stock market going back many years. One of my favorite statistics is the Monthly Rolling Period Analysis of, for example, IFA Index portfolio 100. (You can click on any of the other numbered portfolios from that page to get their Monthly Rolling Period Analysis.) When you examine that table, you will see on the 4th row down is the 12-month rolling returns. Starting in January 1958 until December 2007 there were 589 such 12-month periods. Note we’re not just going from January to January but also February to February and March to March and so on.
In columns six and seven you see that the worst 12-month period for the index portfolio 100 was from 10/73 until 9/74 when the portfolio experienced a loss at -35.73%. It now appears that the chart will have a new entry for lowest rolling period. According to information I have pieced together from the Benchmark Your Portfolio Tool and the Year To Date Returns of IFA Portfolios and Indexes as of Market Close 10/31/08, both available at IFA.com, the period from 11/07 thru 10/08 has just experienced a loss at -42.53% [corrected]. To arrive at this number, combine the -8% loss from 11/07 thru 12/07 with the -37.53% loss YTD in 2008. [This was the source of my math mistake: I added the percentages together. Instead, I should take the percentage of the percentage. For example: $1000 with 8% loss is $920. $920 with 37.53% loss is $574.72. From the original $1000, that is a 42.53% loss.]
This will have a significant impact on the statistics and on the assumptions of risk going forward as the Monthly Rolling Period Analysis table gave an impression that the worst loss one might reasonably expect in a 12 month period was -35%. When the table is updated to show a maximum expected loss of 45%, it might cause investors to choose a portfolio with lower risk. Note that I have singled out 12-month rolling period. I suspect we have also set records in many other rolling periods as well.A quick check of the 2 year shows it was -23.86% and is now -29.57%. [The 2-year return is annualized, not total.] A more detailed check of the 2 year shows it was -23.86% but the most recent was only a -17.86% loss annualized.
Also using IFA data, I calculate that the S&P 500 12 month return just ended was (-4.81%) and (-32.71%) resulting in -35.95%. If you examine the tables carefully, you will see that the S&P 500 has slightly more risk (measured by monthly standard deviation) than a portfolio 85, but with lower annualized returns.
To create the Rolling 12-Month Analysis for any of the other 19 IFA Index Portfolios, use the Benchmark Your Portfolio Tool and select the portfolio of interest and choose the range from 1 November 2007 through 31 December 2007. Add Combine [properly] the total return (which is probably negative) to one of of the following 2008 Year-to-date returns through 31 October 2008:
Portfolio
2008 YTD Return
thru 10/31/08
5
-4.57%
10
-6.54%
15
-8.51%
20
-10.48%
25
-12.45%
30
-14.42%
35
-16.39%
40
-18.36%
45
-20.33%
50
-22.30%
55
-24.26%
60
-26.23%
65
-28.20%
70
-30.17%
75
-32.14%
80
-34.11%
85
-36.08%
90
-38.05%
95
-37.79%
100
-37.53%
But just to be fair, we should also examine the Highest Rolling Period Return and ask if we might someday overstretch its limits. It currently sits at 66.72% for the period 4/03 thru 3/04, a time after a recent recession. I wonder if after this recession we will bounce back higher? Note I’m not predicting that it will happen, just kinda wishing. Maybe after the 10% gain of the past few days, we’re on the right track?
Fri, October 31 2008 » Analysis, Blog » Comments Off on It’s Official: Worst Rolling 12 Month Returns Just In [Corrected!]
Reality is stranger than fiction. MFT3K. Bogle. Roubini. Markowitz. Shame? PowerShares. Keep watch over your IRA and 401(k). Catch Speculation Blues and Henry Paulson Wants to Rules the World.
Remember my show called "Surviving the Tsunami ?" I thought tsunami was a pretty good metaphor for what I thought would happen when the current deflation (wave going out) is followed by hyperinflation (giant wave crashing to shore).
To switch metaphors, let’s say that we are witnessing the two stages of a tsunami. The current disappearance of wealth in the form of debts repudiated, bets welshed on, contracts cancelled, and Lehman Brothers-style sob stories played out is like the withdrawal of the sea. The poor curious little monkey-humans stand on the beach transfixed by the strangeness of the event as the water recedes and the sea floor is exposed and all kinds of exotic creatures are seen thrashing in the mud, while the skeletons of historic wrecks are exposed to view, and a great stench of organic decay wafts toward the strand. Then comes the second stage, the tidal wave itself — which in this case will be horrific monetary inflation — roaring back over the mud flats toward the land mass, crashing over the beach, and ripping apart all the hotels and houses and infrastructure there while it drowns the poor curious monkey-humans who were too enthralled by the weird spectacle to make for higher ground. The killer tidal wave washes away all the things they have labored to build for decades, all their poignant little effects and chattels, and the survivors are left keening amidst the wreckage as the sea once again returns to normal in its eternal cradle.
Go read the whole article for yourself. I love the term "monkey-humans!"
Tue, October 28 2008 » Analysis, Blog » Comments Off on Kunstler says “tsunami” also
Please stop by PodcastAwards.com every day and vote for Mad Money Machine in the “Best Mobile Phone Formated [sic] Podcast” which is the 2nd one down on the right column.
Mon, October 27 2008 » Announcements, Blog » Comments Off on Vote (for MMM)
I took the song written by Mark T. Hebner at Index Funds Advisors along with their original paintings and charts and made a music video for your enjoyment. Have a look and let me know what you think. Oh, and here’s the link for the High Quality version at YouTube.
I produced the video on my new 13" MacBook using the iMovie software that came with it. Amazing where computing, communications, and the internet has come since my first PC XT clone that I built in 1986.
Mon, October 27 2008 » Blog, Fun » Comments Off on The Speculation Blues
New MacBook. Buffet says buy. VOTE for MMM. How much gain to make up for 40% loss? Gold? Cramer on dividends. Guru Andrew Lahde. Vote out your incumbent. Drop me a file. Lazy Portfolios. Improve your 401(k). Ron Paul says… New low rolling period?
Bob Barr is also running for president of the US as the Libertarian party candidate. Here’s a 10-minute interview with Judy Woodruff. I like his answers to her questions. I would love to see him debate against BO or JM. But more than that, I would love to see BO and JM absorb his philosophy of individual freedom and tiny government.
Mon, October 20 2008 » Blog, Reviews » Comments Off on What’s Not to Like About What Bob Barr Says?
Thank you for nominating the Mad Money Machine podcast at PodcastAwards.com.
Strangely, you nominated it for the “Best Mobile Phone Formated [sic] Podcast”. I was kinda hoping for “Best Business Podcast” but I’ll take whatever I can get. Does seem like a typo though (or a categoryo).
Is the MMM really that good on a mobile phone? I know I like it on my iPhone, but I don’t put any special graphics in or anything. Perhaps it is because I work endlessly making the sound come out level? And that makes it easier to listen to on a phone? Anyone have any suggestions why, please email me.
Nonetheless, I am grateful. Thank you for nominating MMM. It will help me help you.
Sun, October 19 2008 » Announcements, Blog » Comments Off on MMM Nominated! Thanks, I think?
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Topics in this week’s show include:
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