Too Much Cash???????????

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Gaddock's picture
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AB
 
Now that we've established the only risk to this position is a surprise dividend read between the lines.
 
Who would ever imagine somebody like ahhh say AIG for example would pay a special dividend at this time? Can you imagine the moral outrage? 
 

Jebediah's picture
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Ron 14 wrote:
I can take or leave MPT. MPT makes reference to risk free assets. There is no such thing. Ask my Great Uncle who has been rolling CD's since the early 80's if those are risk free. Now the poor guy has to sell his house to pay bills because inflation crushed him. Equities will return a greater real return over time than anything else and you will have to take on risk to get that.

 
 
You're proof being?????
 

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iceco1d wrote:
B24 wrote:Incredible Hulk wrote: B24 wrote:
My opinion is that asset allocation/MPT smooths out the returns during cyclical (bull and bear)markets, but does absolutely nothing to protect in a secular bear market.  The key is not having a crystal ball, but rather reacting to what is known. I shall humbly disagree with this paragrah. AA does a tremendous job protecting in just about any market, excluding the last 18 months. To discard a well worn strategy on a once in an investment lifetime event like last year is very short sighted. In a secular bear market you still have rallies up and down. If your asset allocation would suggest 35% fixed & 10% cash then regular rebalancing to that tune would have provided substantial protection in any given decade that doesn't include last year. Even including last year, you were protected to an extent against the 50%+ market decline. Anyone basing their advice for retirees, pre-retirees on market performance over the last 24 months is as narrow minded as the advisor in '99 basing their advice on the then previous 24 month period..
 
I think you're missing my point.  Secular markets are part of the investing cycle.  I am not talking about every cyclical bear and bull.  I am saying that MPT/AA works within a secular bull market.  Since the last secular bull was 18 years long, people were duped into thinking that that's how things always are.  What about the 20's?  What about the 40's? What about the 70's?  What about the 00's?  Four out of the last 10 decades have been wipeouts.  I know Jones likes to talk about buy-and-hold like it's the holy grail, but the truth is, there are a lot of advisor-led investors that have had their portfolios wiped out (twice) in the past 10 years.  But hanging your hat on AA and MPT because it works in some markets is short-sighted.  You can recover from a 4-month cyclical bear market, it's tough to recover from a 10-15 year secular bear market.Glad this thread didn't die (yes, I'm still away).  I haven't caught up yet, but I've seen this statement (or some variant of it) posted several times now. My new question is this...In a "SECULAR BEAR MARKET," do stocks discontinue the concept of paying dividends?  Do bonds take a hiatus from coupon payments?  Does cash stop paying interest?Going to go read the next 6 pages now, but if someone could enlighten me on this, I'd really appreciate it.  Thanks in advance!

I get your point, but my guess would be that some companies may stop paying dividends and some bonds may stop paying coupons (Ah ha! The argument for diversification).

Ice - you're in for a long read!

Anonymous's picture
Anonymous

Haha, just finished.  I was in for a long read.  I'm glad the thread ended on a less "angry" note...then again, it isn't over yet I suppose!FWIW, I'd rather chat EMH than MPT.I think some of these POVs vary depending on what your definition of "buy and hold" is, and to what extent you considering MPT (conceptually, or literally).  Does time-frame rebalancing count as B&H?  How about tolerance-based rebalancing?What if you are selling using a buy-write strategy on your equity piece, does that still count as b&h (as long as you are doing the same thing, over and over, and not using any research to base your trades...like selling @ the money calls repeatedly on the same security(ies)).If you are talking retired people taking income from their portfolios, is it still considered b&h if you are "tactically" placing your withdrawals?  Comments welcomed.  Going to go catch up on some other threads now.

Ron 14's picture
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Ill change my tag too !

Moraen's picture
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iceco1d wrote: Haha, just finished.  I was in for a long read.  I'm glad the thread ended on a less "angry" note...then again, it isn't over yet I suppose!FWIW, I'd rather chat EMH than MPT.I think some of these POVs vary depending on what your definition of "buy and hold" is, and to what extent you considering MPT (conceptually, or literally).  Does time-frame rebalancing count as B&H?  How about tolerance-based rebalancing?What if you are selling using a buy-write strategy on your equity piece, does that still count as b&h (as long as you are doing the same thing, over and over, and not using any research to base your trades...like selling @ the money calls repeatedly on the same security(ies)).If you are talking retired people taking income from their portfolios, is it still considered b&h if you are "tactically" placing your withdrawals?  Comments welcomed.  Going to go catch up on some other threads now.

The real problem with MPT is that it is based in statistics. Conceptually, it's a great idea. The only problem is, things change. We have gone through way too many changes in the past 100 or so years to think that something will always work one way. Economics is the only social science where we assume people are rational. A big mistake, IMHO. It is the reason we have Marxist theories that we battle to this day. I think we must constantly evolve the way we do business, or we'll stagnate and eventually screw up.

As for your questions - I have to wonder that myself. Time-frame rebalancing seems to me to be both an offensive and defensive strategy (probably why people like it so much). Tolerance-based rebalancing seems a little strange simply because people's risk tolerance changes as often as the market does. And since you are selling every time you rebalance, it might not be literally buy and hold. But I think it falls in the same framework as buy and hold.

Retired people - I don't think you can call people taking withdrawals buy and hold investors. They are in a different phase of their life. They are in the only phase where they should be taking money out.

All very good questions though.

A b's picture
A b
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Gaddock wrote:AB
 
Now that we've established the only risk to this position is a surprise dividend read between the lines.
 
Who would ever imagine somebody like ahhh say AIG for example would pay a special dividend at this time? Can you imagine the moral outrage? 
 
 
surprise div. worry is retarded.   
 
if u can net 4% with comm and snake pit option spreads etc its neat.
 
Like every thing else in our biz, you got to get people to do it.  
 
prospects would have to be real players to grasp it.  so many moving parts.
 
seems like it would take a hell of a lot of work to build up a good biz with it BUT sounds like u have a passion for it.    Its certainly unique
 

Don Draper's picture
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Joined: 2009-01-27

structured CDs. problem solved

Gaddock's picture
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A b wrote: surprise div. worry is retarded.   
 if u can net 4% with comm and snake pit option spreads etc its neat.
 Like every thing else in our biz, you got to get people to do it.  
 prospects would have to be real players to grasp it.  so many moving parts.
 seems like it would take a hell of a lot of work to build up a good biz with it BUT sounds like u have a passion for it.    Its certainly unique
 
 
May be retarded BUT it does happen.
 
"snake pit option spreads"? actually it's called a reverse conversion. I'll bet your BD does them for you then sells them in strips just like the "structured product" that's nothing more than an over-wright.
 
If you show a guy that has some serious mulla that you can bring in hedged returns like that it's a no brainer. It makes the other broker look lazy. As for work ... I've automated the entire process. I can easily monitor hundreds of positions. My software only alerts me to positions that are out of tolerance for maintenance or to simply close out early with a profit.
 
Luckily I've been able to land some trusts, foundations & an endowments that allow me to show all involved what I can do. The referrals have been coming in very nicely.
 
 
 

Wet_Blanket's picture
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Joined: 2008-11-13

Gaddock wrote:A b wrote: surprise div. worry is retarded.   
 if u can net 4% with comm and snake pit option spreads etc its neat.
 Like every thing else in our biz, you got to get people to do it.  
 prospects would have to be real players to grasp it.  so many moving parts.
 seems like it would take a hell of a lot of work to build up a good biz with it BUT sounds like u have a passion for it.    Its certainly unique
 
 
May be retarded BUT it does happen.
 
"snake pit option spreads"? actually it's called a reverse conversion. I'll bet your BD does them for you then sells them in strips just like the "structured product" that's nothing more than an over-wright.
 
If you show a guy that has some serious mulla that you can bring in hedged returns like that it's a no brainer. It makes the other broker look lazy. As for work ... I've automated the entire process. I can easily monitor hundreds of positions. My software only alerts me to positions that are out of tolerance for maintenance or to simply close out early with a profit.
 
Luckily I've been able to land some trusts, foundations & an endowments that allow me to show all involved what I can do. The referrals have been coming in very nicely.
 
 
 
 
And this is all done on a non-discretionary basis?

Gaddock's picture
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Wet_Blanket wrote: 
And this is all done on a non-discretionary basis?
 
That is correct.

Wet_Blanket's picture
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Gaddock wrote:Wet_Blanket wrote: 
And this is all done on a non-discretionary basis?
 
That is correct.
 
Dear lord...when do you sleep?  Or, are you just picky and have a handful of large accounts?

Gaddock's picture
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Wet_Blanket wrote:Gaddock wrote:Wet_Blanket wrote: 
And this is all done on a non-discretionary basis?
 
That is correct.
 
Dear lord...when do you sleep?  Or, are you just picky and have a handful of large accounts?
 
Put it this way ... I'm always on th phone and I'm going to start implementing minimums for these kinds of trades. Cant really do it on small accounts anyway. My two largest accounts trade in blocks most of the time.

A b's picture
A b
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Joined: 2009-06-04

go for it.  
ur margin pages had to look like a sceince project gone bad during oct nov 08 melt and feb mar of this year.  short puts at 30-40-50? 
I bet margin geeks love u

Gaddock's picture
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Joined: 2007-02-23

Actually I was assigned an assistant manager who knows all about options LOL. The other folks were pretty clueless.
During the meltdown i was going short and selling calls. Most of the put selling was rolling out of positions.

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