madsinger monthly report (November 2016)

[madsinger]

Here is a big fat collection of portfolios, with their November 2016 returns, 2016 YTD return, and annualized returns since 1999, 2006, 2011 and 2013 (17 years 11 months, 10 years 11 months, 5 years 11 months, 3 years 11 months). I broke them into four categories, roughly corresponding to 100/0, 80/20, 60/40, 40/60 stock/bond portfolios, sorted by 10 year Total Return. The 3 fund is 50/30/20 Total Stock/Total Int'l/Total Bond. The s&d is 10 each of VFINX, VIVAX, NAESX, VISVX, VGSIX, 25 VGTSX, 5 VINEX, 20 VBMFX. The coffeehouse is a 60/40 described at The Coffeehouse Investor. The Newsletter portfolios are from a newsletter following Vanguard funds. William Bernstein's "Sheltered Sam" is an all stock portfolio which is 20% VFINX, 25% VIVAX, 5% NAESX, 15% VISVX, 10% VGSIX, 3% VGPMX, 5% each VEURX, VPACX, VEIEX, and 7% VTRIX. The madsinger portfolio is my real-world portfolio, roughly 50/6/11/33 stock/REIT/Gold/bond. The madsingerPP portfolio is the "permanent portfolio" portion of my portfolio consisting of 25% each of stock, long bond, cash, gold.

-Brad.

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                                   CAGR    CAGR    CAGR    CAGR
                   Nov     YTD     since   since   since   since
                   2016    2016    2013    2011    2006    1999
VFINX              3.70%   9.66%  13.92%  12.12%   7.47%   5.17%
Sheltered Sam      3.08%  12.05%  10.65%   9.07%   6.68%   7.35%
Hot Hands         -2.49%  -3.24%  10.14%   8.62%   5.01%  10.62%
                  
Newsletter G       4.25%   8.00%  13.28%  10.82%   7.77%   9.23%
Newsletter G-IND   4.06%  10.30%  12.51%  10.61%   7.59%   6.43%
s&d                1.56%   7.35%   8.06%   7.25%   6.25%   7.08%
3 fund             1.06%   6.43%   7.93%   7.16%   6.03%   5.48%
LS G               0.98%   6.58%   8.34%   7.44%   5.54%   4.93%

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Wellington         2.22%   8.71%   9.55%   9.07%   7.46%   7.27%
Newsletter CG      3.84%   8.10%  12.07%  10.40%   7.35%   7.71%
coffeehouse        1.47%   7.58%   7.69%   7.41%   6.48%   6.92%
STAR               0.42%   5.61%   7.63%   7.44%   6.06%   6.34%
LS MG              0.21%   5.80%   6.84%   6.50%   5.37%   5.03%
                  
Wellesley         -0.74%   6.65%   6.39%   7.55%   7.00%   6.70%
Newsletter Inc     1.25%   5.40%   9.27%   8.93%   6.35%   5.68%
LS CG             -0.54%   4.94%   5.26%   5.31%   4.88%   4.83%
                  
madsinger          0.53%   8.23%   7.10%   6.23%   5.84%   
madsinger PP      -2.98%   5.82%            

[madsinger]

A pretty quiet month. Nothing really to report here...

OR MAYBE NOT!!!

Yes, November was quite a month for the markets. US stock markets up 3% to 6% for large caps, and as high as 10% for small cap value. Bonds were down in the -2% to -3% range. International stocks down in the -1% to -2% for developed markets, down over -4% for emerging markets. The precious metals fund was down almost -10% for the month, but still up 50% for the year.

The components of the permanent portfolio were certainly showing low correlation. Long bonds and Gold were down about -8% for the month, while the stock (an S&P 500 fund) was up about 3.6%. This month was the largest monthly loss for the PP this year (even as stocks were soaring). Vive la difference!

-Brad.

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           STOCK  LONG BOND  CASH    GOLD   PORTFOLIO 
January   -4.97%    5.24%    0.09%   5.38%    1.25%
February  -0.18%    3.20%    0.08%  11.22%    3.47%
March      6.72%    0.06%    0.09%  -0.92%    1.45%
April      0.37%   -0.62%    0.09%   5.05%    1.27%
May        1.75%    0.77%    0.10%  -6.09%   -0.97%
June       0.22%    6.50%    0.08%   8.87%    3.83%
July       3.65%    2.02%    0.09%   2.04%    1.98%
August     0.08%   -0.99%    0.09%  -3.23%   -1.02%
September -0.02%   -1.31%    0.08%   0.71%   -0.11%
October   -1.84%   -4.22%    0.09%  -2.92%   -2.17%
November   3.66%   -7.85%    0.09%  -8.36%   -2.93%
               
YTD        9.34%    2.82%    0.99%   10.36%   5.82%

[John Z]

Thank you for your continued tracking of this information. Retired nearly 5 years with Coffeehouse but now modified from 60/40 to 50/50 and portfolio continues to grow even taking approx 4% per year for living expenses in addition to SS.

[jmndu99]

Brad,
Thank you for keeping us updated. Your time is appreciated. I'm still in the accumulation phase.

Best wishes,
James

[investor]

Thanks Brad.

Those managed Wellington and Wellesley funds are still doing just fine and have served me well in 20 + years of retirement.

investor

[ruralavalon]

Thanks, that's always very interesting.

[madsinger]

Today I rebalanced...a tough one from a "gut check" point of view.

Long bonds were down over 22% from their target value, and Gold (IAU) was down over 16% from its target, REITs down about 10% from target, while US stocks were a fat chunk over. Buying a wad of long bonds and gold today was a test of my belief in the system. I don't know if this will be a nice "sell high, buy low" moment, but I do know that my exposure to the US stock market today is back in line with my pre-determined allocation plan.

(holding nose and jumping in...)

-Brad.

[investor]

Brad:

you are now buying Long Bonds in a probably rising interest rate enviroment ? Did I read that correctly?

investor

[livesoft]

^It is probable that next week's news from the FOMC is priced into current long bond prices, so buy-on-the-rumor, sell-on-the-news could kinda work here. So in a perverse sort of way, buying now before next Wednesday could be ideal. Bond funds could go up on the news. Besides, there is kind of a current paralysis where things are stalled until that news is released.

But who knows?

[investor]

^^ indeed, now that is market timing . I used to play with "Benham Zero Coupon bonds fund" in a similar manner. But that was when rates were dropping.... Good luck

investor

[madsinger]

Brad:

you are now buying Long Bonds in a probably rising interest rate environment ? Did I read that correctly?

investor

Yes, you read that correctly. This is most certainly not a guess on where I think Long Bonds will be in the near or far future. This is, in fact, the very opposite of guessing where rates will be! I have chosen an asset allocation that is 11.11% Long Bonds. As of yesterday, the per cent of my portfolio in long bonds had dropped below 8.5%, about 24% under the target. So, I rebalanced, and brought it back up to target (along with gold, and REITs). US stocks have outpaced these other asset classes by something like 20% in the past six weeks, so I moved according to plan.

One of the reasons I posted this here was to "time stamp" this move. If a year from now, defying expectations, bonds are up relative to stocks, I wanted to be able to say that I followed my AA plan in the face of this "obviously" being a bad idea, and it paid off. Now, if bonds are down another 20% against stocks in the next year, I'll also point to this date and remind myself. And, hopefully, I'll have the courage to buy more bonds then!

-Brad.

[madsinger]

...I should clarify. The real "trigger" for rebalancing is that my stocks got over 55% of my portfolio, more than 5% over the 50% target, and that is what triggered the wholesale rebalance. If my US stocks were up that much, something was down, and that was bonds, gold, and REITs.

-Brad.

[livesoft]

But suppose you didn't check your AA until next Wednesday? You could have then noticed and just did the deed then.

[investor]

Thanks Brad.. I enjoy your honesty and conviction... I just use balanced funds and let them worry about it all. But then I have played the game and have been retired for 20 years..Wellington and Wellesley in some combo work for me. just soooo much simpler.

investor.

[madsinger]

update on rebalance switch from last month.

Of course, three weeks is not a good time frame to measure investment performance, but I thought it was interesting that after my rebalance on December 9 from Small Cap Value to Long Term Treasury, from that point to the end of the year (yes, I know, three weeks...)

Small Cap Value: -1.81%
Long Term Treasury: +0.41%

I'll admit that it "felt wrong" to be selling stocks and buying long bonds on that day, and I do understand that in the long run, I expect my stocks to outperform my bonds, but I am glad that the very short term result did not make me feel like a fool right off the bat. Hopefully, this kind of experience will give me the courage to rebalance in the future, even if it "feels wrong" at the time!

-Brad.

[livesoft]

It is fun to root for SCV to drop after one has sold it, isn't it?

[madsinger]

It is fun to root for SCV to drop after one has sold it, isn't it?

well...I still hold quite a chunk of small cap value, so I can't really say that I'm rooting for it to drop!

But, it was up almost 25% last year, so it was the most "over" stock fund I had for rebalancing.

[pkcrafter]

It is fun to root for SCV to drop after one has sold it, isn't it?

Good one!

Paul