Bill Sharpe's preferred portfolio

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watchnerd
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Re: Bill Sharpe's preferred portfolio

Post by watchnerd »

pascalwager wrote: Fri Apr 30, 2021 10:33 pm
watchnerd wrote: Fri Apr 30, 2021 9:22 pm Posting this graph from page 38 of RISMAT 7:

https://web.stanford.edu/~wfsharpe/RISMAT/RISMAT-7.pdf

I hadn't see it here before.

Image

I think the original intent is to show static allocations.

But it also happens to reflect the non-rolling LMP TIPS (and STRIPS) ladder we'll be building as our rising equity glide path.

As the TIPS get chewed down over time, and the equity portion of the glide path rises, the total portfolio of LMP + World Stock Bond will resemble the above graph.



(although, if I'm being picky, the relative risk in the graph should be non-linear given how much more of a risk contribution is made by equities vs bonds)
In the past, I'd wondered if you'd seen this; but maybe we have differing interpretations. I've always thought Sharpe intended rebalancing between the market portfolio and TIPS--so the TIPS wouldn't be considered an LMP, but rather a proportioned riskless asset.

So Sharpe intended hiring a professional to determine the relative percentages, and then you took over from there and did the portfolio management during the remainder of your retirement.
Yes, I definitely recall him writing about something like you're describing, and I remember thinking how much I disliked it as it smacked of buckets. ;)

But I could swear he also talked about a LMP ladder in something else I either read or saw a video about.

Or maybe I'm just cherry picking subconsciously between what I like about Bernstein and Sharpe and mashing them together. ;)
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Re: Bill Sharpe's preferred portfolio

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watchnerd wrote: Fri Apr 30, 2021 10:50 pm
pascalwager wrote: Fri Apr 30, 2021 10:33 pm In the past, I'd wondered if you'd seen this; but maybe we have differing interpretations. I've always thought Sharpe intended rebalancing between the market portfolio and TIPS--so the TIPS wouldn't be considered an LMP, but rather a proportioned riskless asset.

So Sharpe intended hiring a professional to determine the relative percentages, and then you took over from there and did the portfolio management during the remainder of your retirement.
Yes, I definitely recall him writing about something like you're describing, and I remember thinking how much I disliked it as it smacked of buckets. ;)

But I could swear he also talked about a LMP ladder in something else I either read or saw a video about.

Or maybe I'm just cherry picking subconsciously between what I like about Bernstein and Sharpe and mashing them together. ;)
I thought Bill Sharpe had a (seemingly idiosyncratic) "lockbox" approach that more or less works by dividing the portfolio into different accounts for each year of consumption in the future. Into each lockbox, you place a certain amount of TIPS plus a certain amount of stocks/bonds in the risk portfolio (plus, in his ideal world, a certain amount of theoretical assets that you can't actually buy that he calls "m-shares" and that I haven't really tried to understand). You leave each lockbox alone until you get to the year it is assigned, and then you spend whatever ends up in the lockbox. It is described in chapter 15, here: https://web.stanford.edu/~wfsharpe/RISMAT/
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Re: Bill Sharpe's preferred portfolio

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HootingSloth wrote: Sat May 01, 2021 8:18 am

I thought Bill Sharpe had a (seemingly idiosyncratic) "lockbox" approach that more or less works by dividing the portfolio into different accounts for each year of consumption in the future. Into each lockbox, you place a certain amount of TIPS plus a certain amount of stocks/bonds in the risk portfolio (plus, in his ideal world, a certain amount of theoretical assets that you can't actually buy that he calls "m-shares" and that I haven't really tried to understand). You leave each lockbox alone until you get to the year it is assigned, and then you spend whatever ends up in the lockbox. It is described in chapter 15, here: https://web.stanford.edu/~wfsharpe/RISMAT/
Thanks -- I'm re-reading the whole RISMAT series so will get to chapter 15 soon.
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Re: Bill Sharpe's preferred portfolio

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HootingSloth wrote: Sat May 01, 2021 8:18 am I thought Bill Sharpe had a (seemingly idiosyncratic) "lockbox" approach that more or less works by dividing the portfolio into different accounts for each year of consumption in the future. Into each lockbox, you place a certain amount of TIPS plus a certain amount of stocks/bonds in the risk portfolio (plus, in his ideal world, a certain amount of theoretical assets that you can't actually buy that he calls "m-shares" and that I haven't really tried to understand). You leave each lockbox alone until you get to the year it is assigned, and then you spend whatever ends up in the lockbox. It is described in chapter 15, here: https://web.stanford.edu/~wfsharpe/RISMAT/


To me, the lockbox sounds like a weird LMP portfolio where each lockbox is similar to a ladder, but has the following ingredients:
1. Zero-coupon TIPS maturing in 9 years
2. World Bond/Stock Mutual Fund or ETF Shares to be sold in 9 years
3. m-Shares maturing in 9 years
#1 doesn't actually exist; there are no zero coupon TIPS.

I half fake it, though, by using alternating rungs of TIPS and STRIPS in a bond ladder.

#2 Exists

#3 Does not exist


Chapter 15 is probably the only chapter in the RISMAT series where I feel Sharpe jumped the shark between applicable theory and just pure mental masturbation.

I think he sort of admits this, as he says:
The conclusion is that absent the availability of suitable m-shares, it is impossible to obtain a portfolio optimal for an investor with a constant relative risk aversion marginal utility function with risk aversion that differs from that priced in the market portfolio. That said, it is possible
to choose a combination of TIPS and the market portfolio for one year, find the implied marginal utility function, then find combinations for subsequent years that are optimal for the same marginal utility.
He then gives some utility functions for approximating the lockbox contents with TIPS and WSB shares.

At this point, I don't see the point in trying make a model to determine how many WSB shares to allocate a 'lockbox', as opposed to just withdrawing from the Risk Portfolio at a future date according to needs.

It feels tortured, and not solving a genuine problem, given that m-shares don't exist.

He then ends the chapter with:
Absent the availability of m-shares, retirees can either need to choose retirement income strategies that provide payments with significantly different probability distributions of income at future dates, adopt an approach consistent with marginal utility functions of future income
that differ substantially, or select some combination of the two approaches. Moreover, given the fact that most retirees will receive fixed real payments from Social Security or some other sort of defined benefit plan, it will be important take into account all sources of income. The
remaining chapters explore some of these implications in detail for the construction of strategies for providing income with and without insuring against longevity risk. In both contexts, lockboxes can play a prominent role.
I my case, I will have an income strategy that provide payments with significantly different probability distributions at future dates:

LMP TIPS/STRIPS ladder (mixture of fixed real and nominal payments)
Social Security (fixed real payments)
Risk Portfolio (variable distribution)

One could also swap in an annuity en lieu of the LMP ladder.

Given that m-shares don't exist, without which lockboxes can't really be implemented as envisioned, I'm going to consider LMP + WSB RP as 'close enough'. ;)
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Re: Bill Sharpe's preferred portfolio

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watchnerd wrote: Sat May 01, 2021 6:47 pm I my case, I will have an income strategy that provide payments with significantly different probability distributions at future dates:

LMP TIPS/STRIPS ladder (mixture of fixed real and nominal payments)
Social Security (fixed real payments)
Risk Portfolio (variable distribution)

One could also swap in an annuity en lieu of the LMP ladder.

Given that m-shares don't exist, without which lockboxes can't really be implemented as envisioned, I'm going to consider LMP + WSB RP as 'close enough'. ;)
Thanks for the summary, watchnerd. I remember that chapter being a real slog. I definitely agree with your conclusion!
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Re: Bill Sharpe's preferred portfolio

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djm2001 wrote: Fri Apr 30, 2021 3:25 pm Methodology: Same as before.
I'm curious if you're implementing the N-fund or 4 Fund with gold?
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Re: Bill Sharpe's preferred portfolio

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watchnerd wrote: Sat May 01, 2021 6:47 pm
HootingSloth wrote: Sat May 01, 2021 8:18 am I thought Bill Sharpe had a (seemingly idiosyncratic) "lockbox" approach that more or less works by dividing the portfolio into different accounts for each year of consumption in the future. Into each lockbox, you place a certain amount of TIPS plus a certain amount of stocks/bonds in the risk portfolio (plus, in his ideal world, a certain amount of theoretical assets that you can't actually buy that he calls "m-shares" and that I haven't really tried to understand). You leave each lockbox alone until you get to the year it is assigned, and then you spend whatever ends up in the lockbox. It is described in chapter 15, here: https://web.stanford.edu/~wfsharpe/RISMAT/


To me, the lockbox sounds like a weird LMP portfolio where each lockbox is similar to a ladder, but has the following ingredients:
1. Zero-coupon TIPS maturing in 9 years
2. World Bond/Stock Mutual Fund or ETF Shares to be sold in 9 years
3. m-Shares maturing in 9 years
#1 doesn't actually exist; there are no zero coupon TIPS.

I half fake it, though, by using alternating rungs of TIPS and STRIPS in a bond ladder.

#2 Exists

#3 Does not exist


Chapter 15 is probably the only chapter in the RISMAT series where I feel Sharpe jumped the shark between applicable theory and just pure mental masturbation.

I think he sort of admits this, as he says:
The conclusion is that absent the availability of suitable m-shares, it is impossible to obtain a portfolio optimal for an investor with a constant relative risk aversion marginal utility function with risk aversion that differs from that priced in the market portfolio. That said, it is possible
to choose a combination of TIPS and the market portfolio for one year, find the implied marginal utility function, then find combinations for subsequent years that are optimal for the same marginal utility.
He then gives some utility functions for approximating the lockbox contents with TIPS and WSB shares.

At this point, I don't see the point in trying make a model to determine how many WSB shares to allocate a 'lockbox', as opposed to just withdrawing from the Risk Portfolio at a future date according to needs.

It feels tortured, and not solving a genuine problem, given that m-shares don't exist.

He then ends the chapter with:
Absent the availability of m-shares, retirees can either need to choose retirement income strategies that provide payments with significantly different probability distributions of income at future dates, adopt an approach consistent with marginal utility functions of future income
that differ substantially, or select some combination of the two approaches. Moreover, given the fact that most retirees will receive fixed real payments from Social Security or some other sort of defined benefit plan, it will be important take into account all sources of income. The
remaining chapters explore some of these implications in detail for the construction of strategies for providing income with and without insuring against longevity risk. In both contexts, lockboxes can play a prominent role.
I my case, I will have an income strategy that provide payments with significantly different probability distributions at future dates:

LMP TIPS/STRIPS ladder (mixture of fixed real and nominal payments)
Social Security (fixed real payments)
Risk Portfolio (variable distribution)

One could also swap in an annuity en lieu of the LMP ladder.

Given that m-shares don't exist, without which lockboxes can't really be implemented as envisioned, I'm going to consider LMP + WSB RP as 'close enough'. ;)
I enjoyed parts of the book. It seems longevity is not solved by lockboxes (you don't know how many boxes you will need), which is one of two major quandaries. The other is you don't know how much money you need the last year. If those two were known, the rest would become much easier.
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Re: Bill Sharpe's preferred portfolio

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trueblueky wrote: Sun May 02, 2021 8:57 am
I enjoyed parts of the book. It seems longevity is not solved by lockboxes (you don't know how many boxes you will need), which is one of two major quandaries. The other is you don't know how much money you need the last year. If those two were known, the rest would become much easier.
The other issue is the inability to revise the lockboxes if something changes, e.g. Social Security benefits get reduced.
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Re: Bill Sharpe's preferred portfolio

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watchnerd wrote: Sun May 02, 2021 8:25 am I'm curious if you're implementing the N-fund or 4 Fund with gold?
I currently have a version of N-fund without gold, adjusted slightly for personal circumstance. I hold TSM, TISM, TBM, TIBM, high-yield corporate bond, TIPS, and muni bonds.

Some wrinkles:
  1. For high-yield corporate bonds, I use VWHEX/VWEAX (in my Roth IRA for tax efficiency) which is not an index fund, but performs very closely to JNK and HYG which are index funds. Vanguard doesn't currently offer a high-yield corporate bond index fund.
  2. Because I used to lived in CA until recently and had a high tax rate, I hold only CA muni bonds, and in fact I apportioned some of my TBM allocation to CA muni bonds instead for greater tax efficiency. Now that I've moved to FL (no income tax state), I'm slowly adjusting the allocation back toward TBM, and I plan to switch my CA muni bonds to the broad US muni bond fund (VTEAX) as soon as I can sell them for a loss (or at least lower gain) when interest rates inevitably rise again.
  3. Unlike Sharpe, I treat TIPS as just another opaque asset class whose allocation I let the market caps decide for me. (Zero-coupon TIPS would be ideal for LMP... but as you noted, they don't exist.)
Things I am considering in the future:
  1. Considering adding gold in my Roth IRA. But the gold allocation is so low that I haven't been motivated to make the final call between GLD, SGOL, IAU, and AAAU yet. (Leaning toward IAU based on mixture of assets-under-management, expense ratio, and bid-ask spread considerations, but I haven't finished researching.)
  2. Considering buying BTC and ETH. But their float-adjusted market cap is not easy to find. Most sources list their non-float-adjusted market cap, which is not the right thing to use for determining the efficient market allocation. I am also unsure of wrinkles around security, taxation, and estate planning around holding these.
Since you were talking about LMP earlier... I'm not directly attempting LMP per se. Rather, I eyeball my intrinsic exposure to various risks (e.g., term risk based on my retirement horizon, credit risk based on my job security, sector risk based on my employment industry, etc.), and try to hand-wavily compensate for them in my RP so that my overall risk exposure (i.e., the combination of my intrinsic risk exposures and my investment portfolio's risk exposures) match the global market portfolio's (GMP's) risk exposure. For example, if I had a stable job in tech, I'd reduce my bond allocation (because I myself would function like a bond that has a fixed income via my salary) and maybe short the tech sector somehow (because my job compensation would already already exposed to tech sector risk). I think LMP + RP is just a very specific case of this general strategy of "getting back to the GMP's risk allocation". LMP zeroes out the risk (mostly term risk) of future cash outflows by hedging them against (ideally, zero-coupon) duration-matched TIPS. But you can do the same for other risks in your life as well. LMP + RP is no longer a "bucket / mental accounting" approach if viewed through this lens of targeting your risk to the GMP's risk.

edit: I'd summarize the above point by saying that we should be less focused on attaining the global market's allocation to asset classes in our investment portfolio, and instead more focused on attaining the global market's allocation to compensated risks in our overall risk exposure (intrinsic + portfolio). I.e., we should be trying to achieve the following equation:

Code: Select all

Global Market Portfolio's risks = My intrinsic risks + My portfolio's risks
... because the GMP gives an efficient allocation of compensated risks (via the Lego blocks of available asset classes).

For most people, typically the portfolio is the free variable in the above equation. So we should skew our portfolio based on our intrinsic risk exposure. IMO that would be a principled way to do factor investing (as opposed to just saying, "I have high risk tolerance (whatever that means...), and so I can bet on small/value stocks").
Last edited by djm2001 on Sun May 02, 2021 12:10 pm, edited 1 time in total.
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Re: Bill Sharpe's preferred portfolio

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djm2001 wrote: Sun May 02, 2021 11:34 am For example, if I had a stable job in tech, I'd reduce my bond allocation (because I myself would function like a bond that has a fixed income via my salary) and maybe short the tech sector somehow (because my job compensation would already already exposed to tech sector risk). I think LMP + RP is just a very specific case of this general strategy of "getting back to the GMP's risk allocation". LMP zeroes out the risk (mostly term risk) of future cash outflows by hedging them against (ideally, zero-coupon) TIPS. But you can do the same for other risks in your life as well.
That would be my job.

I've thought about shorting, either broadly tech, or specifically my megacorp employer stock. But the cost of insurance adds up after a while.

Instead I just reduce my US exposure by an amount equal to my ESPP plan holdings, which is pretty straight forward. And low cost.

As I get closer to retirement (planned for 2025), I've thought of buying puts on my outstanding RSUs. If CAPE gets high enough, maybe I will. Although it may be too expensive and/or against company policy.

Muni bonds are tricky for me.

On the one hand, I should hold them, given our tax bracket and the fact we've run out tax-sheltered space for bonds.

On the other hand, holding market weight of VTEAX at 0.67% is too little to solve the 'bonds in taxable' problem.

Although, really, in WA state (no state income tax) the difference in tax equivalent yield is pretty small, even in our bracket (32-35%%).
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Re: Bill Sharpe's preferred portfolio

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djm2001 wrote: Sun May 02, 2021 11:34 am [

Things I am considering in the future:
  1. Considering adding gold in my Roth IRA. But the gold allocation is so low that I haven't been motivated to make the final call between GLD, SGOL, IAU, and AAAU yet. (Leaning toward IAU based on mixture of assets-under-management, expense ratio, and bid-ask spread considerations, but I haven't finished researching.)
I'm sure you've done this already, but I thought it was amusing how little of an impact the tradable market weight in gold has:

https://www.portfoliovisualizer.com/bac ... on5_2=0.16
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Re: Bill Sharpe's preferred portfolio

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watchnerd wrote: Sun May 02, 2021 5:10 pm
djm2001 wrote: Sun May 02, 2021 11:34 am [

Things I am considering in the future:
  1. Considering adding gold in my Roth IRA. But the gold allocation is so low that I haven't been motivated to make the final call between GLD, SGOL, IAU, and AAAU yet. (Leaning toward IAU based on mixture of assets-under-management, expense ratio, and bid-ask spread considerations, but I haven't finished researching.)
I'm sure you've done this already, but I thought it was amusing how little of an impact the tradable market weight in gold has:

https://www.portfoliovisualizer.com/bac ... on5_2=0.16
Hey you made $39 :)
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Re: Bill Sharpe's preferred portfolio

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Blue456 wrote: Sun May 02, 2021 5:23 pm
Hey you made $39 :)
With senior discounts, that will be like $78!

Don't spend it all in one place, kids.
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Re: Bill Sharpe's preferred portfolio

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djm2001 wrote: Sun May 02, 2021 11:34 am
  1. Considering buying BTC and ETH. But their float-adjusted market cap is not easy to find. Most sources list their non-float-adjusted market cap, which is not the right thing to use for determining the efficient market allocation. I am also unsure of wrinkles around security, taxation, and estate planning around holding these.
Look into the ETF BITW, which holds a market cap weighted index of crypto currencies.
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Re: Bill Sharpe's preferred portfolio

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aj76er wrote: Sun May 02, 2021 8:20 pm
djm2001 wrote: Sun May 02, 2021 11:34 am
  1. Considering buying BTC and ETH. But their float-adjusted market cap is not easy to find. Most sources list their non-float-adjusted market cap, which is not the right thing to use for determining the efficient market allocation. I am also unsure of wrinkles around security, taxation, and estate planning around holding these.
Look into the ETF BITW, which holds a market cap weighted index of crypto currencies.
EXPENSE RATIO 2.5%*

Dang!

Although if it's 1% of a port, maybe not such a big deal.

But it looks to be super thinly traded....volume of 18?
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Re: Bill Sharpe's preferred portfolio

Post by HootingSloth »

aj76er wrote: Sun May 02, 2021 8:20 pm
djm2001 wrote: Sun May 02, 2021 11:34 am
  1. Considering buying BTC and ETH. But their float-adjusted market cap is not easy to find. Most sources list their non-float-adjusted market cap, which is not the right thing to use for determining the efficient market allocation. I am also unsure of wrinkles around security, taxation, and estate planning around holding these.
Look into the ETF BITW, which holds a market cap weighted index of crypto currencies.
That's interesting. They also list the float-adjusted market capitalizations for each cryptocurrency that is used in constructing their index, e.g. here: https://www.bitwiseinvestments.com/indexes/Bitwise-10

Along with this explanation:
About Market Capitalization
The Bitwise Crypto Indexes use a free-float measure of market capitalization to better reflect the true investable opportunity in the crypto space. The free float adjustment excludes issuance that is withheld from the public market, such as coins held by insiders or project foundations; the inflation adjustment captures the forecasted additional issuance of coins or tokens over the next five years, reflecting the fact that cryptoasset issuance is not fixed, but constantly evolving. One result of this institutional viewpoint is that Bitwise’s market capitalization statistics may not agree with other publicly available statistics that use naïve and/or static calculations of market capitalization.
It seems to me that it would likely be quite difficult to make these determinations for cryptocurrencies. For example, you may not be able to tell when insiders divide up holdings of cryptocurrency across a large number of different wallet addresses or have their holdings combined with the holdings of others in omnibus addresses. It would also seem impossible to know how much cryptocurrency has been "burned," i.e. transferred into a wallet address where no one continues to hold the private key. I'm sure there are other difficulties that I am also not thinking of.
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Re: Bill Sharpe's preferred portfolio

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I'm skeptical that the BITW published allocations are actually float-adjusted. (Maybe the fund uses float-adjusted allocations internally, but the published weights do not look float-adjusted.)

Here is one source of float-adjusted crypto market caps: https://coinmetrics.io/crypto-prices/

May 3 snapshot:
Bitcoin: $1,098.4B (non-float-adjusted); $856.2B (float-adjusted)
Ethereum: $366B (non-float-adjusted); $352.5B (float-adjusted)

As a sanity check, the non-float-adjusted mkt caps from coinmetrics.io match closely to those at https://coinmarketcap.com/.

May 3 snapshot:
Bitcoin: $1,100B
Ethereum: $366.2B

And here are the market caps used by the BITW fund for its allocations: https://www.bitwiseinvestments.com/funds/Bitwise-10

May 2 snapshot:
Bitcoin: $1,064B
Ethereum: $343B

The Bitcoin market caps match the non-float-adjusted numbers from coinmetrics.io and coinmarketcap.com, and do not match the float-adjusted market caps from coinmetrics.io. Maybe Bitwise vastly overestimates the free-float portion relative to Coin Metrics' methodology. I'm not confident in either methodology at this point.
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Re: Bill Sharpe's preferred portfolio

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djm2001 wrote: Mon May 03, 2021 7:23 am Maybe Bitwise vastly overestimates the free-float portion relative to Coin Metrics' methodology. I'm not confident in either methodology at this point.
I think this is very likely the case. If you look at, for example, the float adjustment methodology that S&P uses in the construction of its indexes (https://www.spglobal.com/spdji/en/docum ... nload=true), it is hard to imagine how you would try to translate that from the context of publicly traded stocks into cryptocurrencies. In many cases, the analogous categories of holdings would be difficult to define at best. Even when there are appropriate analogies, the necessary information typically would not be publicly available. It seems like large amounts of guesswork would be unavoidable in determining float adjustments for cryptocurrencies, so it should not be surprising that different sources come to very different conclusions.
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Re: Bill Sharpe's preferred portfolio

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HootingSloth wrote: Mon May 03, 2021 8:28 pm
djm2001 wrote: Mon May 03, 2021 7:23 am Maybe Bitwise vastly overestimates the free-float portion relative to Coin Metrics' methodology. I'm not confident in either methodology at this point.
I think this is very likely the case. If you look at, for example, the float adjustment methodology that S&P uses in the construction of its indexes (https://www.spglobal.com/spdji/en/docum ... nload=true), it is hard to imagine how you would try to translate that from the context of publicly traded stocks into cryptocurrencies. In many cases, the analogous categories of holdings would be difficult to define at best. Even when there are appropriate analogies, the necessary information typically would not be publicly available. It seems like large amounts of guesswork would be unavoidable in determining float adjustments for cryptocurrencies, so it should not be surprising that different sources come to very different conclusions.
S&P Crypto Indexes announced

https://www.coindesk.com/sp-goes-live-w ... to-indexes
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Re: Bill Sharpe's preferred portfolio

Post by HootingSloth »

watchnerd wrote: Tue May 04, 2021 12:47 pm
HootingSloth wrote: Mon May 03, 2021 8:28 pm
djm2001 wrote: Mon May 03, 2021 7:23 am Maybe Bitwise vastly overestimates the free-float portion relative to Coin Metrics' methodology. I'm not confident in either methodology at this point.
I think this is very likely the case. If you look at, for example, the float adjustment methodology that S&P uses in the construction of its indexes (https://www.spglobal.com/spdji/en/docum ... nload=true), it is hard to imagine how you would try to translate that from the context of publicly traded stocks into cryptocurrencies. In many cases, the analogous categories of holdings would be difficult to define at best. Even when there are appropriate analogies, the necessary information typically would not be publicly available. It seems like large amounts of guesswork would be unavoidable in determining float adjustments for cryptocurrencies, so it should not be surprising that different sources come to very different conclusions.
S&P Crypto Indexes announced

https://www.coindesk.com/sp-goes-live-w ... to-indexes
That's interesting. Thanks for sharing.

Note, however, that S&P does not claim that the combined index is weighted by "float adjusted" market capitalization. The methodology includes a concept that plays a similar role to a float adjustment, called the "effective coin supply." However, there is little that I could find describing how the effective coin supply will be determined. The policy document only says that it will be determined once per quarter (on the rebalancing date of the index) and that "coin burning will adjust the effective coin supply at rebalancing." I don't know how they plan to take burning into account, as anyone can privately burn coins without any public disclosure that it has been done. https://www.spglobal.com/spdji/en/docum ... x-math.pdf
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watchnerd
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Re: Bill Sharpe's preferred portfolio

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HootingSloth wrote: Tue May 04, 2021 1:03 pm

That's interesting. Thanks for sharing.

Note, however, that S&P does not claim that the combined index is weighted by "float adjusted" market capitalization. The methodology includes a concept that plays a similar role to a float adjustment, called the "effective coin supply." However, there is little that I could find describing how the effective coin supply will be determined. The policy document only says that it will be determined once per quarter (on the rebalancing date of the index) and that "coin burning will adjust the effective coin supply at rebalancing." I don't know how they plan to take burning into account, as anyone can privately burn coins without any public disclosure that it has been done. https://www.spglobal.com/spdji/en/docum ... x-math.pdf
Yes, it's some kind of 'points' system like the Dow uses, I guess?

I need to re-read it, as it seemed kind of fuzzy to me on first read.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
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watchnerd
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Re: Bill Sharpe's preferred portfolio

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Now that my LMP ladder pretty much built, here is the Global Market Portfolio allocation I'm using for my Risk Portfolio:

==Global Stocks== 59.7%
US Stocks: 34.67%
Ex-US Stocks: 25.03%
==Global Bonds== 38.2%
US Bonds: 19.96%
Ex-US Bonds: 18.23%
==Alts== 2.1%
Crypto: 1.94%
Gold Backed ETFs: 0.17%
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
dml130
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Re: Bill Sharpe's preferred portfolio

Post by dml130 »

watchnerd wrote: Fri May 07, 2021 7:19 am Now that my LMP ladder pretty much built, here is the Global Market Portfolio allocation I'm using for my Risk Portfolio:

==Global Stocks== 59.7%
US Stocks: 34.67%
Ex-US Stocks: 25.03%
==Global Bonds== 38.2%
US Bonds: 19.96%
Ex-US Bonds: 18.23%
==Alts== 2.1%
Crypto: 1.94%
Gold Backed ETFs: 0.17%
If I recall correctly, you were considering EM local currency bonds as a sort of stagflation hedge a little while back before deciding against and instead going with a currency basket - does your newer "Ex-US bonds" portion specifically include those bonds?
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watchnerd
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Re: Bill Sharpe's preferred portfolio

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dml130 wrote: Fri May 07, 2021 5:52 pm If I recall correctly, you were considering EM local currency bonds as a sort of stagflation hedge a little while back before deciding against and instead going with a currency basket - does your newer "Ex-US bonds" portion specifically include those bonds?
It's an annoying sticking point.

At the moment, I'm using Vanguard's international bond fund.

I would prefer a local currency international bond fund, but none of them have an ER as cheap as Vanguard.

Which is annoying at the current low yields.

BWX has an ER of 0.35, which is too high for my liking for a core holding that makes up a large chunk of my portfolio:

https://www.ssga.com/us/en/intermediary ... nd-etf-bwx
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
dml130
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Re: Bill Sharpe's preferred portfolio

Post by dml130 »

watchnerd wrote: Fri May 07, 2021 6:06 pm
It's an annoying sticking point.

At the moment, I'm using Vanguard's international bond fund.

I would prefer a local currency international bond fund, but none of them have an ER as cheap as Vanguard.

Which is annoying at the current low yields.

BWX has an ER of 0.35, which is too high for my liking for a core holding that makes up a large chunk of my portfolio:

https://www.ssga.com/us/en/intermediary ... nd-etf-bwx
I see what you're saying. I suppose if low yields vs. expense ratio are the issue with BWX, you could keep Vanguard's fund and consider adding a separate EM local currency bond fund like LEMB - 30 day SEC yield is over 4.5% vs. ER of 0.30. Although maybe that would complicate the portfolio beyond what you'd want.
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