==> BOB BRINKER'S MARKETIMER BOND PORTFOLIO PERFORMANCE
Bob Brinker's Marketimer fixed income portfolio performance for 2017 is not on his website, but for the first time ever (to my knowledge) he has published its performance (3.9%) for this year in Marketimer.
Jim did this research for us:
Jim said...For 2017 Brinker's Fixed Income Portfolio returned 3.9% which beat the 3.2% return on the funds he owned prior to the "taper tantrum" of 2013. This was mostly due to his inclusion of junk bonds in the portfolio. It had little to do with duration. Currently I cannot find the numbers I posted a year ago but Brinker's current portfolio was trailing his older portfolio by around 5-6% going into 2017 so picking up a small gain of 0.70% still doesn't make up the deficit. Once again 2017 was a good year for Long-Term bond funds. Those funds returned anywhere from 8-12% so anyone who sold Long-Term bond funds based on Brinker's advice during the taper tantrum of 2013 has missed out on more than the 5-6% I mentioned.......January 2, 2018 at 3:32 PM
It was in 2013 that Brinker sold all Vanguard Ginnie Mae Fund holdings, and moved into low-duration bond funds because he anticipated rapidly rising interest rates. Obviously that did not happened.
As Jim mentioned above, he compared Brinker's new portfolio returns with what the former one would have done. The lost opportunity cost was enormous in just 2014, and as history shows were never made up - and has become larger each year.
Jim said...
I've taken a look at Bob Brinker's final performance numbers for his fixed income portfolio. For calendar year 2014 his Income portfolio was +1.10%. If he had not made any changes from his prior holdings he would have been +6.11%.
==> BOB BRINKER'S MARKETIMER MODEL PORTFOLIO PERFORMANCE
Another factor to bear in mind is that Brinker's model portfolio III is a balanced portfolio which contains the same three bond funds that the income portfolio contains - which explains the very poor performance last year.
For the first time in the last ten years, Bob Brinker's Marketimer model portfolio performance for 2017 was just slightly better than the total stock market index. This is from his website:
10 years ended 12-31-2017 for all Model Portfolios:
Portfolio I: 116%
Portfolio II: 118%
Portfolio III: 80% (balanced portfolio of equity and fixed-income securities)
Active/Passive: 106%
Vanguard Total Stock Market Index Fund: 128% (VTSMX)
5 years ended 12-31-2017 for all Model Portfolios:
Portfolio I: 96%
Portfolio II: 94%
Portfolio III: 52% (balanced portfolio of equity and fixed-income securities)
Active/Passive: 91%
Vanguard Total Stock Market Index Fund: 104% (VTSMX)
1 year ended 12-31-2017 for all Model Portfolios:
Portfolio I: 23%
Portfolio II: 23%
Portfolio III: 14% (balanced portfolio of equity and fixed-income securities)
Active/Passive: 22%
Vanguard Total Stock Market Index Fund: 21% (VTSMX)
13 comments:
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Go Dow, Go! 25K and climbing. Some headlines this morning:
DOW 25,000!
+250K JOBS
LAYOFFS LOWEST SINCE '90
Were in idyllic stock market investing environment. Low inflation, low interest, good government. All of this when a period in time coming off 8yr period of bad government, low inflation, low interest, but the kicker is bad government practices kept us close to stagnation and deflation threats. I should say poor government practices vs superior. Absolutely no threat of recession in the scope presently. Does history teach us to be invested in good economic times. Yes. Actually, stock market investing a good bet most of the time.
So, we read of threat of interest rate creeping up and how the 30-40 year bull market for bonds maybe over. That BB advises to go short duration. I read we have potential to lose 30% in long term bonds, but this will happen slowly and no need to panic. Also, a period of time when income vs equities chasm is wide. Risk is low in equities given the idyllic environment.
I read an article comparing long term treasury investment 10+ year within a period of increasing interests rates. The Jimmy Carter Reagan years. This should be a good measure on interests vs long term treasury. They did fine. Currently, we have a very tepid interest rate threat for no other reason than since we have so much national debt the government could not afford high interest rates. Also, the cost of the debt will continue to be a wet blanket on economic growth. I read many current permanent portfolios that have 25yr treasury as the mainstay. What's up with that?
In addition I continue to vet gold as a fire insurance and the value of the commodity to optimize portfolio diversity. Gold does appreciate, but technically not an earnings investment. However, it does move the ticker up per unusual diversification attributes. I've change my mind on gold. It achieves or better suited for fire insurance as compared to other commodities. Also, gold or gold funds not mining stock or precious metals. I often read of gold in the class as speculative. Well, ok, that doesn't mean much to me when investors throw money at FANGS, Tesla, or bitcoin. Gold has much history to base decisions upon. Gold is leverage to hedge against losses. Also, those bullet proof permanent portfolios all seem to have gold 15%-25%. I know BB does not approve of gold, but think of the bond risk and low return. Gold may be a better hedge, at least a small percentage. Do your portfolio analysis with 10% gold. It looks like for retirees a 30% stock, 60% long term bond, and 10% gold (IAU) has higher return and a good drop in volatility. Putting 10% gold along side Wellesley looks terrific.
Another interesting investment portfolio. I read of a 85% bond investment doing very well if paired up with 15% speculative. Meaning, the anchor to stability is the bonds, The muscle is the 15% risky investment that seeks only the best return. Maybe not chasing the monthly best, but going where the action is. For example, currently FANGS, health, or financials. Maybe Tesla or bitcoin could enter into this foray. This would be a fun portfolio maybe like the three stallions performance reported on HBBBB.
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This mornings Fox Business economic report:
U.S. employers added 148,000 jobs in December led by construction, manufacturing and health care. The unemployment rate held steady at 4.1%. The report caps off a strong year with 2.1 million jobs created giving the U.S. stock market more fuel to move higher.
U.S. TRADE DEFICIT SWELLS TO LARGEST IN NEARLY 5 YEARS!
The U.S. trade deficit widened 3.2% in November to $50.5 billion, the highest trade gap since January 2012. A larger deficit will likely be a drag on fourth-quarter GDP growth. President Trump has vowed to reduce deficits and bring jobs back home, but the U.S. is on track to post an even bigger gap for all of 2017 that could be the largest in five years.
Source: MarketWatch
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Tom from Livermore...Sorry if you don't like my economic and stock market reports.
The more info I get from this tax overhaul the better it looks for the countries future. Funny, how the cleantech industry just knee jerk attacked. This is what I've experienced on trade journals and blogs as well. They are very political at least the Journalist that have the natural inborn instinct. Those in green energy and agriculture are very attuned to the bias. I see no afront of current government on renewable energy. Actually, it's support, but on a constructive plane. Meaning not indirectly by attacking the competition such as fossil fuels.
The 100% depreciation will push the energy sector ahead including green. Ditching the power plan, Paris, and building pipelines all good stuff. The public was held to the assumption that if we kill the fossil fuel industry we will have wonderous green energy at our doors. I like green energy, but the optimistic analysis puts green energy take over about 30 years out. Meanwhile our demand keeps rising due to good economic growth. A good thing. Also, good to keep green energy on the march with better performance and technological improvements. This seems to be the current CIC action. Really, the CO2 increase is of little concern given how technology has risen to the threat. Even if were to be proven 100% correct, there is so much technology to emit the gas stream. For example Ohio state continues to bring their looping technology to commercial status. This utilizes metal oxides to transport oxygen to those processes that need air. Their process actually is CO2 negative and looks to be usable in the power and chemical industry i.e. coal, hydrogen, and bio. Solar, wind and biofuel will make steady production improvements as well as the rest of renewables. Biofuel could flip to carbon negative as well. IMHO, if the threat was real and those that fixate on the matter were truly concerned we would be in the middle of a Manhattan project to build nuclear power.
So, in terms of mega trends the U.S has the captains chair to move the economy. We own high tech given our propensity to support open markets, We still have the ability to sprout and support game changers and soon to be titans. This is not a bad thing given the hope we can invest in their business plan. I do worry of those increasing tax free entities that become popular with the rich and powerful to gain praise and influence upon our tax dollar. Not good.
Jester posted:
"The U.S. trade deficit widened 3.2% in November to $50.5 billion, the highest trade gap since January 2012."
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Thanks for posting that info.
Trade and Budget deficits going forward along with GDP are IMO important investment signals for those of us looking for Federal Reserve impact, and possible topping formations.
Interpretation of the numbers along with impact to economy is key as shown with the discussion of Quarterly Annualized GDP figures.
smile
The exchange rate was steady around $1.10 US dollars to 1 Euro from 2015 to 2017. From 2017 to present day it has risen where 1 Euro is equivalent to $1.20. The dollar has dropped about 9% in value compared to the Euro over the last 12 months (i.e., $0.10 increase / $1.10 = 9 %).
The drop in the dollar will affect impact consumer prices such as the price at the gas pump unless US oil increases. Productivity gains in the food and housing industry also need to be realized also in order to curtail inflation.
The federal debt to GDP ratio has ranged 100% to 105% since 2012.
https://fred.stlouisfed.org/series/GFDEGDQ188S
AD
AND CERTAINLY, if I may... Let's try to infuse just a little molasses into the steak sauce to slow the boil and gain some taste.
Nobody of a right mind would consult a crystal ball for a prediction of the stock market movement for a year, and then dance on the grave of the ball if it wasn't accurate. Any sane person knows there are too many variables in action.
Therefore, if BB beats the market or doesn't beat the market or slips and falls on a banana peel left by Gundlach, it's irrational to judge, within such a small period, the results of his plan.
For example, if I forced my Saab mechanic David Puddy to give me a diagnosis within 15 minutes, and then lambasted him if he was wrong, Elaine would be shaking her head vigorously to imply, "You're NUTS, Jerry."
So if Ol' Bob was wide of the berth this year but then closer next year, I'd say he's in the ballpark generally.
If you have different ideas, run with them, baby. I'll hook up with you in Vancouver.
Not Kramer
I'm having an epiphany :). After reviewing the magic of Harry Browne's Permanent Portfolio and understanding better the value of diverse investments, I leaning more to value long term bonds and gold. Both of which BB claims is toxic. Browne's very well respected port includes equal portions of cash, gold, stocks, and long term bonds. This is his formulation for bullet proof safety returns for no matter economic environment. Presently, BB claims long term bonds are a very dangerous place to be in as well as gold. So, he offers advice for retirees to be 70%-50% in stocks? The rest short term bonds. Well, short term bonds = cash. Cash does offer safety, liquidity, but little return. I you understand Browne's strategy you will rethink some of Bob's advice. It is hard to understand how this PP (permanent portfolio) works so well. First one does need liquidity, especially those in retirement. Also, since no asset class does well in recession good to have this stable force. That is unless the fed pumps phony money out to pump up stocks. Cash, also, has high value in deflation. I read LT bonds do well in declining interest rates, deflation, and reasonably well in prosperity. Ouch, isn't this the period were in? BB says to stay away?
It looks to me the power of the portfolio lies with re-balancing. Since it is a diverse port, the different asset classes that will sink and raise more independent. So, we have an automatic system to buy cheap and sell high. My guess we could actually time the re-balancing per some timing formula. Set up each possible groupings of two and watch the percentage spread of each group. When they increase spread, good. Watch until the spread appears to decrease, then re balance. It would appear in such a port, that within the asset classes, volatility is a good thing. One reason LT bonds are better. So, no matter the economic season, we have a port that will benefit.
This new understanding dovetails with value of low cost active fund such as Wellesley. You have the advantage within such a fund to tap into their wealth of knowledge and auto balancing. It might be better given, the fund does sway more spread to asset class for example when the economy is doing well, put slightly more into stocks. The fund does have short duration bonds, but may be good to have more in your interest paying savings to offer better ratio. We probably already do this anyways. The fund does not have gold, but hold that asset externally and watch the percentage spread. Re-balance at the optimum time. As gold rises and falls this pumping action will improve your return and take away volatility. Strange isn't it, that a volatile holding will decrease your overall volatility. It looks like 10% portion will do a heap a good. If your more conservative 15%. If something dramatic happens, you will wish for 25%.
Also, some of this magic is from your financial investments clipping draw downs. You can suffer lower returns if you gain the ability to decrease draw down. Even in low growth you win if your base is larger and it will be for a longer period.
Well Trees, today IS Epiphany Sunday.
Trees: I leaning more to value long term bonds and gold. Both of which BB claims is toxic.
BB has just happened to live his whole life in the richest country in the history of humanity, in the boomer era, the wealthiest cohort in USA history, one that has restricted childbearing for even more wealth while going into historic debt. Of course BB thinks anything not about "bull" and "prosperity" is toxic.
But for those of us with another likely 40-50 years in front of us, 10% cash plus 10% precious metals (always stored privately, off-grid) is just common sense. If a person is so greedy they can't spare 20% of their net worth for insurance due to wars and depressions, they don't know much of human history. And yes, this included BB, who seems to think the world California 1950 forever.
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