Boghies Account Talk

[Boghie]

'Hold and Hopers' vs more fluid Asset Allocation Management

Asset Allocation

Smart ‘Hold and Hopers’ set an allocation based on many factors (not just age and retirement date) and then hold that allocation till their situation changes.

Unlike the ‘Hold and Hopers’ I don’t think keeping an allocation that makes sense 90% of the time through that last 10% makes any sense. Who couldn’t figure this year was not a stock market year. But, when will it become so – me not know. So, why not have a few (couple or three) allocations for obviously different market situations?

The asset allocating ‘Hold and Hopers’ think nobody can reallocate on the extremities quickly enough to save money on the dump and make money on the bump.

I don’t think I can either – note a 22% loss this year because I thought I could partially greed up on a short term market bump that very quickly became a crunch. Lost 16% on that move alone – but, the C Fund lost 30%+.

Now, however, I have found an allocation I can live with during obviously crappy times. Very crappy times indeed. So, out of this mess I have a baseline allocation (25% G, 20% F, 25% C, 20% S, 10% I) that allows me to ‘laugh’ off a 30%+ (from August 15) decline in the stock funds while giving me enough growth potential to catch either the wave or wavelet to come.

And, once the wave shows some form I can move to the stock allocation I like.

Gotta learn when you get kicked in the head.

 

[Boghie]

With a brilliant feel for the market, I moved my allocation to:

G: 12%
F: 22%
C: 39%
S: 15%
I: 12%

The IFT Trade committed on the evening of October 21.

Yea!!!!!

Today, the stock market took another crap!!!

Yesterday, I was only 50% in the stock funds.

Today, 66%...

Again, yea!!!

 

[Boghie]

Big Macro Moves in The Sky???

I have heard that Mastercard and Visa declared an 8.4% reduction in credit purchases this Santa Season…

My guess is that this will signal economic doom in the media.

However, it might be interesting to track the cash spending by Santa.

Will cash spending grow???

If so, we have a bunch of Americans who have finally figured out that they were enslaved to credit. They are paying off their debt – and will continue to do so until the debt can no longer hurt. My guess is that we are looking at about 6 – 9 months more of economic slowdown till consumers reignite spending. The average consumer has $8,000 in credit card debt, a car payment, and a mortgage. That $8,000 will have to drop to $2,000 or $3,000 before the debtor looks up. When he/she looks up their spending will be more cash based.

If we see debt drop and cash spending grow we have a macro change in our economy – a change at least as important as the one that drove us toward becoming a totally debt defined polity.

 

[Boghie]

Slacking off on noting IFT Trades - but, who cares!!!

Uuuuugggggghhhhhhh….

On 2008/11/07 I made an IFT to:

G: 18%
F: 32%
C: 29%
S: 11%
I: 10%

I guess I keep the ‘Automated Tracker’ a bit more up to date.

That move to the market funds didn’t last too long. Less than a month. Regardless, it doesn’t seem to matter. Everything was flat anyway since 2008/11/07 – at least for the buy and holders…

However, there seems to be a tradable pattern that I think I will attempt to take advantage of.

The ‘C Fund’ is in a trading range of $9.50 and $10.50. The ‘S’ and ‘I’ funds are leading or following by a couple of days in this free range trading… So, why not sell somewhere around the $10.30 mark and buy at the $9.70 mark.

Not much of a game, but maybe enough to work a 1.0% / month when realizing that my trading can't be perfect...

With maybe 50% in the market funds?

Those damn IFT limits. I posted a question to Poolman because he seems to have a method of making up to four trades/month. Maybe partial pullbacks into the G Fund don’t count toward the limit? I thought the only ‘free’ pullback was a 100% move into the G Fund.

 

[Boghie]

Special Thanks to FuturesTrader

My questions on 'G Fund' pullback trades were answered. And quickly...

Thanks to FuturesTrader I now know that one can perform as many 'pullback' trades to the 'G Fund' as one wishes - as long as you move assets into only the 'G Fund'.

For example assuming your two 'acceptable' IFTs result in an allocation of:
10% G
10% F
40% C
20% S
20% I

Than you can pull back from C/S/I in stages. For example:
T1 and T2 moved assets into F/C/S/I Funds (your forward IFTs).
T1/T2: 10% G / 10% F / 40% C / 20% S / 20% I
T3: 20% G / 10% F / 35% C / 20% S / 15% I
T4: 30% G / 5% F / 35% C / 15% S / 15% I
T5: 40% G / 5% F / 30% C / 15% S / 10% I

In concert with SquealBear's '<1%' IFT trade 'bug' I think this pullback concept leaves one with the capability of being a bit more aggressive in the market funds. Basically, you are less limited than once thought. You don't have to use your second IFT to reallocate to safety in this market, and you don't have to completely bail out of the market and hide yourself completely under the big Green Fund Shell...

Thank you FuturesTrader. Can better minds than I come up with a strategy that survives that crappy IFT limitations by using SquealBears '<1%' transactions and unlimited pullbacks to the 'G Fund'???

 

[Boghie]

An Economic 'Tsunami' Always has a Target

Why are we assuming that it will be the private sector that will be clank-fooed by the recession (depression...)?

Why should this economic transition follow the model of the past economic challenge? When we started dealing with the Depression our government was much smaller and had little or no debt. Now, our Federal government is the epitome of an unworthy borrower. We have lived beyond our means for 48 years+. Even in boom years we run deficits - excepting two years. And, most of those 48 years were growth years. That is one reason I do not like to have my retirement assets in Social Security bonds (that is, the ‘G Fund’). The ‘G Fund’ can be raided by the treasury when the government must, absolutely must, blow past the congresscritter defined ‘debt ceiling’…

So, I ask another question:

What would an economic tsunami (to use a blow dried talking head term) look and act like if it targeted the government sector?:suspicious:

And, an anciliary question:

If the public sector is the hardest hit (it is probably far more leveraged than the private sector) why would anyone maintain holdings in the 'G Fund'?

 

[budnipper1]

Re: An Economic 'Tsunami' Always has a Target

Why are we assuming that it will be the private sector that will be clank-fooed by the recession (depression...)?

Why should this economic transition follow the model of the past economic challenge? When we started dealing with the Depression our government was much smaller and had little or no debt. Now, our Federal government is the epitome of an unworthy borrower. We have lived beyond our means for 48 years+. Even in boom years we run deficits - excepting two years. And, most of those 48 years were growth years. That is one reason I do not like to have my retirement assets in Social Security bonds (that is, the ‘G Fund’). The ‘G Fund’ can be raided by the treasury when the government must, absolutely must, blow past the congresscritter defined ‘debt ceiling’…
So, I ask another question:
What would an economic tsunami (to use a blow dried talking head term) look and act like if it targeted the government sector?:suspicious:
And, an anciliary question:
If the public sector is the hardest hit (it is probably far more leveraged than the private sector) why would anyone maintain holdings in the 'G Fund'?

"Anyone" is a broad spectrum, but the reason for continuing to be exposed to risk would depend on the individual investor's target date for securing and maintaining financial security. For older guys like myself, the G-fund is a safe-haven that still provides a steady return to offset inflation. At some point, you need to ask yourself, "how much more risk is necessary to have enough money to be comfortable?"

I choose not to worry about a so-called "treasury raid". If economic conditions erode to that extreme, everybody's money will be proportionately worthless, irregardless of where it's invested.

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[Boghie]

On 2009/01/13 I made an IFT to:

G: 18%
F: 50%
C: 20%
S: 7%
I: 5%

This is a very nasty market, eh...

I am 'cashing' about 3/4ths of my gains from December/January 'bull'. And, with 'The One' out there borrowing another Trillion or so I really don't want to be in the position of lender of last resort ('G Fund Holder'). But, I do like the stability of the G Fund - that is, I don't think we are in for an economy where we will all be fighting for bugs and rodents...

 

[Boghie]

Buy at 840, Sell at 930... CorePuncher

I have been wathing the 'C Fund' price for a pricepoint (buy at $9.70, sell at $10.30).

CorePuncher is tracking on the same range using the S&P Index - which can be watched without logging into anything!!!

I allowed my Market Timing half to tell me there was still umph in the market after $10.30. Watched the C Fund hit $10.50, but then gawked as it quickly crashed to $10.08 before I could execute the get out of town trade.

Now, watching it hit $9.75.

Should have bought in today.

Should buy in tomorrow - Go C/S/I...

But, that little loser of a Market Timer voice is telling me to wait... Probably to after "The One's" little market bounce - yuk, yuk...

 

[Boghie]

Yuk, yuk - Proof Market Timing Works...

Didn't move assets into C/S/I!!!

Still only have 32% on that falling knife...

Will be listening to the new President. If I have confidence in his proposed actions I will put my money and my retirement on the line.

Otherwise, not so much.

My guess is that I am a microcosm of the economy. If he satisfies me, he will satisfy millions of others. That satisfaction will result in a growing economy and a growing Federal revenue stream.

The converse, not so much.

And, no I don't follow a market timing model. Some markets are too dangerous, some bubbles too apparent, some panics too visible to ignore.

Will use three allocations.

This 30/70 split is going to be my Falling Knife Allocation.

A 50/50 split is the Unknown Unknown Allocation:suspicious:

A 70/30 split is back to the Boom Times...

 

[Boghie]

Hope Springs a Leak...

Wow,

I guess I am going to have to initiate a self lobotomy...

I cannot understand this market. This economy. And, really this country.

I am hearing a barely edited version of FDR. But, FDR could actually build a dam, a building, a road, a power plant...

Can't do that now.

Some bug or rodent will be residing (migrating or something) in the path of progress. Any fiat (or, as Mr. Chrysler would utter while rolling about in his grave - Fiat) money spent on public works would have bugs and birds standing tall and strong right in the path of Rachael Corey’s tractor!!! Power to the people!!!

Anyway, its fun to watch when you are still youngish, poring gobs o' cash in DCA paydays, and only 30% in the equities market

Did FDR really get us out of the dump then - NOPE. But it was worth a shot and we got stuff built the Terminator can't even push through. Can 'The One' push a bridge expansion through the Sierra Club. Me thinks he ain't got enough game to take on those blue hairs...

 

[Boghie]

Anyone want to help California

Journalists are surprised that the evil rich are moving out of the state.
The very land of Fruits and Nuts to which the Okie’s migrated.
9.3% unemployment and growing rapidly.
Tax base shrinking swiftly.
40% Budget Growth.
In 4 Years.

And, folks like me are not going to like the Sacramento Solution

To them, expect what FDR called a ‘capital strike’. My single goal in life will be to ensure that you get less revenue from me than before your bloated tax increase. This ‘Forgotten Man’ will make his voice heard.

I have dramatically reduced my debt load; I am ready to legally ‘hide’ much more income (TSP, FSA, miscellaneous expenses, etc.). Didn’t play that game at all from 2000 onward. Didn’t feel that the tax rates were confiscatory. Simply paid. Soon, not so much…

For those to the east and north (and maybe south - yuk, yuk) of my state expect a migration of California’s poor – and our lawyers and beaurocrats and regulators and tree huggers as well.

 

[budnipper1]

Re: Anyone want to help California

For those to the east and north (and maybe south - yuk, yuk) of my state expect a migration of California’s poor – and our lawyers and beaurocrats and regulators and tree huggers as well.

WHAT? The GOLD RUSH days are GONE??? :laugh:

Perhaps, history will refer to us high tech dream-seekers of the late 20th Century as "the 99ers" and perhaps, we will also be remembered for our hopeful cry, "Thar's Internet Gold in them thar hills!"

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[justbizness45]

Re: Anyone want to help California

For those to the east and north (and maybe south - yuk, yuk) of my state expect a migration of California’s poor – and our lawyers and beaurocrats and regulators and tree huggers as well.

Boghie, thanks for the warning. I live in the Pacific NW, you can keep the tree huggers, we have our own.:suspicious: And the lawyers!!:laugh:

 

[alevin]

Re: Anyone want to help California

For those to the east and north (and maybe south - yuk, yuk) of my state expect a migration of California’s poor – and our lawyers and beaurocrats and regulators and tree huggers as well.

Glad I live inland-we're too cold for those southerners. Lotsa CA retirees moved back out after experiencing the winter of 92-93-couldn't hack it. Got a pretty good winter going here again this year too. Maybe the Okie migration in reverse will occur.

 

[Boghie]

TSP For Doomers

The Doomers are winning, the Doomers are winning!!!

Taleb and Schiff and Roubini and Dalio and the rest of the seers of Black Swans were right!!!

It was funny questing ‘Dr Doom’ in Google. Expecting to find one chap with such a moniker - instead tracking on a number of them.

Taleb was right on the risks associated with ignoring outliers in risk analysis, and on creating simple metrics while simultaneously spawning complex environments, and on his belief that success in the industry is timeframe specific. Schiff was right regarding the debt load straining the US economy and the toxicity of the debt. Roubini was right regarding the real estate bubble bust. All were right on the toxicity and risk behind some (much) of that debt. Personally, I like this interview with Ray Dalio: ‘Recession? No, It's a D-process, and It Will Be Long’.

Taleb recommends holding 80%-90% in very stable assets, and the rest in very risky assets. To me, that is maybe 10%-20% in S and the rest in G/F. The international funds are still in crash mode. Kinda crappy we don’t have more choices…

Dalio thinks quality bond holdings are ok for the short term because they will not collapse, but that gold is where it is at. Uuuggggghhhhhh…. Can’t buy that in our TSP account, eh. So, we are again limited to G/F.

Schiff believes we must atone for our sins and that ‘The One’ is creating massive damage with the Porkulous Bill. I can’t agree more. Our buddy, Bullitt, actually has the most popular summary in Google when I searched for it: 'Peter Schiff: Investment Recommendations'. Schiff recommends gold, commodities, and foreign assets (yuk), and to stay away from cash. That, so far, is the worst case for us TSPers, eh… Anyone want to put a huge chunk of your holdings in the ‘I Fund’ because you can’t own gold or commodities and you must run from cash while simultaneously avoiding United States stocks and bonds like the plague!!! But, we can get frugal!!! Oh joy…

Roubini – who knows? Run to the hills, build a Unibomber cabin, and sit on the ‘porch’ with a shotgun across your knees. Can we find any of these elements in our TSP Fund options? The gold bugs like him. Can’t buy that. My guess is the ‘G Fund’, but I don’t think he would be too comfortable in that either – especially with the Porkulous Pig tripping and rolling downhill toward all us little people.

My question is Bullitt's question.

Are they right now just because they were right then?

For me, I will take Taleb’s and Dalio’s advice.

Which I have seemed to glean even before this long diatribe. Maybe I will take some profits from my massive 32% holdings in C/S/I and reduce it to the 10%-20% recommended by Taleb.

It gives me the best asset safety I have available with - hopefully - enough stock holdings to support growth in the event another Swan flies by. They aren't all going to crap on us, you know

 

[mojo]

"gold is where it is at. Uuuggggghhhhhh…. Can’t buy that in our TSP account, eh"

If you have enough confidence in gold, commodities, or anything else and you don't believe that any of the funds will be profitable this year you can easily take out a 2.75% TSP loan up to 50% and put it wherever you think it will do you the most good. Your paying yourself back with interest and you can make the duration of the loan 1-5 years (your choice). Your still investing in your retirement.

I agree with most of what you said.

 

[Boghie]

Me, A Gold Bug???

Mojo,

I ain't no gold bug. I have also heard other reasonable sounding reports that state that all asset classes will move simultaneously during periods of deflation. Move Up. Move Down. All together now... So, I am kinda looking at assets that dump far less than others - while my almighty salary dollar gains in value!!!

Anyway, gold dumped in value during the 1930's.

Now, part of that was FDR Sr. playing with supply - but who says FDR Jr. won't. He owns the keys to the bank!!! And, while my friends and family are dragging their feet through the bread line we ain't lookin' to buy shiny trinkets

Also, when poor schmucks like you and I traipse into the precious metal coin merchant and buy a few ounces of bullion or some gold eagles we pay for the honor of purchasing said gold. There is a high commission/premium on said purchase.

Then, when poor schmucks like you and me traipse back into said gold merchant he pays us rather less than today's value. There is a high commission/premium on said sale.

That is how the gold merchant stays in business.

If I remember, we are talking 10% - 20% each way...

Gold and Silver and Platinum sure are purty. But not that purty

 

[Birchtree]

I bought 15 ounces of U.S. Gold coins back in the early 1980s and have now just reached a profit level - they sure are purty but I'm keeping them for their numismatic value. You may not remember the Grant Woods and Louis Amstrongs as well as others.

 

[Boghie]

Poof!!! - The Vanishing 'War Supplimental'

To All,

It seems that neither President Bush nor President Obama submitted the annual 'War Supplimental' to Congress. Every year in February we got the honor of viewing congresscritters posturing one way or another in front of C-SPAN cameras. Not so much this year, eh.

Could this be our first Spending Cut?