madsinger monthly report (May 2020)

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madsinger monthly report (May 2020)

Post by madsinger »

Here is a big fat collection of portfolios, with their April 2020 returns, 2020 YTD return, and annualized returns since 1999, 2010, 2015, and 2017 (21 years 4 months, 10 years 4 months, 5 years 4 months, 3 years 4 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 VFIAX, VVIAX, VSMAX, VSIAX, VGSLX, 25 VTIAX, 5 VINEX, 20 VTABX. 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% VFIAX, 25% VVIAX, 5% VSMAX, 15% VSIAX, 10% VGSLX, 3% IAU, 5% each VEUSX, VPADX, VEMAX, 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.

Bogleheads wiki: Madsinger Monthly Reports

-Brad.

Code: Select all

                                   CAGR    CAGR    CAGR    CAGR
                   May     YTD     since   since   since   since
                   2020    2020    2017    2015    2010    1999
VFINX             4.76%   -4.99%  11.51%   9.60%  12.29%   6.23%
Hot Hands         6.97%    6.23%   9.93%   5.99%  10.20%  10.54%
Sheltered Sam     3.97%  -13.27%   4.62%   4.97%   8.58%   6.99%
                  
Newsletter G-IND  5.43%   -6.80%   8.66%   7.51%  10.80%   6.84%
Newsletter G      5.69%   -7.10%   9.45%   7.94%  10.76%   9.30%
LS G              4.21%   -6.20%   7.54%   6.02%   8.29%   5.40%
3 fund            4.11%   -5.94%   7.77%   6.15%   8.03%   5.90%
s&d               3.74%  -10.35%   4.56%   4.36%   7.33%   6.74%

Code: Select all

Newsletter CG     4.72%   -4.60%   9.26%   7.79%  10.24%   7.99%
Wellington        2.83%   -4.29%   7.96%   7.01%   9.02%   7.45%
STAR              4.18%   -1.46%   9.15%   6.90%   8.43%   6.81%
LS MG             3.25%   -3.47%   7.01%   5.59%   7.38%   5.38%
coffeehouse       2.64%   -6.40%   4.87%   4.59%   7.36%   6.64%
                  
Newsletter Inc    3.72%   -2.50%   9.50%   7.48%   9.35%   6.30%
Wellesley         2.12%   -0.07%   6.71%   5.93%   7.64%   6.74%
LS CG             2.31%   -0.79%   6.38%   5.06%   6.26%   5.10%
                  
madsinger         2.97%   -3.16%   6.05%   5.02%   7.26%   
madsinger PP      1.67%    7.95%   9.82%   6.68%      
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Re: madsinger monthly report (May 2020)

Post by madsinger »

Another strong month for the portfolios in May. Stocks continue strong rebound off of March lows. Bonds (short and intermediate) held up well.

Only Long Bonds were negative in the Permanent Portfolio. Crazy high returns in long bonds and gold for the year have pushed the PP return to almost 8% at the end of may.

Code: Select all

           STOCK   LONG BOND  SHORT BOND   GOLD     PORTFOLIO 
January   -0.04%     7.34%      0.95%      4.62%      3.19%
February  -8.23%     6.37%      0.69%     -0.66%     -0.42%
March    -11.48%     6.64%     -4.37%      0.68%     -2.19%
April     12.76%     1.73%      2.44%      6.90%      5.74%
May        4.69%    -1.72%      1.20%      2.61%      1.67%
   
YTD       -3.49%    23.43%      1.03%     14.06%      7.95%
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ram
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Re: madsinger monthly report (May 2020)

Post by ram »

Thanks madsinger.
Ram
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Re: madsinger monthly report (May 2020)

Post by jjustice »

The STAR fund has starred lately. In fact, it has done very well for the past three years.

I'm happy to see this because my son-in-law chose it for his IRA 3 or 4 years ago when he had only $2,000 to invest. I suppose that with its low minimum it is a kind of poor man's fund.

John
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Maestro G
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Re: madsinger monthly report (May 2020)

Post by Maestro G »

Hi Madsinger,

Is the Hot Hands portfolio the strategy the Dan Wiener uses (or used to employ) in his newsletter: sticking with the current best performing Vanguard fund until that fund is outperformed by another and then switching to that one on an annual basis and so on and so on……..?

If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.

Thanks!

Maestro G
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Re: madsinger monthly report (May 2020)

Post by PDX_Traveler »

Maestro G wrote: Tue Jun 09, 2020 7:03 pm Hi Madsinger,

Is the Hot Hands portfolio the strategy the Dan Wiener uses (or used to employ) in his newsletter: sticking with the current best performing Vanguard fund until that fund is outperformed by another and then switching to that one on an annual basis and so on and so on……..?

If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.

Thanks!

Maestro G
Does that account for friction due to taxes (I guess the same question applies to the other portfolios too, wherever rebalancing applies I guess) or is the assumption this is within a tax-deferred account? I suppose including tax situations makes the calculations more complicated due to different personal situations, etc...
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Re: madsinger monthly report (May 2020)

Post by ResearchMed »

PDX_Traveler wrote: Tue Jun 09, 2020 7:24 pm
Maestro G wrote: Tue Jun 09, 2020 7:03 pm Hi Madsinger,

Is the Hot Hands portfolio the strategy the Dan Wiener uses (or used to employ) in his newsletter: sticking with the current best performing Vanguard fund until that fund is outperformed by another and then switching to that one on an annual basis and so on and so on……..?

If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.

Thanks!

Maestro G
Does that account for friction due to taxes (I guess the same question applies to the other portfolios too, wherever rebalancing applies I guess) or is the assumption this is within a tax-deferred account? I suppose including tax situations makes the calculations more complicated due to different personal situations, etc...
My understanding is that it is the actual fund performances, given that everyone's tax situation could be different.

But the Hot Hands Fund, last I knew, was one fund for a full year, unless the same fund happened to qualify for a second consecutive year. It was always chosen on the same month.
A few times, he published what the HHF would have been for each of the 12 months, but he always used the same one for the official HHF.
It was selected from among all of the USA equities funds. Sector funds or fixed income were not eligible. Whichever fund had the *best* total performance was designated as the next HHF for the next year.
Needless to say, some years, and some intervals of years, were better than others.

Note: I am not totally up to date on this, so it might have changed.

RM
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Re: madsinger monthly report (May 2020)

Post by Elysium »

Maestro G wrote: Tue Jun 09, 2020 7:03 pm If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.
How is it impressive when it is underperforming the S&P 500 by a big margin for every period reported since 2010.
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Re: madsinger monthly report (May 2020)

Post by Maestro G »

Elysium wrote: Tue Jun 09, 2020 10:26 pm
Maestro G wrote: Tue Jun 09, 2020 7:03 pm If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.
How is it impressive when it is underperforming the S&P 500 by a big margin for every period reported since 2010.
I was referring to the CAGR performance as Madsinger has tracked it from 1999 relative to the other portfolios that he is tracking including VFINX.

20 years seems more impressive and meaningful to me. Time will tell of course whether or not this holds up.

Maestro G
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Re: madsinger monthly report (May 2020)

Post by Elysium »

Maestro G wrote: Tue Jun 09, 2020 11:37 pm
Elysium wrote: Tue Jun 09, 2020 10:26 pm
Maestro G wrote: Tue Jun 09, 2020 7:03 pm If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.
How is it impressive when it is underperforming the S&P 500 by a big margin for every period reported since 2010.
I was referring to the CAGR performance as Madsinger has tracked it from 1999 relative to the other portfolios that he is tracking including VFINX.

20 years seems more impressive and meaningful to me. Time will tell of course whether or not this holds up.

Maestro G
Time is already showing it isn't working out for the last 10 years. Anyone who chased this strategy by looking at numbers from 1999 to 2009 and started doing it from then on has lagged S&P 500 by a large margin. Clearly, it hasn't worked in the last decade. Should they bet another 10 years of hard earned savings on this in order to confirm it works or not? Considering that anyone who started in 2010 is lagging, there is a lot of catching up to do first, then they need to outperform. Why bother with all these dubious bets when the market returns are there for the taking.
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Re: madsinger monthly report (May 2020)

Post by Maestro G »

Elysium wrote: Wed Jun 10, 2020 8:10 am
Maestro G wrote: Tue Jun 09, 2020 11:37 pm
Elysium wrote: Tue Jun 09, 2020 10:26 pm
Maestro G wrote: Tue Jun 09, 2020 7:03 pm If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.
How is it impressive when it is underperforming the S&P 500 by a big margin for every period reported since 2010.
I was referring to the CAGR performance as Madsinger has tracked it from 1999 relative to the other portfolios that he is tracking including VFINX.

20 years seems more impressive and meaningful to me. Time will tell of course whether or not this holds up.

Maestro G
Time is already showing it isn't working out for the last 10 years. Anyone who chased this strategy by looking at numbers from 1999 to 2009 and started doing it from then on has lagged S&P 500 by a large margin. Clearly, it hasn't worked in the last decade. Should they bet another 10 years of hard earned savings on this in order to confirm it works or not? Considering that anyone who started in 2010 is lagging, there is a lot of catching up to do first, then they need to outperform. Why bother with all these dubious bets when the market returns are there for the taking.
I’m not suggesting that anyone do anything, “bet" or otherwise with their “hard earned savings.” I am merely commenting on Madsinger’s numbers.
I certainly wouldn’t “bet” my entire portfolio on the "Hot Hands" strategy.

As I stated, time will tell whether or not this long term trend will continue. Personally, I do think that of all the factors endlessly debated on this forum, momentum (not small, not small value, not quality or the other esoteric factors explored) does seem persistent and I believe there are strong behavioral reasons for that. Will it continue to persist in any significant way? I have no idea as my crystal ball is cloudy, and besides, “nobody knows nothin.”

I think I will always have a certain percentage of my portfolio dedicated to momentum for the reasons just stated, but that’s a choice I have made personally. Everyone has to make their own decisions and choices about these things.

As someone on the forum has so eloquently stated any number of times: “Ya pay your monies, ya take your chances.”

Good luck!
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Re: madsinger monthly report (May 2020)

Post by Elysium »

Maestro G wrote: Wed Jun 10, 2020 10:55 am As I stated, time will tell whether or not this long term trend will continue.
Time is already showing it hasn't worked for the past 10 years.
Maestro G wrote: Wed Jun 10, 2020 10:55 am Personally, I do think that of all the factors endlessly debated on this forum, momentum (not small, not small value, not quality or the other esoteric factors explored) does seem persistent and I believe there are strong behavioral reasons for that.
I don't believe factor data mining is helpful. But this is not even a proper momentum factor following, as I understand it is investing in the best performing fund of last year, which could be an active managed fund or index fund, there is possibility of considerable style drift and manager risk. If anything this is a weak momentum chasing strategy. Newsletters editors need to show something they are doing to add value, even when they aren't.
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Re: madsinger monthly report (May 2020)

Post by sperry8 »

Maestro G wrote: Tue Jun 09, 2020 7:03 pm Hi Madsinger,

Is the Hot Hands portfolio the strategy the Dan Wiener uses (or used to employ) in his newsletter: sticking with the current best performing Vanguard fund until that fund is outperformed by another and then switching to that one on an annual basis and so on and so on……..?

If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.

Thanks!

Maestro G
Yes, agreed. Although it hasn't outperformed the past 10 years. If you're going to follow that strategy you're going to have to do it for decades and assume it's outperformance wasn't due to momentum factor being unidentified the first 10 years (because it's well known and traded now).
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Re: madsinger monthly report (May 2020)

Post by madsinger »

Maestro G wrote: Tue Jun 09, 2020 7:03 pm Is the Hot Hands portfolio the strategy the Dan Wiener uses (or used to employ) in his newsletter: sticking with the current best performing Vanguard fund until that fund is outperformed by another and then switching to that one on an annual basis and so on and so on……..?

If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.
It appears that this has been mostly answered! But, yes, this is what this "report" is tracking. The past year and 5 months has been a good stretch for the strategy. However, it is certainly a bumpy ride. You can see from this report for December 2018:

viewtopic.php?t=268481

the Hot Hands had a 5-year annualized return for 0.09% while the S&P 500 fund had a 8.35% annualized return. It would take a strong stomach to keep following this approach for 5 years of underperformance like this.

There was a four-year stretch from 2004-2007 where the International Explorer fund was the Hot Hands fund (meaning it was the top Vanguard fund in 2003-2006, so it was owned for three of those years) and racked up crazy high returns. (and Global Equity in 2003 was up over 44%) which gave this "strategy" its very high return since 1999.

So, while it's easy to look at this when it is doing well and decide it is a good way to go, one would need to be prepared for some long periods of underperformance. Really, this is true of any strategy that deviates from a "Total Market" approach.

Brad.
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Re: madsinger monthly report (May 2020)

Post by Maestro G »

madsinger wrote: Wed Jun 10, 2020 2:33 pm
Maestro G wrote: Tue Jun 09, 2020 7:03 pm Is the Hot Hands portfolio the strategy the Dan Wiener uses (or used to employ) in his newsletter: sticking with the current best performing Vanguard fund until that fund is outperformed by another and then switching to that one on an annual basis and so on and so on……..?

If so, it’s interesting and an impressive period of outperformance, lending credence to the momentum factor concept.
It appears that this has been mostly answered! But, yes, this is what this "report" is tracking. The past year and 5 months has been a good stretch for the strategy. However, it is certainly a bumpy ride. You can see from this report for December 2018:

viewtopic.php?t=268481

the Hot Hands had a 5-year annualized return for 0.09% while the S&P 500 fund had a 8.35% annualized return. It would take a strong stomach to keep following this approach for 5 years of underperformance like this.

There was a four-year stretch from 2004-2007 where the International Explorer fund was the Hot Hands fund (meaning it was the top Vanguard fund in 2003-2006, so it was owned for three of those years) and racked up crazy high returns. (and Global Equity in 2003 was up over 44%) which gave this "strategy" its very high return since 1999.

So, while it's easy to look at this when it is doing well and decide it is a good way to go, one would need to be prepared for some long periods of underperformance. Really, this is true of any strategy that deviates from a "Total Market" approach.

Brad.
Yes, of course. Thanks for the confirmation and additional detail and for compiling these monthly results.

BTW, if you don’t mind me asking: are you actually an opera singer? Musical theater? Both?

Best,

Maestro G
Everything should be made as simple as possible, but no simpler. Most daily market noise is "a tale told by an idiot, full of sound and fury, signifying nothing.”
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