Dear VictoriaF

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Maestro G
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Dear VictoriaF

Post by Maestro G »

Hi Victoria,

Perhaps you didn't see my reply/inquiry to your post over on the "What is your investment philosophy?" thread?

I have pasted same below. When you have a moment, and if you would care to share, I would be very interested in your current thoughts.

As mentioned below, if you would prefer to respond through a PM that would also be greatly appreciated.

Thanks in advance again,

Maestro G


VictoriaF wrote:
My investment philosophy is Other.

I am a TIPSter, I am buying TIPS when they look even half-decent.

Victoria


Hi Victoria,

I have admired the thought and content of your posts for sometime now, not to mention your wonderful sense of humor in general, and specifically your keen ability to put that to good use when diffusing any number of tense exchanges from time to time on this forum.
Wink

Like you (though probably not as extensively) I have read and also admired much of what Nassim Taleb argues for: robust society, recognizing what we can't possibly predict (black swans) in a complex financial world through forecasts, metrics etc...

From what I have gathered based on your posts about Taleb, his philosophy and world view would seem to shape your own, at least with respect to global finance. Please forgive me if I have characterized or overstated this incorrectly. If not, I would like to say that more and more I am also drawn to this view.

As in the above, you also have made it clear that TIPS form the core of your investment philosophy and approach, a la Zvi Bodie, whom I also find persuasive.

This leads me to my question if I may?: given the apparent Taleb/Bodie influence, would you mind sharing if you employ the barbell strategy that Taleb has suggested, perhaps, I'm thinking using TIPS as the so called "safe" asset? Or is it exclusively TIPS?

As you know (including today on Charlie Rose) Taleb has been passionately (does he know any other way!) recommending the last two years the shorting of US Treasuries since the FED's bailout and QE solution to the financial crisis, out of genuine fear of the resultant high or hyperinflation. If he is correct, however unlikely (though certainly not out of the realm of possibility), do you feel comfortable that TIPS will carry the day given that the government would be essentially responsible for the inflation? This question stems from CraigR's oft argument that "one shouldn't buy arson insurance form a potential arsonist!"

What I find difficult with Taleb, aside from the occasional hyperbole, is reconciling and implementing his quite brilliant philosophy and world view into a practical investment strategy. It would seem that the only thing he might recommend right now would be cash, gold and German bonds!

Since it seems you have thought about this a great deal, I would appreciate any insights you might care to share. If you would prefer to do this through a PM, I would understand completely.

Thanks much and all best regards,

Maestro G

Smile
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Post by VictoriaF »

Hi Maestro G,

At some point I stopped following the "What is your investment philosophy?" thread and did not see your reply there.

In that thread I reduced my investment philosophy to a quip, because at the time I was preoccupied with the decisions related to the 2041 TIPS auction, i.e., whether to buy, how much to buy, and in which account(s) to buy.

My actual investment approach is rather humorless, I am ashamed to admit. I have about 40/60 equities/fixed income, with the fixed income split between inflation-indexed securities (TIPS and I-Bonds) and the TSP G-Fund. This allocation reflects my sound sleep level, and I like to invest in my sound sleep, because it enhances my human capital.

And the human capital brings me to Taleb. Taleb's "The Black Swan" helped me to recognize, organize and emphasize various aspects of my life and aspirations. For me, Taleb is primarily a philosopher with a gift of effectively communicating his philosophy to me. He has taught me to see the world through the prism of the Black Swans, to be skeptical, to spot deferrals to history, reliance on models, and projections into the future.

But the most important thing Taleb has taught me was the existence of the positive Black Swans.

Taleb's investing philosophy is not practical for me. I don't have the skills for or the interest in putting 10-20% of my liquid assets into positive Black Swans-generating securities. However, I purposely cultivate my own abilities and pursuits, and I want to try to catch positive Black Swans in what Taleb calls "scalable professions."

I agree with Taleb that dedicating one's life to scalable professions is too dangerous, the odds are overwhelmingly against Extremestan citizens. However, placing 10-20% of one's human capital in Extremestan could pay off.

And so my barbell is
- 80-90% - liquid assets, boringly invested
- 10-20% - cultivation of my human capital

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
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Post by Maestro G »

VictoriaF wrote:Hi Maestro G,

At some point I stopped following the "What is your investment philosophy?" thread and did not see your reply there.

In that thread I reduced my investment philosophy to a quip, because at the time I was preoccupied with the decisions related to the 2041 TIPS auction, i.e., whether to buy, how much to buy, and in which account(s) to buy.

My actual investment approach is rather humorless, I am ashamed to admit. I have about 40/60 equities/fixed income, with the fixed income split between inflation-indexed securities (TIPS and I-Bonds) and the TSP G-Fund. This allocation reflects my sound sleep level, and I like to invest in my sound sleep, because it enhances my human capital.

And the human capital brings me to Taleb. Taleb's "The Black Swan" helped me to recognize, organize and emphasize various aspects of my life and aspirations. For me, Taleb is primarily a philosopher with a gift of effectively communicating his philosophy to me. He has taught me to see the world through the prism of the Black Swans, to be skeptical, to spot deferrals to history, reliance on models, and projections into the future.

But the most important thing Taleb has taught me was the existence of the positive Black Swans.

Taleb's investing philosophy is not practical for me. I don't have the skills for or the interest in putting 10-20% of my liquid assets into positive Black Swans-generating securities. However, I purposely cultivate my own abilities and pursuits, and I want to try to catch positive Black Swans in what Taleb calls "scalable professions."

I agree with Taleb that dedicating one's life to scalable professions is too dangerous, the odds are overwhelmingly against Extremestan citizens. However, placing 10-20% of one's human capital in Extremestan could pay off.

And so my barbell is
- 80-90% - liquid assets, boringly invested
- 10-20% - cultivation of my human capital

Victoria
Dear VictoriaF,

I thought I sensed, to a great degree, a philosophical and investment approach kinship here, and your very thoughtful and always illuminating response confirms it. Thanks so much!

Like you, I also employ a roughly 40/60 portfolio, but with a somewhat different makeup influenced by general Boglehead indexing, Permanent Portfolio philosophy, Fama/French 3 factor model, Swedroe, Swensen and Bodie. At the risk of a highly subjective judgment/overstatement: a kinda of "best of the best" in investment thinking that I find compelling and persuasive. Specifically, my current allocation:

40% Global Equity (VTI 18%, VXUS 18%, and I'm saving a little powder for the impending release of the Russell OWSV etf. provided it has a reasonable ER.)

20% Long TIPS (LTPZ. Like you, I should probably buy individual bonds here, but I'm a bit lazy in this regard and the PIMCO fund is not expensive)

20% Commodities (USCI 10; IAU 10)

20% Cash (TUZ; I-bonds; Alliant CU savings; Cash Balance 403b tied to LT treasury rates)

I had a VG global Reit allocation, but I decided to simplify given their inclusion in the larger indexes.

So far, so good.

Also like you, I value my "sound sleep level" (though my schedule often doesn't permit it!:() particularly as it contributes to my effective and enduring human capital:!:

Still, it concerns me that I (and I suppose many others) am falling into the trap that Taleb refers to as "medium risk" investments. At the same time, like you, I probably don't have the time, skill or interest to effectively or successfully implement the positive Black Swan "barbell" strategy. Though, on a certain level, the simplicity coupled with the extreme risk taking (albeit contained by the percentage of exposure) that strategy entails is fascinating, enticing and appealing:?

Which brings me to the issue of "scalable professions." As you might have gathered from my avatar, my profession definitely resides in Extremestan! And, as I have dedicated my life to it, perhaps I am already taking that extreme risk:!::lol:

I suppose in this regard, it all comes down to how you define career success :?: Though there have been
many challenges, travails and detours along the way, my career has, all in all, been quite satisfying to date and getting better all the time :!: And, after all, I get to work with genius on a daily basis :!: 8)

From a risk tolerance/retirement point of view, I suppose I am a little non-conventional as, health permitting and professional opportunity provided (fingers crossed!), I plan never to retire in any conventional sense. I love what I do and wouldn't mind dying while doing it! (well, maybe right after the performance.:wink: ) But who knows, there are many Black Swans lurking out there :shock: :wink:

I hope we can continue our dialogue from time to time, and particularly as the investment climate and world changes, which seems to be happening at an exponential rate these days :!: :shock:

In the meantime, thanks again for your reply, I will look forward to your future posts with great interest, and may I wish you many, many positive Black Swans in all your future endeavors :!: :)

Maestro G

p.s. I would be interested to know what has and/or currently constitutes your 10-20% human capital exposure to Extremestan if you would care to share :?:

Best,
MG
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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Post by VictoriaF »

Hi Maestro G,
Maestro G wrote:Like you, I also employ a roughly 40/60 portfolio, but with a somewhat different makeup influenced by general Boglehead indexing, Permanent Portfolio philosophy, Fama/French 3 factor model, Swedroe, Swensen and Bodie. At the risk of a highly subjective judgment/overstatement: a kinda of "best of the best" in investment thinking that I find compelling and persuasive.
You are trying to optimize at the meta-level, across different investment strategies. Designing your own innovative portfolio that combines the best ideas from leading models could be intellectually stimulating. In practice, you may or may not get the optimal performance.

And the optimal performance is not easy to define. It is tempting to aim at the maximum amount of money, but this immediately raises questions such as "At what point in time will I have that maximum?" and "How will I know that it is the maximum?" and "What if the markets sharply decline on the next day after I will have reached the maximum?"

Maestro G wrote:Specifically, my current allocation:

40% Global Equity (VTI 18%, VXUS 18%, and I'm saving a little powder for the impending release of the Russell OWSV etf. provided it has a reasonable ER.)

20% Long TIPS (LTPZ. Like you, I should probably buy individual bonds here, but I'm a bit lazy in this regard and the PIMCO fund is not expensive)

20% Commodities (USCI 10; IAU 10)

20% Cash (TUZ; I-bonds; Alliant CU savings; Cash Balance 403b tied to LT treasury rates)

I had a VG global Reit allocation, but I decided to simplify given their inclusion in the larger indexes.
You seem to prefer ETFs over funds. There is nothing wrong with ETFs per se, and frequently they have lower expense ratios than funds. However, ETFs lack some barriers to frequent trading that Vanguard funds have. Artificial constraints could be useful during market turmoils, similarly to taking a deep breath before speaking or sleeping over an idea before acting on it.
Maestro G wrote:So far, so good.

Also like you, I value my "sound sleep level" (though my schedule often doesn't permit it!:() particularly as it contributes to my effective and enduring human capital:!:

Still, it concerns me that I (and I suppose many others) am falling into the trap that Taleb refers to as "medium risk" investments. At the same time, like you, I probably don't have the time, skill or interest to effectively or successfully implement the positive Black Swan "barbell" strategy. Though, on a certain level, the simplicity coupled with the extreme risk taking (albeit contained by the percentage of exposure) that strategy entails is fascinating, enticing and appealing:?
It is possible that when we(*) are trying to combine several investment approaches we lose some of their best features without being adequately compensated for that. It is also possible that what we do will lead to the best results, based on our personal definitions of the "best." Are we clipping long tails (the right ones as well as the left ones) to ascertain the middle? Are we lengthening or thickening the tails? How good is our guess about the nature of the tails? Tomorrow we will know how it has worked. Today we don't.

(*) I started by writing "you" and then changed it to "we" to reflect that some of these questions are rather general ... and mostly unanswerable.


May I offer an observation from a different field? Let's suppose that my job requires me to move to a new area. I could move to within the walking distance from work and live in a suburban environment. Or I could live in a city and have a long commute. Each of these extremes has significant costs, but whatever my choice, I could be content with its benefits. However, if I tried to choose the middle ground and settle half-way between the work and the city, I would lose on both counts.

The conventional wisdom recommends middle grounds. Taleb teaches us the value of bar-bells. Is there the middle ground between the middle ground and the bar-bell? :?:
Maestro G wrote:Which brings me to the issue of "scalable professions." As you might have gathered from my avatar, my profession definitely resides in Extremestan! And, as I have dedicated my life to it, perhaps I am already taking that extreme risk:!::lol:

I suppose in this regard, it all comes down to how you define career success :?: Though there have been
many challenges, travails and detours along the way, my career has, all in all, been quite satisfying to date and getting better all the time :!: And, after all, I get to work with genius on a daily basis :!: 8)

From a risk tolerance/retirement point of view, I suppose I am a little non-conventional as, health permitting and professional opportunity provided (fingers crossed!), I plan never to retire in any conventional sense. I love what I do and wouldn't mind dying while doing it! (well, maybe right after the performance.:wink: ) But who knows, there are many Black Swans lurking out there :shock: :wink:

I hope we can continue our dialogue from time to time, and particularly as the investment climate and world changes, which seems to be happening at an exponential rate these days :!: :shock:

In the meantime, thanks again for your reply, I will look forward to your future posts with great interest, and may I wish you many, many positive Black Swans in all your future endeavors :!: :)

Maestro G

p.s. I would be interested to know what has and/or currently constitutes your 10-20% human capital exposure to Extremestan if you would care to share :?:

Best,
MG


The discussion of the human capital and our plans for enhancing it is too subjective to be of interest in a public forum. Living in the Extremestan takes a lot of courage. May wish you many positive Black Swans in your field,

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
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Post by gabylon »

And, given your backgrounds, you could always team-up to write "Extremistan: The Musical Comedy" :D
Last edited by gabylon on Sun Mar 06, 2011 7:13 pm, edited 1 time in total.
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Re: Dear VictoriaF

Post by Ozonewanderer »

Maestro G wrote:Hi Victoria, I have admired the thought and content of your posts for sometime now, not to mention your wonderful sense of humor in general, and specifically your keen ability to put that to good use when diffusing any number of tense exchanges from time to time on this forum. :Wink
VictoriaF wrote:Hi Maestro G, I started by writing "you" and then changed it to "we"...
Perhaps you two should get a motel room :wink:.
I'm just poking fun. Carry on, I'll look the other way. :sharebeer
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Post by letsgobobby »

Maestro, your portfolio appears to me more similar to Harry Browne's PP than anything you could devise from Taleb's writing. I'm no expert... just my take.
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Post by chaz »

We need more humor in this forum - I like it.
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Post by cinghiale »

Dear Victoria,

I miss the days when the real Abby did Dear Abby. Perhaps you would consider an advice column here on the forum?
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Re: Dear VictoriaF

Post by VictoriaF »

Ozonewanderer wrote:
Maestro G wrote:Hi Victoria, I have admired the thought and content of your posts for sometime now, not to mention your wonderful sense of humor in general, and specifically your keen ability to put that to good use when diffusing any number of tense exchanges from time to time on this forum. :Wink
VictoriaF wrote:Hi Maestro G, I started by writing "you" and then changed it to "we"...
Perhaps you two should get a motel room :wink:.
I'm just poking fun. Carry on, I'll look the other way. :sharebeer
It's time to mobilize my keen ability to diffuse tense exchanges. Yes, please look the other way. :sharebeer

Victoria
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Post by VictoriaF »

cinghiale wrote:Dear Victoria,

I miss the days when the real Abby did Dear Abby. Perhaps you would consider an advice column here on the forum?
Dear cinghiale,

My "column" usually appears after Boglehead reunions. I am planning to have one after BH10, if I get in that is,

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
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Post by wearethefall »

Wouldn't it make more sense to get your exposure to risky assets in the barbell approach through deep out-of-the-money calls?

I think the issue of "scalable" professions is an interesting one in the modern-day internet era. I can definitely see the fields of journalism, writing, and music being dominated by a few top performers who rake in millions, with the rest of the field being composed of hobbyists who give their labour away for free (bloggers and amateur bands, for instance). Very very occasionally one of the hobbyists would make it big and join the elite performers.
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Re: Dear VictoriaF

Post by YDNAL »

VictoriaF wrote:He has taught me to see the world through the prism of the Black Swans, to be skeptical, to spot deferrals to history, reliance on models, and projections into the future.
I think I found my next signature! :)
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Re: Dear VictoriaF

Post by Finridge »

I see that VictoriaF stopped posting in early June. I hope everything is OK with her. I really enjoyed her posts and book recommendations.
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Re: Dear VictoriaF

Post by GoldenFinch »

Finridge wrote: Fri Sep 13, 2019 6:01 pm I see that VictoriaF stopped posting in early June. I hope everything is OK with her. I really enjoyed her posts and book recommendations.
I think she goes away and does interesting stuff and then comes back here in between adventures.
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Re: Dear VictoriaF

Post by Will do good »

GoldenFinch wrote: Fri Sep 13, 2019 6:28 pm
Finridge wrote: Fri Sep 13, 2019 6:01 pm I see that VictoriaF stopped posting in early June. I hope everything is OK with her. I really enjoyed her posts and book recommendations.
I think she goes away and does interesting stuff and then comes back here in between adventures.
+1, she's amazing lady, funny to talk to too.
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Re: Dear VictoriaF

Post by abuss368 »

Victoria's posts were good and I noticed she has been MIA. Hope all is well and that she will return.
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Re: Dear VictoriaF

Post by bampf »

This. +1
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Re: Dear VictoriaF

Post by VictoriaF »

I spent several weeks in Europe and had a few shorter trips. I travel without any communication devices and now have to deal with the accumulated tasks and electronic backlog. Apart from this mundane work, I am fine and looking forward to my next trip to the Bogleheads 2019 conference.

Thank you all,
Victoria
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Re: Dear VictoriaF

Post by dodecahedron »

VictoriaF wrote: Thu Sep 26, 2019 7:52 am Apart from this mundane work, I am fine and looking forward to my next trip to the Bogleheads 2019 conference.

Thank you all,
Victoria
Looking forward to seeing you at BH 2019 next month!
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Re: Dear VictoriaF

Post by protagonist »

Welcome back, Victoria!

I'm interested to hear how your investment strategy has changed since 2011 (see above)....not including your "cultivation of human capital" (sic) now that you are retired...or if you take the Bogleheads catchphrase "Stay the Course" seriously in a fundamentalist way.....
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Re: Dear VictoriaF

Post by Jazzman »

See you in Philly!
Jesse
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Re: Dear VictoriaF

Post by abuss368 »

VictoriaF wrote: Thu Sep 26, 2019 7:52 am I spent several weeks in Europe and had a few shorter trips. I travel without any communication devices and now have to deal with the accumulated tasks and electronic backlog. Apart from this mundane work, I am fine and looking forward to my next trip to the Bogleheads 2019 conference.

Thank you all,
Victoria
Welcome back.
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Re: Dear VictoriaF

Post by Finridge »

VictoriaF wrote: Thu Sep 26, 2019 7:52 am I spent several weeks in Europe and had a few shorter trips. I travel without any communication devices and now have to deal with the accumulated tasks and electronic backlog. Apart from this mundane work, I am fine and looking forward to my next trip to the Bogleheads 2019 conference.

Thank you all,
Victoria
Welcome back! We missed you. :D I hope your trips were enjoyable.
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Re: Dear VictoriaF

Post by Valuethinker »

VictoriaF wrote: Thu Sep 26, 2019 7:52 am I spent several weeks in Europe and had a few shorter trips. I travel without any communication devices and now have to deal with the accumulated tasks and electronic backlog. Apart from this mundane work, I am fine and looking forward to my next trip to the Bogleheads 2019 conference.

Thank you all,
Victoria
I miss your make-me-laugh-out-loud sense of humour.
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Re: Dear VictoriaF

Post by Yukon »

VictoriaF wrote: Thu Sep 26, 2019 7:52 am I travel without any communication devices ....
Thank you all,
Victoria
So, no cell phone? No google maps? Fascinating. I "shut off" most of my mundane computer use (email, social media, forums, etc) during travel but find myself making sure portable chargers are available during travel...
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