Down goes the Dow

just watching it. wrote:

It does seem trade deal is priced in. IMO there's more risk than reward now after the rally.

I would agree, since even a deal means little. The global economy likely peaked this cycle, valuation extremely stretched. Fed painted in a corner. Hey, like I said, it wasn’t me with soiled breeches in December.

Ghost of Igloi wrote:

Hey, like I said, it wasn’t me with soiled breeches in December.

Dude, you totally jizzed your tighty whities last month. You could hardly contain your glee.

I’ll take jizz to your soil.

Stain wrote:

Ghost of Igloi wrote:

Hey, like I said, it wasn’t me with soiled breeches in December.

Dude, you totally jizzed your tighty whities last month. You could hardly contain your glee.

Actually I defended my position in December just like today. But your smugness was consistently absent that month.

Ghost of Igloi wrote:

I’ll take jizz to your soil.

What?

Ghost of Igloi wrote:

Goudas wrote:

+5.8%. Worst year in a decade.

Good job. Beat the market. Let’s talk this time next month and each month thereafter.

This was the best January for stocks in 30 years. Which might indicate to some of us that a massive downturn is not on most people's radar. I mean, if you had to choose, that's certainly more bullish than otherwise.

Ghost of Igloi wrote:

Yes, pretty much doing that now. About 85% in ladddered CDs and the other 15% in aggressive bets. Did well last year.

Rubbish. No one did well last year with such a silly allocation.

Punter wrote:

Ghost of Igloi wrote:Yes, pretty much doing that now. About 85% in ladddered CDs and the other 15% in aggressive bets. Did well last year.

Rubbish. No one did well last year with such a silly allocation.

Rubbish indeed. He sez he did, you sez he didn't... only his portfolio statement really knows...

The approach Taleb describes in Antifragile is really interesting. I'd encourage people to read the book. I've found Taleb's writing a little off-putting, as he's fairly arrogant, and frequently criticizes others. This book is a little better than the others I've read (Fooled by Randomness, Skin in the Game) in that regard, making it a little easier to read in some ways. He does call out Aristotle as being stupid; I suppose of you're going to slander great minds, you ought to swing for the fences... :-)

Anyway, the core idea in the book is that things can either be fragile (easily damaged by volatility), robust (immune to harm from volatility) or what he calls (using his invented word) anti-fragile (improved by volatility and randomness). Processes that are affected by "wild" randomness (random processes having "fat tails" or higher than otherwise expected incidence of large events) are generally fragile (if the fat tail contains harmful events), and processes affected by "normal" randomness (here, normal implies "normal" or Gaussian distributions) are usually robust. Processes with fat tails containing only positive events (not very common) would be anti-fragile. He also says you can construct anti-fragile systems by combining (creating a "barbell") very low volatility processes with very high volatility processes in some suitable proportion, with the idea of insulating yourself from the life-threatening (or portfolio-busting) rare event, meanwhile spending a small amount of money sustaining small losses while exposing yourself to the consequent potential for a huge gain.

The approach Igy describes is very similar to that Taleb uses as an example in his book, where he talks about putting 90% of a portfolio in very low variability bets, and 10% in high risk bets. This limits your potential downside to a maximum of 10% of your portfolio (in this example), and also limits the upside, but contains lots of room for upside in the 10%. For example, if you bet that on a "10-bagger" you will roughly double your portfolio. The more likely case is that your portfolio has relatively small (but reasonable) changes, where the credible range is constrained by the balance between low and high volatility bets.

Simplified, this is one way to balance a portfolio aiming for reasonable gains, but is not an aggressive "growth" investing approach.

The corollary in his discussion is the suggestion to avoid the middle range of variability / volatility, and strike some reasonable (for you) balance at the ends of the volatility spectrum (the "barbell" in his lingo) with the aim of making your portfolio "anti-fragile."

Again, to me, this is intellectually very satisfying. Not sure whether / how best to apply to my own situation, but it gives me plenty to think about.

As I stated earlier actual investor returns since 2000 are much smaller than historical returns and we are taking a snap shot close to all time highs. Taleb’s approach seems particularly approriate at this point in the market cycle or for someone with a short time horizon. Of course the traditional allocation serves its purpose, just not necessarily the most efficient portfolio.

Ghost of Igloi wrote:Taleb’s approach seems particularly approriate at this point in the market cycle or for someone with a short time horizon.

I think this is the key. It wouldn't be for everyone all the time (although Taleb seems to have used this general approach successfully as an options trader back in the day), but surely of interest some people some of the time.

That is correct. Most people are not going to pay enough attention to their portfolio to allow this approach to be successful. Also, the financial services industry would be unlikely to promote such an approach since it runs counter to their buy and hold profit model.

seattle prattle wrote:

This was the best January for stocks in 30 years.

You know what happens when you start seeing headlines like that, right?

SAlly Vx wrote:

He is infamous for cherry-picking. In looking at the stock market, he always wants to compare its performance beginning around 2000 right before the dot.com bubble bursted.

I'm just gonna point out a few things here :

1) Literally every fund manager is guilty of cherry picking. I was just bragging the other day to my friend about how I made 1000% return on FB calls. You think I mention the times I've lost 50% of my entire portfolio in one hour (which has happened like 3 times at this point)? Hell no.

2) I don't think cherry picking the last 18 years is fair because we are in unprecedented times. The Fed's balance sheet has never been this overweight, and the interest rates have never been this low for so long. This is uncharted territory for coming out of the disaster that was 2008 and trying to model future performance from past results is going to be in vain imo because there has never been a time like this

3) Just let the guy have his boring CDs, I don't see what the problem is.

4) Igy, just let people have stock portfolios, I don't see what the big deal is.

OK, no problem. Sally is the same person always flipping me, just another handle. I play along just for fun. I just generally provide my view which runs counter to the prevailing Bullish meme. In regards to #2, I would view that as more of a reason to be cautious than a “green light” and one reason I think you are having problems trading the margins. You know at some point market manipulation just become pushing on a string until domething really bad happens. At that point the gains one thought were durable are erased.

SAlly Vx wrote:

Ghost of Igloi wrote:

Outperformed your stock overweight portfolio by about +7% in 2018.

You are looking at one year.

Of course he is! When your approach was disastrous from 2011 - 2017.

Ghost of Igloi wrote:

That is correct. Most people are not going to pay enough attention to their portfolio to allow this approach to be successful. Also, the financial services industry would be unlikely to promote such an approach since it runs counter to their buy and hold profit model.

The financial services industry, of which you are a part, does not promote buy-and-hold. Rather they promote buy-and-sell in order to reap commissions and related fees from their blindly trusting clients.

KeIIy wrote:

Ghost of Igloi wrote:

That is correct. Most people are not going to pay enough attention to their portfolio to allow this approach to be successful. Also, the financial services industry would be unlikely to promote such an approach since it runs counter to their buy and hold profit model.

The financial services industry, of which you are a part, does not promote buy-and-hold. Rather they promote buy-and-sell in order to reap commissions and related fees from their blindly trusting clients.

No, you are referring to your E*Trade account and the Ouija Board charts that sing to you Lionel Richie’s “all night long” trading signals.

purple martin wrote:

SAlly Vx wrote:

You are looking at one year.

Of course he is! When your approach was disastrous from 2011 - 2017.

That would be true if I was positioned that way. Of course I have never said what you claim.

But hey, you have an ax to grind, so keep grinding.

Ghost of Igloi wrote:

Only time will tell if your purchases made since 2011 will pay off. I say they won’t?.