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Or you can now use TapaTalk again!Last Month's Best Fund Method Strategy
- Thread starter McDuck
- Start date
McDuck
Well-known member
luv2read
Active member
That's what I was referring to.
I think your two posts confused me. Thanks for clarifying.
My results don't track yours. I'm showing that, as of COB May 30, the LMBF method was up 1.75% for the year. I have a 0.33% return for Jan, 0.16% for Feb, 0.32% for Mar, -0.16% for Apr and +1.09% for May. Where do our figures differ?
Are you looking at the returns on the 29th so you'll know which fund to be in on the 1st of the month?
malyla
Active member
Not looking too good, but it has beat the stock funds
C S I returns-11.90%-7.69%-10.78%
The LMBF method is in G for July. I have looked at doing this quarterly, but the results are slightly worst than the LMBF returns. A bear market does give lower results for the LMBF (July 98 - Sep 02 gave 28.29%) but that greatly beat the stock funds (G 26.85%; F 36.45%; C -24.05%
S -29.48%; I -38.43%) for the time period.
Bear markets showed a great deal of oscillation where the YTD return was negative, but by the end of the bear market period, the LMBF was positive while the stock funds where negative.
I'm still evaluating this method and have not fully bought into it. Bear rallies are missed and give a false move into stocks for a loss in the first half of all three bear markets I've looked at (including the one we are in).
Good luck.
malyla
Active member
Well, I have finally had time to get back to the B&H comparisons.
The attachment is the excel spreadsheet showing comparisons of Buy & Hold strategies including the Last Month's Best Fund Method.
All long term strategies have one problem - How to anticipate when a Bull/Bear market occurs. I solved this problem by using the 8.6 year Business Cycle (google it) to determine the cycle for allocation change.
The strategies are three B&H (allocation scheme A,B,D) that ignores market cycles but have different stock/bond allocations, two Cycle B&H (E & H) that take into account the 8.6 year business cycle for capital accumulation /preservation with two different stock allocations, and the LMBF method which ignores the business cycle. I have also performed an analysis of the LMBF using the business cycle but it is not included in the spreadsheet. I will talk about it though
I have used Tom's spreadsheet and equations to calculate the yearly and running returns. I also have two growth percentages; From Sept 91 to Jun 08 and from May 03 to Jun 08. This allows a comparison of the past 17 years which includes the infancy of the TSP program with the last Bull market run to today. I also used the monthly returns for each fund from the TSP.gov website.
First thing that jumped out was that an inflexible B&H gave worst results than a B&H that takes the business cycle into account. Second thing was that a diversified portfolio did not perform as well as the high risk (100% stocks) allocation scheme (expected). The LMBF had a growth return comparable to the Diversified B&H (no business cycle). When the LMBF was in capital preservation (not shown in the spreadsheet), the return was slightly better than the LMBF method that does not take the bussiness cycle into account (74.49% compared to 69.87% since 5/03; 544.15% compared to 428.08% since 9/91).
By far the best strategy takes the business cycle into account for long term investment growth. It was approximately double the growth compared to the inflexible Buy & Hold strategy.
This Cycle B&H strategy works very well for capital preservation as it is the Bear markets falls that quickly and irreparably affect investment growth.
Couple this method with methods to determine and take advantage of the Bear market bull rallies and long term growth is greatly enhanced. This would also allow for DCA-ing by allowing one to put contributions in G during a Bear Market and start contributions near the end of the Bear market time to get the most benefit from this method.
I hope this adds to your TSP tool kit.
malyla
Active member
The 8.6 year business cycle for you reading pleasure for post #70
http://www.nowandfutures.com/buscycle.htm
2032 should be scary. I hope all of us will be around to validate this theory:laugh:
G.L.
malyla
Active member
I looked at the intermediate terms in the 8.6 year Business Cycle. The excel shows this on the date column. What you can see right off is that there are BIG rallies in the Bear Market cycle, usually in the 2nd and 4th quarters. The intermediate term drops in the Bull market cycle are not big and do not seem to occur at any specified time. This tells me not to worry about the intermediate terms during a major up move (bull market), but to pay attention to get the 5-15% rallies during the major down move (bear market).
See Malyla's Account Talk post #102 and #70 in this tread for more info.
Enjoy and be careful out there:cheesy:
Frixxxx
Moderator
You mean the warnings on Fox, CNN, MSNBC and ALL my local news are wrong...They say, "BE AFRAID, BE VERY AFRAID!!!"
Nice research Malyla
malyla
Active member
You mean the warnings on Fox, CNN, MSNBC and ALL my local news are wrong...They say, "BE AFRAID, BE VERY AFRAID!!!"
Nice research Malyla
Thanks. Today appears to be the start of one of the intermediate rallies during a Bear Market. Lets hope it gives us 15% before it fizzles in the next tsumani of bad news.
G.L.
McDuck
Well-known member
http://marketplace.publicradio.org/display/web/2008/07/17/oil_prices/
Thursday, July 17, 2008
Here's how to predict future oil prices
Justin Wolfers
Experts use complicated formulas to predict the future price of oil. But commentator Justin Wolfers says he's got a simple do-it-yourself method that works even better.
TEXT OF COMMENTARY
Kai Ryssdal: When we talk about oil prices, it's usually a futures contract that we're talking about. An agreement to pay a pre-arranged price for a barrel of oil at some point in the future, hence future contract. The art of the deal, though -- and the way to make money -- is to guess that future price of the world's most actively-traded commodity. Commentator and economist Justin Wolfers thinks he's got it all figured out.
JUSTIN WOLFERS: Important decisions about our family finances -- things like which car we purchase, or where we choose to live -- all of it hinges on whether today's high oil prices are here to stay, or whether this is just a temporary blip.
And there are dozens of talking heads on TV, pontificating about the latest oil industry developments.
But in fact, you're more of an expert than any of these talking heads. Or you will be, when I give you my secret forecasting formula.
Here it is: The single best forecast of oil prices in one month, three months, or a year is -- [sound of drumroll] -- today's oil price.
With oil at exorbitant prices today, I'm forecasting that next year's price will also be at exorbitant prices. I'm not saying that prices won't change, but I am saying that they're about as likely to go up as they are to go down. Let's call this the no-change forecasting rule. It won't work for everything, but it does pretty well for oil prices.
In fact, Ron Alquist and Lutz Killian, two University of Michigan economists, recently assessed the forecasting performance of the no-change rule. Amazingly, this simple rule did better than the average of dozens of professional forecasters! In fact, the no-change forecast was 34 percent more accurate at predicting oil prices in three months' time, and 18 percent more accurate at predicting prices in a year's time. While professional prognosticators might argue that this difference isn't statistically significant, it sure is embarrassing.
Others ignore the professional forecasters and focus instead on what futures markets are saying. But it turns out that even futures prices are not as accurate as our simple formula. Even sophisticated econometric models don't yield better forecasts than our simple no-change rule.
The truth is that forecasting oil prices is so darn hard that complicated formulae add nothing but complexity. And so the simplest forecasting rule also turns out to be the best. Don't you wish all of economics was this easy?
Ryssdal: Justin Wolfers teaches at the University of Pennsylvania's Wharton School of Business.
malyla
Active member
Hi all,
I took one more look at the B&H comparisons that I posted earilier to look at the FED rate oscillations and how they affected the F fund.
As you would expect, when we are in a Bear Market, this usually means we are in a recession and FED rates stay low (1% during most of the 2000-2003 Bear market). When we come out of a Bear market, the FED starts raising rates and the F fund suffers. For the most part, the F fund does well in a Bear market when the rates are low.
My concern is that this Bear market is somewhat different (more like the 1970s Bear Market). I have no data that can easily help me determine if stagflation affects the F fund. I have two questions: Would the FED raise rates in a Bear Market under current market conditions, and How would this affect using the F fund as the capital perservation fund using the Cycle B&H method (I'm guessing badly)?
Any thoughts?
luv2read
Active member
- IMO the fed will not raise rates during an election year BEFORE the election UNLESS it's to be a GOP political ploy.
- They will not raise rates while the housing market is still in a slump, UNLESS Congress passes and BA signs the housing rescue package. 30 year mortgage rates are at 6.25 (go figure) ...pretty much where they were before all the rate cuts which were supposedly to HELP homeowners as well as support the market.
- The won't raise rates UNLESS rampant inflation takes off, period, and they still won't do it BEFORE the election UNLESS the GOP is in dire need of a boost.
- They MIGHT raise rates if the price of oil stays at or below $130, supply continues to exceed demand, and OPEC threatens to reduce production. I know this seems backwards, but everything they've done so far has been backwards so in a contrary way this makes sense.
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