madsinger monthly report (July 2020)

[madsinger]

Here is a big fat collection of portfolios, with their July 2020 returns, 2020 YTD return, and annualized returns since 1999, 2010, 2015, and 2017 (21 years 7 months, 10 years 7 months, 5 years 7 months, 3 years 7 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
                  July    YTD     since   since   since   since
                  2020    2020    2017    2015    2010    1999
VFINX             5.64%   2.37%  13.28%  10.44%  12.88%   6.55%
Hot Hands         7.63%  19.81%  13.18%   7.86%  11.29%  11.07%
Sheltered Sam     4.38%  -7.81%   6.19%   5.79%   9.06%   7.24%
                  
Newsletter G      4.81%   0.30%  11.35%   8.91%  11.39%   9.62%
Newsletter G-IND  5.29%  -0.40%  10.27%   8.30%  11.31%   7.11%
LS G              4.29%   0.39%   9.22%   6.91%   8.85%   5.69%
3 fund            4.31%   0.55%   9.42%   7.01%   8.58%   6.18%
s&d               3.52%  -5.25%   5.96%   5.11%   7.77%   6.96%

Code: Select all

Newsletter CG     4.19%   1.90%  10.83%   8.56%  10.75%   8.26%
Wellington        4.59%   0.97%   9.19%   7.58%   9.43%   7.66%
STAR              4.38%   5.95%  10.93%   7.84%   9.04%   7.11%
LS MG             3.58%   2.15%   8.37%   6.30%   7.84%   5.62%
coffeehouse       3.00%  -2.19%   5.93%   5.12%   7.68%   6.81%
                  
Newsletter Inc    3.54%   2.40%  10.54%   7.95%   9.71%   6.49%
Wellesley         2.81%   3.22%   7.35%   6.18%   7.84%   6.85%
LS CG             2.85%   3.78%   7.42%   5.58%   6.61%   5.28%
                  
madsinger         4.46%   3.62%   7.77%   5.96%   7.83%   
madsinger PP      5.17%  15.33%  11.38%   7.51%      

[madsinger]

Another strong month for the portfolios.

The portfolios that use a "small cap" or "value" tilt are trailing the Total Stock portfolios by quite a bit this year. The largest 5 US stocks, by market capitalization (and thus, top 5 Total Stock and S&P 500 stocks) are up over 30% YTD, and the rest of the market is basically flat. US Large Value stocks are down over -12% through July, and Small Value is down almost -19% YTD. By contrast, Large US Growth is up over +20% YTD.

The four permanent portfolio asset classes are now all positive for 2020. Long Bonds and Gold up almost +30% YTD. Gold was up over +11% for the month of July. The falling dollar against other major currencies (down -5% in July) was about half of gold's gain. The PP is up over 15% through July, well ahead of its historical return.

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%
June       1.97%     0.85%      0.90%     2.78%     1.58%
July       5.62%     4.22%      0.68%    11.01%     5.23%
               
YTD        3.75%    29.80%      2.67%    29.35%    15.33%

[LadyGeek]

Can you please provide an explanation of the "Hot Hands" portfolio? A member in this post has noticed a missing description.

I don't see a description in the wiki: Madsinger monthly reports

[ResearchMed]

Can you please provide an explanation of the "Hot Hands" portfolio? A member in this post has noticed a missing description.

I don't see a description in the wiki: Madsinger monthly reports

I think there is a concern about not publicizing information that ordinarily only available by subscription.

I'm not aware that madsinger is describing the details of the Wiener's other portfolios, either, other than by name (Growth, Growth Index, etc.).

RM

[LadyGeek]

The assumption is that they are Dan Wiener's portfolios. However, I don't see anything which documents that aspect. The details can be proprietary (not publicly available), but it should be clear what they're based on.

"Newsletter following Vanguard funds" is an assumption of the source and could be anyone.

[madsinger]

Here's an explanation of the "Hot Hand" portfolio.

The newsletter writer has observed that a Vanguard fund that did well one year often did well the next. The "Hot Hand" "portfolio" is not really a "portfolio" at all, but rather a single fund. The method for selecting the fund has been described as looking at all Vanguard "diversified" stock funds, and selecting the fund that had the highest return for one year, and holding it for the next year. At the end of each year, a new "Hot hand" fund is selected and held.

For example, in 2017, the #1 performing diversified Vanguard Stock fund was "International Growth Fund". So, for 2018, the the "Hot Hand" portfolio consisted of one fund: International Growth. Some years, this works out very well, some years, not.

In the four years from 2004 to 2007, "international Explorer" was the Hot Hand four years in a row. In those four year, this fund outperformed the Total Stock Market as follows:

2004: +19.25%
2005: +14.51%
2006: +14.83%
2007: -0.34%

In 2007, this fund was not the top performing fund, and a different fund was chosen. However, those three years of outpeformance are remarkable.

However, it does not always work that way. The three years from 2016 to 2018, the "Hot Hand" fund trailed the Total Stock Market by a significant amount.

Code: Select all

2016 Int'l Explorer      -14.30%
2017 Small Cap Value	  -9.38%
2018 International Growth -7.43%

In fact, the five year total return from 2014-2018 for the Hot Hand "portfolio" was +0.45% versus +45.51% for the Total Stock Market. It would have taken a strong fortitude to hold on to that "portfolio" for five years with basically no return, versus the 45% gain in the total market.

This year, the Hot Hand fund holds over 35% of it portfolio in the five highest market cap US stocks, and these five stocks have had very large positive returns for the year.

-Brad.

[ResearchMed]

The "Hot Hands" strategy is, in my understanding, basically one flavor of a momentum approach, but restricted to a Vanguard fund.

A reasonable question might be whether it's better or worse than a similar annual selection from, say, Fidelity or Morgan Stanley, etc.

And it's easier than using a momentum algorithm that requires frequent (or almost constant?) analysis and possible portfolio changes, etc.

I have no idea how these would compare, or would compare with something like MTUM, a momentum ETF.

Here is a more general discussion, with examples, albeit a bit older:

https://www.nytimes.com/2000/08/27/busi ... -hold.html

R

[LadyGeek]

Here's an explanation of the "Hot Hand" portfolio...

Thanks! I have added your description to the wiki. See: Madsinger monthly reports

[rascott]

The "Hot Hands" strategy is, in my understanding, basically one flavor of a momentum approach, but restricted to a Vanguard fund.

A reasonable question might be whether it's better or worse than a similar annual selection from, say, Fidelity or Morgan Stanley, etc.

And it's easier than using a momentum algorithm that requires frequent (or almost constant?) analysis and possible portfolio changes, etc.

I have no idea how these would compare, or would compare with something like MTUM, a momentum ETF.

Here is a more general discussion, with examples, albeit a bit older:

https://www.nytimes.com/2000/08/27/busi ... -hold.html

R

MTUM has beaten the market index quite significantly since it started in 2013.

[jhendrix]

Has there ever been a hot hand portfolio that was done on a 6 month schedule instead of yearly? For example: Instead of taking the fund from previous year and holding for a year, take the fund that has done the best the past six months and re-adjust every 6 months instead of a year.

[ResearchMed]

Has there ever been a hot hand portfolio that was done on a 6 month schedule instead of yearly? For example: Instead of taking the fund from previous year and holding for a year, take the fund that has done the best the past six months and re-adjust every 6 months instead of a year.

The NYTimes article linked above includes as the Hot Hand example one that was updated quarterly.

The article notes that it probably should be used in a tax-deferred/free account, given the selling needed for the possibly frequent change to the account holdings. (The entire amount was re-allocated as appropriate.)

RM

[AlwaysLearningMore]

Thank you very much for continuing this tracking. It takes time and skill, and your efforts are much appreciated.