Boghies Account Talk

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Re: Panic, running to safety

Re(1): 'Man Without a Country', The Belmont Club, Richard Fernandez

The calendar says we’re in the first part of the 21st century. But whether AD or BC nobody has specified.

...

“What are they carrying to their homes? They are carrying their deaths.” When they start feeling bad in a few days it will just be bad luck.
Click to expand...

I always thought it important to know fact and reality. At least what can be known. It was important to make decisions using math and science and something other than politics. In our environment - and apparently most environments - politics is the turning of a word. Spin. Spin loses to math. But we chose spin because it sounds so good. Hard decisions are hard, spin is the answer - till it is not.

But, now that spin wins every time can we make the hard decisions. Or, will someone else make the hard decisions and supplant us. Spin does not absolve us of economic fact. Even economic spin cannot do that. Spin does not bring victory against barbarism. Even spin intended to include barbarians in civilization. Spin does not heal the sick. Even the ancient spin of superstition and witchcraft.

Can one make his own good luck in an era of bad luck.

Or are we just spinning.

:worried:
 
Thoughts...

Re(1): 'The Poverty of Ideas', The American Interest, Roger Berkowitz

Again, a similar theme... It is past time to move past the spin of WingNuts and Moonbats... They no longer matter...

Critical theory, as Geuss understands it, is a relentless uncovering of the oppression. Thinking is not to be mobilized in the name of justice but in the pursuit of uncovering what is, what Heraclitus called the need to “say what is.”

Over and over today pundits and philosophers seek to offer justifications. They justify the death penalty or argue against it; they justify strong police action, or argue against it; they justify war or drone attacks, or argue against it. In the spirit of Rawls, we are obsessed with justification.

But justification is not justice. Israel can certainly justify its war against Gaza, just as the United States justified its war against the Taliban in Afghanistan. In justifying a war, however, we divert attention away from the reality of war; we focus on whether it has met certain criteria of proportionality; we ask if it is fought in offense or defense; and we demand it follow settled rules. In doing so, however, we can ignore the basic reality of the killing and the tragedy that war is.

Geuss ends his essay with the hope that as the failure of the liberal democratic project becomes visible the time might arise for a critical thinking that eschews justification and insists instead on the relentless engagement with reality and the effort to say what is.
Click to expand...
 
Stream of Thought...

My normal 'Conservative' Allocation is (G/F/C/S/I) results in an expected annual return of 5% (over inflation) and an expected standard deviation (risk) of 7%.
My current allocation results in an expected annual return of 4% (over inflation) and an expected standard deviation (risk) of 5%.
It's been a very long time since I sat in this sort of an allocation. But I ain't all out because I guess poorly.

Now, what does this mumbo jumbo mean?

Assuming an inflation rate of 3% than the current allocation should range between +2% and +12% 67% of the time with the highest norms centering on 7%. 95% of the time this allocation will result in an annual return of between -3% and +17%. And, if we get another 2008 or 2013 I the return will be between -8% and +22%. The 'risk' factors I get from Quicken should reflect the fat tails of market investing - but I am not counting on that.

Now, for those folks who are sitting in the 'C Fund' then the same computations are (7%/16%):
  • 67% of the time the annual return is between -6% and +26%
  • 95% of the time the annual return is between -22% and +42% (2013)
  • And 3 deviations result in an annual return is between -38% and +58% (2008)

Now, for those folks who are sitting in the 'S Fund' then the same computations are (8%/20%):
  • 67% of the time the annual return is between -9% and +31%
  • 95% of the time the annual return is between -29% and +51%
  • And 3 deviations result in an annual return is between -49% and +71%

Now, for those folks who are sitting in the 'I Fund' then the same computations are (8%/18%):
  • 67% of the time the annual return is between -7% and +29%
  • 95% of the time the annual return is between -25% and +47%
  • And 3 deviations result in an annual return is between -43% and +65%

Now, for those folks who are sitting in the 'F Fund' then the same computations are (6%/5%):
  • 67% of the time the annual return is between +1% and +11%
  • 95% of the time the annual return is between -4% and +16%
  • And 3 deviations result in an annual return is between -9% and +21%

In my investing lifetime (based on the S&P500 since 1994) I have seen:
To the Negative
  • 3 Risk Deviations: 2
  • 2 Risk Deviations: 2
  • 1 Risk Deviation: 0

To the Positive
  • 3 Risk Deviations: 0
  • 2 Risk Deviations: 6
  • 1 Risk Deviation: 10

Right now doesn't look good to me. I really don't want to participate in a fast moving correction. However, sitting in the 'G Fund' while concerned means I would lose 100% of the growth in months like this past August. My lack of sticky pants resulted in a monthly growth of 1.92% when the market grew by 4.01%. The G budged 0.20% for those of you that sat there because the crystal ball showed Ruskie troops vacationing in Ukraine, ISIS recording decapitations in Syria or Iraq, and Obama golfing while the world burns. This demonstrates why swinging in and out of the market based on something other than pure technicals (not certain about that either:o) is a losers game. You need to participate in the normal growth markets (like this one as weird as that might sound) to survive the dumps. Playing the Burka/Thong game and making 2% a year is a losers game. If you make 2% in a two factor growth market you are just waiting to be killed in a two/three deviation down market. You simply have no buffer. You have to be right when you are make two points a year because losing 8% in a day wipes out four years. If you are a swinger you have to be in the market much more than you are out of the market and you have to read the market not the Turkish Coffee tea leaves. If you are an allocator you should have a 'normal' allocation and a couple that are less risky and a couple that are more risky to take advantage of the market without destroying your system.

Just thinking.
 
Re: Black Swan...

Fergeson WHO? this is really stupid! If it had been a White boy/man would it have been on the news?
 
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Re: Black Swan...

nnuut said:
Fergeson WHO? this is really stupid! If it had been a White boy/man would it have been on the news?
Click to expand...

Eh, I don't think there was anything about Fergeson in the American Interest article.

And, Alevin, I am not Richard Fernandez - the author of 'The Belmont Club'. I wish I was in many ways. He is brilliant on so many topics. In any room both he and I are in I am confident that I am not the smartest person in the room. Same with Walter Russell Mead, Mark Steyn, Glenn Reynolds, Steven den Beste, the Sandmen and many others I link to here along with a few whose posts have gone down the memory hole. I have to say there are those on this site I pale to. But, because I am very cocky I will not admit to that or to who they are...:p

Just to prove my point, here are a few of the most important posts ever placed on the internet:

and, for we Gubmint Slugs, this is a very important dose of reality:
 
Re: Black Swan...

I apologize I posted that in your thread by mistake and in the * Furgerson thread, TOO MUCH WINE!drinking%20all%20the%20time.gif:embarrest:
 
Investing Into the Falling Knife.

It is dumb to invest into a falling knife. I don't like the slope of the charts, but you have to be in to win and I have a plan!!!

G: 22%
F: 32%
C: 26%
S: 10%
I: 10%

Expected Return: 5% over inflation
Expected Risk: 6%​

I have added a point more to expected risk for the benefit of a point more expected return. That point of risk is also a point more in growth on the high side. Anyway, I would really like a real tool rather than Quicken for blending the risk/return of the funds into an allocation number - but, I got what I got. Looked around the web and found something, but its results were way out of line. Oh well...

So, why invest now... Because this does not feel like 2008. It feels like a normal 10% - 15% correction or even a little sell off. Leaning toward a correction because of that slope thang, but... Regardless, unless this blows through 12% - 15% than it will turn around. This allocation should limit my YToD loss to something around -3% or so in a Bear Market. I can live with that.
 
Re: Investing Into the Falling Knife.

I don't know what swimwear this will result in, but I am scared. Basically, I believe the F is topped out and equities are in a mini-permabull. Thus, I am a little more in than a standard moderate allocation - but not in my bullish allocation.

G: 12%
F: 17%
C: 41%
S: 15%
I: 15%

Expected Return: 6% over inflation
Expected Risk: 8%​

The Return/Risk is kinda guessed. I don't have my tools handy and spent Sunday drinking beer rather than number crunching my IFT. My best guess is the 6/8 though...

In the end - Burro - all this move did was migrate 15% of my assets held in G/F to C/S/I with the biggest migration to C/I. I like the I for the same reason BT does - it is beat down. Buy low (I), sell high (F)!!!
 
Because JPCavin Asked!!!

Being old and slow – actually very old and slow, I didn't read a message sent to me till just now…

What is the CAGR/IRR? And, how does it relate to the investor?

Well, the Compound Annual Growth Rate/Internal Rate of Return (same thing) is a way of calculating your real returns while incorporating variance (risk). Risk is not necessarily scary unless you are learning about it in 2008 like I did. It can be a good thing because it is in reality variance. Variance from the center point (your average return) to the upside is a good thing – a very good thing. Variance to the downside is not so good. Here is the generally accepted formula for CAGR/IRR:

CAGR_Equation.JPG

See how it factors in the risk of investing. Why it matters is discussed in the MoneyChimp website. Cactus has had a very good discussion on this as well. Basically, demanding a CAGR from a purveyor of some mutual fund or asset management account can help you determine a risk adjusted annualized return. That is, an allocation that has big swings will have its average return reduced more than one whose variance is smoother. Me likes that. It means that I will not get taken by some chump selling me something that had a 40% return last year and a -20% the year before and calling it an average return of 10%. The CAGR for that account would be 5.83%. They sell you on 10% returns, do not show you the annual returns, and do not tell you that most bail out when it dumps. The dumpers actually bring the return down even further from the CAGR because they lock in losses.

So, if we look at my most recent blather in poor Burro’s thread we see that my:
  • Length of Review: 6 years, 10 months
  • Average Return: 9.40%
  • Risk (Variance): 13.34%
  • CAGR or IRR: 8.59%
Is it more proper to sell my allocations as 9.40% which kinda discounts 2008 and 2011 or 8.59% which factors those years in a bit better.
Now let us look at JPCavin’s numbers because she asked:

  • Length of Review: 3 years, 10 months
  • Average Return: 14.06%
  • Risk (Variance): 9.59%
  • CAGR or IRR: 13.66%
And compare those to the ‘C Fund’:
  • Length of Review: 3 years, 10 months
  • Average Return: 15.42%
  • Risk (Variance): 12.74%
  • CAGR or IRR: 14.72%
What that means JPCavin is that your allocation is taking quite a bit of the variance out of the returns for a small reduction in the average return. However, take this with a huge twenty pound grain of salt. The market has done nothing but go up the past four years and four years is a small sampling size – as is my posted seven years. We old geezers have been embarrassed by documented AutoTracker returns and have had our CAGR ‘adjusted’ by 2008 and 2011. Anyway, your actual long term returns would center at 7% (pre-inflation) and have a variance/risk of 11%. Thus, you have been riding the tide – but it is smart to ride the tide when the tide is coming in. Yummy. But, that means that a normal correction would set you back between -2% through – 13%. Better than just holding a single equity fund, but worse than mixing in some bonds. You are actually wearing dental floss for a swimsuit, but it you are young enough (retire 2050+) and/or fit enough (your six-pack stomach can handle the churn of 2002 – 2003, 2008 without locking in your losses) you will do great. If the second the market dumps by 10% you skip the brazilian, the bikini, the one piece and pull on the full coverage burka than you might want to take some of the long term risk out by holding a little G/F. If you are older than a puppy with thirty years of hard labor ahead of you than you might want to hold a little G/F. If you are in your 50's or 60's than a normal correction will take YEARS off your retirement income. Otherwise, I ain't got no problem with the lovely ladies getting a serious tan. No problem at all - I might join you soon:p.

Not recommending bonds, they seem topy. But normally they take some of the variance out an allocation. Just keep a watch. If the market corrects (say 10%) than grab some G and maybe F to smooth things out. That is market timing to some extent, but bonds right now seem much more risky than stock to me…
 
Looking for a Brazillian Cut Bikini...

Well folks, my current allocation (pre-IFT) has all the risk of a brazillian cut bikini (10) but the performance a step more conservative. Why romp around showing so much cheek when nobody wants to look - yuk, yuk. I upgraded my Quicken to 2015 - which seems to have changed the 'Risk' number quite a bit so I had to reconfigure against the L Funds. Regardless, after looking deeply into Quicken and the L Funds it has become apparent that the G Fund is a very good alternative to the current F Fund - which is returning pennies over the G excepting capital gains. And, how long can this be going on, how long. My guess is not very much longer. So, given the Christmas Season I have decided to don a better fit which emphasizes my assets better while not taking the risk of holding the frothy stuff. Anyway:

  • G: 12%
  • F: 8%
  • C: 42%
  • S: 19%
  • I: 19%
  • Expected Return: 6% over inflation
  • Expected Risk: 10%

Last week the 'Expected Risk' would have been 8%. I am still trying to track on it. My marker is the S&P500 which still holds a 7/16 Return/Risk. Adding inflation that means ~10/16 which still rings true and fairly closely matches MoneyChimps 11/17 numbers from 1957 onward.

Also, considering that the G Fund is returning >2% at the same time that the actual internal F Fund returns about 2% I will overweight G in relation to F. At our low bond rates we cannot really count on share appreciation very much longer. That is where the F Fund is making it's money nowadays. I do not want to count on that now that we are no longer QEing anything and just waiting for a rate increase.

Note: If you are confused or scared of the reference to Brazillian Cut Bikini's on a guy than please review Burrocrat's Ark posts. It scares me too, but even more scary are the chaps wearing burkas on the beautiful warm beaches of T.A.H.I.T.I..
 
Re: Looking for a Brazillian Cut Bikini...

Last post didn't take hold. Wondering if I can post after the brazillian cut thang...

Yup, can do:p
 
Why the Stagnation...

Re(1): 'Why has Human Progress Ground to a Halt', Aeon, Michael Hanlon
HT: 'The Golden Quarter', Instapundit, Glenn Reynolds

Have you noticed a slowdown in both progress and in the use of that progress. Believe it or not, I have. I have been talking about this for a while, but Michael Hanlon discusses it quite well and in detail. And, Reynolds snark is a valid point as well.

I have one other point that stemmed from Hanlon and Reynolds. Here it is:

During the 'Golden Quarter' millions of flowers bloomed. There were millions of points of light. There was what we consider out-sized risk though. See the yammering about the recent SpaceX accident - as if space exploration can be performed at a conference desk manned by government safety Nazis, lawyers, and the tax man. There is the hint. Right now some gubmint flaks and a team of lawyers is poring through the written record and sleuthing a way of regulating and suing for the common good.

Well, if that is how things get done - ie. expecting to spend a projects entire budget 'scoping' a project with unknowns, and defending the project when an unknown happens - than only extremely wealthy entities can take part. And, if there are very view extremely wealthy entities than they can easily be regulated and controlled by a political entity without financial limits. It is a self-fulfilling, closed loop environment. Anyone here think Bill Gates (before he owned 1% of the world) could have marketed a buggy version of an operating system (albeit that was in the 80's) with teams of medical malpractice lawyers challenging the operating system upon which other buggy software resided. Our automation efforts seem to targeted to security - not a bad or worthless effort, but not something that gets us past binary. And, when the gubmint wants to automate something nowadays they get the purchasing department, their ignit supervisors with Gender Studies degrees, and someone that went through an extensive week of training in Project Manage(r, ment) involved before someone in the field scopes the request. Or, they write some ignit contract vehicle (NMCI) and think that a network/desktop support contract fulfills their data management needs. Are there any Rickover's out there?

So, regulation and fear and the resulting consolidation of effort (to the 1%ers) plays a major role in stifling progress.
 
Re: Why the Stagnation...

Re(1): 'Kling's List', The Belmont Club, John Fernandez

A little of this (regulation of past issues, ignorance of current issues, politics over reality etc.) and a little of that - which might, just might be a Black Swan...
 
Re: My Synapses are Flashing - And that is a Bad Thing...

Wow, nice DJIA guess this year! If I don't **JINX** it!
 
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