At least -50% in next 2 years - Michael Burry and David Wright

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
User avatar
Vulcan
Posts: 2996
Joined: Sat Apr 05, 2014 11:43 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Vulcan »

KlangFool wrote: Sat Jun 25, 2022 8:48 pm
smitcat wrote: Sat Jun 25, 2022 6:53 pm
KlangFool wrote: Sat Jun 25, 2022 6:36 pm
Vulcan wrote: Sat Jun 25, 2022 5:28 pm
KlangFool wrote: Sat Jun 25, 2022 4:47 pm
You are making a prediction that the stock market could not oscillate and go side way for the the next 10 years.
I am making no predictions whatsoever - just pointing out that the much-vaunted "rebalancing bonus" is a behavioral perception, not a mathematical fact.

I see the links to Siamond's analysis were already provided upthread, so I will just leave it there.
Please do not confuse a back test as a mathematical fact.

What happened to rebalancing bonus if the stock market is oscillating and going side way or down for the next 10 years?

KlangFool
Please tell us what happens by....
Please provide a model similar to the ones above with the market going 'sideways' for an extended period of time demonstrating the advantage/disadvantage to the rebalancing.
AA = 60/40, Portfolio = 100K, 60K stock and 40K bond.

The stock market drops 30% and then went up by 30% -> Side way . The bond did nothing.

A) No rebalancing.

60K * 0.7 * 1.3 = 54.6K + 40K = 94.6K

B) With rebalancing

60K stock drop to 42K stock (60K * 0.7)

Rebalance to

49.2K stock and 32.8K bond

Stock goes up 30 % -> 49.2K * 1.3 = 63.96K

Bond = 32.8K

Total = 96.76K

KlangFool
Great. Now try it on the opposite direction.

Also: as long as we are backtesting, include the period before the market went down.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

Vulcan wrote: Sat Jun 25, 2022 8:54 pm
KlangFool wrote: Sat Jun 25, 2022 8:48 pm
smitcat wrote: Sat Jun 25, 2022 6:53 pm
KlangFool wrote: Sat Jun 25, 2022 6:36 pm
Vulcan wrote: Sat Jun 25, 2022 5:28 pm
I am making no predictions whatsoever - just pointing out that the much-vaunted "rebalancing bonus" is a behavioral perception, not a mathematical fact.

I see the links to Siamond's analysis were already provided upthread, so I will just leave it there.
Please do not confuse a back test as a mathematical fact.

What happened to rebalancing bonus if the stock market is oscillating and going side way or down for the next 10 years?

KlangFool
Please tell us what happens by....
Please provide a model similar to the ones above with the market going 'sideways' for an extended period of time demonstrating the advantage/disadvantage to the rebalancing.
AA = 60/40, Portfolio = 100K, 60K stock and 40K bond.

The stock market drops 30% and then went up by 30% -> Side way . The bond did nothing.

A) No rebalancing.

60K * 0.7 * 1.3 = 54.6K + 40K = 94.6K

B) With rebalancing

60K stock drop to 42K stock (60K * 0.7)

Rebalance to

49.2K stock and 32.8K bond

Stock goes up 30 % -> 49.2K * 1.3 = 63.96K

Bond = 32.8K

Total = 96.76K

KlangFool
Great. Now try it on the opposite direction.

Also: as long as we are backtesting, include the period before the market went down.
A) No rebalancing. Same result

60K * 1.3 * 0.7 = 54.6K + 40K = 94.6K

B) With rebalancing

60K * 1.3 = 78K

Rebalance

70.8K stock and 47.2K bond

70.8K * 0.7 = 49.56K stock

Bond = 47.2K

Total = 96.76K

Same result.


KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
User avatar
Vulcan
Posts: 2996
Joined: Sat Apr 05, 2014 11:43 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Vulcan »

You didn't include the runup before (or after) the market went down.

You can always come up with a scenario where the elusive bonus shows up over a particular set of trades if the timing is just right.

But to talk about it as a guaranteed free lunch is a fallacy.

There is no free lunch.
KlangFool wrote: Sat Jun 25, 2022 6:36 pm
Vulcan wrote: Sat Jun 25, 2022 5:28 pm I am making no predictions whatsoever - just pointing out that the much-vaunted "rebalancing bonus" is a behavioral perception, not a mathematical fact.
Please do not confuse a back test as a mathematical fact.
Exactly!
If you torture the data long enough, it will confess to anything. ~Ronald Coase
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

Vulcan wrote: Sat Jun 25, 2022 9:18 pm You didn't include the runup before (or after) the market went down.

You can always come up with a scenario where the elusive bonus shows up over a particular set of trades if the timing is just right.

But to talk about it as a guaranteed free lunch is a fallacy.

There is no free lunch.
KlangFool wrote: Sat Jun 25, 2022 6:36 pm
Vulcan wrote: Sat Jun 25, 2022 5:28 pm I am making no predictions whatsoever - just pointing out that the much-vaunted "rebalancing bonus" is a behavioral perception, not a mathematical fact.
Please do not confuse a back test as a mathematical fact.
Exactly!
Vulcan,

"But to talk about it as a guaranteed free lunch is a fallacy."

I did not say guaranteed free lunch. It is your claim that rebalancing bonus is not possible. It is just a behavioral perception.

"You can always come up with a scenario where the elusive bonus shows up over a particular set of trades if the timing is just right."

And, that is my whole point. The back test is based on long term rising stock market trend. It is entirely possible that we could in a side way stock market for the next 10 year. So, unless we can predict the future, we cannot claim that the rebalancing bonus is not possible.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
User avatar
Vulcan
Posts: 2996
Joined: Sat Apr 05, 2014 11:43 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Vulcan »

KlangFool wrote: Sat Jun 25, 2022 9:43 pm I did not say guaranteed free lunch. It is your claim that rebalancing bonus is not possible. It is just a behavioral perception.
It's possible. But on average, over an investment horizon, it isn't there.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
billaster
Posts: 2930
Joined: Wed Apr 27, 2022 2:21 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by billaster »

Marseille07 wrote: Sat Jun 25, 2022 8:51 pm
billaster wrote: Sat Jun 25, 2022 7:25 pm Michael Burry never demonstrated any particular skill in market predictions. After all, there were lots of prominent economists who observed and predicted exactly the same housing meltdown. But for most of us who saw it coming, the best we could do was avoid losing money in the doomed real estate market. What Michael Burry did was figure out a way not just to avoid losing money like the rest of us but make a profit off of it using complicated derivatives and credit swaps.

So not so much market prediction skill but more financial engineering skill. I wouldn't put a lot of stock in his prediction ability.
Are you kidding me? Give him credit. Economists may have predicted this and that but they didn't put their money on it. Burry did, and it wasn't easy (tell me on top of your head how to short the housing market if you were to do it today)..
That's exactly what I said. Lots of people recognized and wrote about the coming housing meltdown but couldn't do much about it except sound the warning. The data were obvious to anyone who bothered to look. Burry didn't come up with anything new regarding that prediction. What he did come up with is some fancy financial engineering to make a profit from it, a way to short the housing market that didn't exist for most people.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

Vulcan wrote: Sat Jun 25, 2022 9:47 pm
KlangFool wrote: Sat Jun 25, 2022 9:43 pm I did not say guaranteed free lunch. It is your claim that rebalancing bonus is not possible. It is just a behavioral perception.
It's possible. But on average, over an investment horizon, it isn't there.
Vulcan,

It did happened in March 2020.

"But on average, over an investment horizon, it isn't there."

We only live once. We only get one sequence of returns. The average does not apply to us. We have to live at least 20 times before average can be useful to us.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
User avatar
Vulcan
Posts: 2996
Joined: Sat Apr 05, 2014 11:43 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Vulcan »

KlangFool wrote: Sat Jun 25, 2022 9:51 pm
Vulcan wrote: Sat Jun 25, 2022 9:47 pm
KlangFool wrote: Sat Jun 25, 2022 9:43 pm I did not say guaranteed free lunch. It is your claim that rebalancing bonus is not possible. It is just a behavioral perception.
It's possible. But on average, over an investment horizon, it isn't there.
It did happened in March 2020.
Is your investment horizon one month long?
"But on average, over an investment horizon, it isn't there."

We only live once. We only get one sequence of returns. The average does not apply to us. We have to live at least 20 times before average can be useful to us.
It is more useful than one month looked at in isolation, that's for sure.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Marseille07 »

billaster wrote: Sat Jun 25, 2022 9:50 pm That's exactly what I said. Lots of people recognized and wrote about the coming housing meltdown but couldn't do much about it except sound the warning. The data were obvious to anyone who bothered to look. Burry didn't come up with anything new regarding that prediction. What he did come up with is some fancy financial engineering to make a profit from it, a way to short the housing market that didn't exist for most people.
Buddy, that crash was not as obvious as you think. Even Burry was -20% at one point because he shorted too early.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

Vulcan wrote: Sat Jun 25, 2022 9:57 pm
KlangFool wrote: Sat Jun 25, 2022 9:51 pm
Vulcan wrote: Sat Jun 25, 2022 9:47 pm
KlangFool wrote: Sat Jun 25, 2022 9:43 pm I did not say guaranteed free lunch. It is your claim that rebalancing bonus is not possible. It is just a behavioral perception.
It's possible. But on average, over an investment horizon, it isn't there.
It did happened in March 2020.
Is your investment horizon one month long?
"But on average, over an investment horizon, it isn't there."

We only live once. We only get one sequence of returns. The average does not apply to us. We have to live at least 20 times before average can be useful to us.
It is more useful than one month looked at in isolation, that's for sure.
Vulcan,

Every single oscillation create rebalancing bonus. It does nothing to the folks that do not rebalance.

"Is your investment horizon one month long?"

Actually, the argument should go back to folks that do not rebalance.

I rebalance to maintain my AA of 60/40. It is totally based on Boglehead's philosophy of "Buy, Hold, and Rebalance". Folks that did nothing in March 2020 do not maintain their AA.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
sfnerd
Posts: 348
Joined: Tue Apr 08, 2014 1:16 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by sfnerd »

Michael Burry might be saying the sky is falling, but he’s also loading up on tech and travel stocks in his portfolio.

Remember that these gurus are making these high level predictions, but rarely are they “all in” or all out as the case may be.

These experts use complicated derivative strategies to try to profit if some of these big problems materialize, but usually only with a small portion of their capital.
User avatar
Vulcan
Posts: 2996
Joined: Sat Apr 05, 2014 11:43 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Vulcan »

KlangFool wrote: Sat Jun 25, 2022 10:01 pm
Vulcan wrote: Sat Jun 25, 2022 9:57 pm
KlangFool wrote: Sat Jun 25, 2022 9:51 pm
Vulcan wrote: Sat Jun 25, 2022 9:47 pm
KlangFool wrote: Sat Jun 25, 2022 9:43 pm I did not say guaranteed free lunch. It is your claim that rebalancing bonus is not possible. It is just a behavioral perception.
It's possible. But on average, over an investment horizon, it isn't there.
It did happened in March 2020.
Is your investment horizon one month long?
"But on average, over an investment horizon, it isn't there."

We only live once. We only get one sequence of returns. The average does not apply to us. We have to live at least 20 times before average can be useful to us.
It is more useful than one month looked at in isolation, that's for sure.
Every single oscillation create rebalancing bonus. It does nothing to the folks that do not rebalance.
This is a straw man that is addressed Siamond's write-up. (See: "What should we compare to?")
"Is your investment horizon one month long?"

Actually, the argument should go back to folks that do not rebalance.

I rebalance to maintain my AA of 60/40. It is totally based on Boglehead's philosophy of "Buy, Hold, and Rebalance". Folks that did nothing in March 2020 do not maintain their AA.

KlangFool
The reason to rebalance is to maintain the AA, not to earn the "rebalancing bonus".

I refer you back to the Siamond's excellend write-up for the detailed explanation and yield the rest of my time.

https://www.bogleheads.org/blog/2020/08 ... ---part-2/

"The bottomline is that rebalancing is a very useful discipline to stay the course, to stick to one’s investment plan. But any perception of ‘selling high, buying low’ is mostly one’s intuition (behavioral biases included) playing games with one’s brain, while there is just little concrete reality to a ‘rebalancing bonus’ of sort, besides side-effects of the AA drifting away from its target."
If you torture the data long enough, it will confess to anything. ~Ronald Coase
User avatar
HomerJ
Posts: 21281
Joined: Fri Jun 06, 2008 12:50 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by HomerJ »

Marseille07 wrote: Sat Jun 25, 2022 8:51 pm
billaster wrote: Sat Jun 25, 2022 7:25 pm Michael Burry never demonstrated any particular skill in market predictions. After all, there were lots of prominent economists who observed and predicted exactly the same housing meltdown. But for most of us who saw it coming, the best we could do was avoid losing money in the doomed real estate market. What Michael Burry did was figure out a way not just to avoid losing money like the rest of us but make a profit off of it using complicated derivatives and credit swaps.

So not so much market prediction skill but more financial engineering skill. I wouldn't put a lot of stock in his prediction ability.
Are you kidding me? Give him credit. Economists may have predicted this and that but they didn't put their money on it. Burry did, and it wasn't easy (tell me on top of your head how to short the housing market if you were to do it today).

He also held GME at $3.90 a share (hit as high as $300), he also shorted bonds which was too early but his direction was correct.

I'm not suggesting Burry is correct on -50% in next 2 years, but his track record is definitely there.
He nearly went bankrupt... because "timing" is important in "market-timing"... If the market had crashed 6-12 months later, he would have lost it all.

He was early... and it nearly cost him everything.

See my quote from above... He was predicting a huge market-crash in 2017... when the SP500 was at 2400.

It instead went up 100% first.

Anyone waiting to "deploy dry powder" since 2017 has been probably feeling pretty upset with Burry all the time. The original poster may make a lot of money waiting for the market to drop farther... They may lose a lot of potential gains instead. No one knows. Not even Burry.

There are no "experts". We all need to get this through our heads.

The stock market is NOT predictable.
Last edited by HomerJ on Sat Jun 25, 2022 11:34 pm, edited 2 times in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
User avatar
HomerJ
Posts: 21281
Joined: Fri Jun 06, 2008 12:50 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by HomerJ »

I agree there is no "rebalancing bonus".

Sometimes it works out and makes you more money. Usually it doesn't. The market goes up more often than it goes down, and rebalancing out of stocks costs you gains.

But rebalancing does keep your risk level semi-constant. And that's the whole point.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Topic Author
Isabela
Posts: 7
Joined: Thu Jun 23, 2022 10:17 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Isabela »

First of all then you all for response, data and interesting facts about market gurus. Staying on sideline would make stress on myself, better improving personal skills, earn more income and stick with the plan which I started in 2007. - 30% dops are quite rare investing in possible recession might be good on the end, nobody knows. I'm 100% stocks no bods and have plan to stick like that until mid 40s. Had luck that I got additional capital when there were worst Corona news. Will never forget coming in bank with mask, scared for my life and investing when was around - 25% = pure luck for now... I belive it is all priced in and information this days is much faster than it used be in the past. Won't forget when Warren Buffet was saying how much easier was finding undervalued assets in the past and now we live in information age where there will be very difficult for him to beat index. Nobody knows anything Mr. Bogle quote, stay invested and do not miss the best bull days because it will cost us a lot in the long run.
invest4
Posts: 1905
Joined: Wed Apr 24, 2019 2:19 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by invest4 »

...and then there is the bit where people say one thing (stock returns will be bad!) while doing something else (gobbling up stocks).

No one knows...these folks simply make a best guess and may get lucky. wash, rinse, repeat.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

Vulcan wrote: Sat Jun 25, 2022 10:14 pm
KlangFool wrote: Sat Jun 25, 2022 10:01 pm
Vulcan wrote: Sat Jun 25, 2022 9:57 pm
KlangFool wrote: Sat Jun 25, 2022 9:51 pm
Vulcan wrote: Sat Jun 25, 2022 9:47 pm
It's possible. But on average, over an investment horizon, it isn't there.
It did happened in March 2020.
Is your investment horizon one month long?
"But on average, over an investment horizon, it isn't there."

We only live once. We only get one sequence of returns. The average does not apply to us. We have to live at least 20 times before average can be useful to us.
It is more useful than one month looked at in isolation, that's for sure.
Every single oscillation create rebalancing bonus. It does nothing to the folks that do not rebalance.
This is a straw man that is addressed Siamond's write-up. (See: "What should we compare to?")
"Is your investment horizon one month long?"

Actually, the argument should go back to folks that do not rebalance.

I rebalance to maintain my AA of 60/40. It is totally based on Boglehead's philosophy of "Buy, Hold, and Rebalance". Folks that did nothing in March 2020 do not maintain their AA.

KlangFool
The reason to rebalance is to maintain the AA, not to earn the "rebalancing bonus".

I refer you back to the Siamond's excellend write-up for the detailed explanation and yield the rest of my time.

https://www.bogleheads.org/blog/2020/08 ... ---part-2/

"The bottomline is that rebalancing is a very useful discipline to stay the course, to stick to one’s investment plan. But any perception of ‘selling high, buying low’ is mostly one’s intuition (behavioral biases included) playing games with one’s brain, while there is just little concrete reality to a ‘rebalancing bonus’ of sort, besides side-effects of the AA drifting away from its target."
How can it be a strawman when it actually happened recently? It is simple math. A drop and recovery of 30+% in less than one year. Aka, in 2020.

In summary, a person should rebalance to maintain the AA. In some sequence of returns when the market is going side way and highly volatile, the person may enjoy some rebalancing bonuses.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
HKexpat
Posts: 142
Joined: Thu Dec 24, 2020 4:21 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by HKexpat »

If you believe in passive investing, then you cannot also believe in a rebalancing bonus.

1) Suppose that Asset A increases in price and Asset B decreases in price. Your rebalancing strategy now means you have to sell some of A and buy some of B. That restores your original balance between A and B.

2) For this to give you a "bonus," it has to be the case that Asset B on average will now gain more than Asset A. That is, B is on discount and A is at a premium relative to their "true" underlying value.

3) This implies that the returns at time T are predictive of the returns at time T+1 -- specifically, that there's inverse correlation: an asset that does well on one day is less likely to do well on the next day (or week or month, etc). But if you think that's the case, you shouldn't do any passive investing at all. Instead, you should buy assets that dropped on the previous trading day and sell assets that gained on the previous day, thereby capitalizing on this inverse correlation. You would outperform the market in the long run.

Notably, the benefit of diversification across asset classes is the risk-adjusted rate of return, not the rate of return. If one asset returns on average 8% and another returns on average 5%, you'll never maximize your expected return by putting anything in the second asset.
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by smitcat »

KlangFool wrote: Sat Jun 25, 2022 8:48 pm
smitcat wrote: Sat Jun 25, 2022 6:53 pm
KlangFool wrote: Sat Jun 25, 2022 6:36 pm
Vulcan wrote: Sat Jun 25, 2022 5:28 pm
KlangFool wrote: Sat Jun 25, 2022 4:47 pm
You are making a prediction that the stock market could not oscillate and go side way for the the next 10 years.
I am making no predictions whatsoever - just pointing out that the much-vaunted "rebalancing bonus" is a behavioral perception, not a mathematical fact.

I see the links to Siamond's analysis were already provided upthread, so I will just leave it there.
Please do not confuse a back test as a mathematical fact.

What happened to rebalancing bonus if the stock market is oscillating and going side way or down for the next 10 years?

KlangFool
Please tell us what happens by....
Please provide a model similar to the ones above with the market going 'sideways' for an extended period of time demonstrating the advantage/disadvantage to the rebalancing.
AA = 60/40, Portfolio = 100K, 60K stock and 40K bond.

The stock market drops 30% and then went up by 30% -> Side way . The bond did nothing.

A) No rebalancing.

60K * 0.7 * 1.3 = 54.6K + 40K = 94.6K

B) With rebalancing

60K stock drop to 42K stock (60K * 0.7)

Rebalance to

49.2K stock and 32.8K bond

Stock goes up 30 % -> 49.2K * 1.3 = 63.96K

Bond = 32.8K

Total = 96.76K

KlangFool
A one swing model? Not at all relevant.
Perhaps read up on the subject a bit.
Generally, when rebalancing between 'stocks and bonds' you can expect a lower overall gain and a lower overall risk.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

HKexpat wrote: Sun Jun 26, 2022 5:57 am
If you believe in passive investing, then you cannot also believe in a rebalancing bonus.
HKexpat,

1) The world does not have to behave in the way that we believe. I learned that long ago. Real world is a lot more complex and interesting than that.

It is very simple.

If the stock market drops 30+% and then it recovers 30+% in a few months, you would have a rebalancing bonus. This is simple math. And, it happened in 2020.

You can choose to ignore the reality. But, it does not change the fact that it happened. As to whether it would happen in the future, we do not know. But, we know now that it is possible.

2) "For this to give you a "bonus," it has to be the case that Asset B on average will now gain more than Asset A."

This is fundamentally wrong. As I had shown in my example, if the stock market drops 30+% and recovers 30+% in a few months.

A portfolio of 60/40 of equal size

A) No rebalancing = no rebalancing bonus.

B) With rebalancing, the portfolio is bigger. (B) is bigger than (A).

A bigger 60/40 portfolio of (B) would grew bigger than a portfolio (A) in the future. They have the same ratio of the stock and bond. They would enjoy the same average growth rate of the stock and the bond.

The assumption of no rebalancing bonus is based on a less volatile market trending upward. That assumption is broken in a highly volatile market that go up and down 30+% in less than a year.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
tvubpwcisla
Posts: 1167
Joined: Sat Nov 09, 2019 9:09 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by tvubpwcisla »

After the -50% drop over the next two years, do they predict what will happen after that?
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by smitcat »

KlangFool wrote: Sat Jun 25, 2022 9:51 pm
Vulcan wrote: Sat Jun 25, 2022 9:47 pm
KlangFool wrote: Sat Jun 25, 2022 9:43 pm I did not say guaranteed free lunch. It is your claim that rebalancing bonus is not possible. It is just a behavioral perception.
It's possible. But on average, over an investment horizon, it isn't there.
Vulcan,

It did happened in March 2020.

"But on average, over an investment horizon, it isn't there."

We only live once. We only get one sequence of returns. The average does not apply to us. We have to live at least 20 times before average can be useful to us.

KlangFool
"The average does not apply to us."
All of your current investment rules and strategies are based on the past average, every single one.
Examples of just a few that you utilize today,
- stock returns
- bond returns
- inflation numbers
- various AA based returns
- correlation of performance of various differing investment groups
- age of demise
- SS
and the list goes on and on....
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

smitcat wrote: Sun Jun 26, 2022 7:50 am
KlangFool wrote: Sat Jun 25, 2022 8:48 pm
smitcat wrote: Sat Jun 25, 2022 6:53 pm
KlangFool wrote: Sat Jun 25, 2022 6:36 pm
Vulcan wrote: Sat Jun 25, 2022 5:28 pm
I am making no predictions whatsoever - just pointing out that the much-vaunted "rebalancing bonus" is a behavioral perception, not a mathematical fact.

I see the links to Siamond's analysis were already provided upthread, so I will just leave it there.
Please do not confuse a back test as a mathematical fact.

What happened to rebalancing bonus if the stock market is oscillating and going side way or down for the next 10 years?

KlangFool
Please tell us what happens by....
Please provide a model similar to the ones above with the market going 'sideways' for an extended period of time demonstrating the advantage/disadvantage to the rebalancing.
AA = 60/40, Portfolio = 100K, 60K stock and 40K bond.

The stock market drops 30% and then went up by 30% -> Side way . The bond did nothing.

A) No rebalancing.

60K * 0.7 * 1.3 = 54.6K + 40K = 94.6K

B) With rebalancing

60K stock drop to 42K stock (60K * 0.7)

Rebalance to

49.2K stock and 32.8K bond

Stock goes up 30 % -> 49.2K * 1.3 = 63.96K

Bond = 32.8K

Total = 96.76K

KlangFool
A one swing model? Not at all relevant.
Perhaps read up on the subject a bit.
Generally, when rebalancing between 'stocks and bonds' you can expect a lower overall gain and a lower overall risk.
A) Someone claim that it is impossible.

B) I just need to show that it happened at least once.

"A one swing model? Not at all relevant. "

C) Unless you can predict the future, how would you know that it would not happen again?

D) With every swing, the gap widen.

"Generally, when rebalancing between 'stocks and bonds' you can expect a lower overall gain and a lower overall risk."

E) We all live through 2020. And, it impacted our portfolio depending on whether we rebalanced in March 2020. We do not need to discuss in general.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

smitcat wrote: Sun Jun 26, 2022 7:56 am
KlangFool wrote: Sat Jun 25, 2022 9:51 pm
Vulcan wrote: Sat Jun 25, 2022 9:47 pm
KlangFool wrote: Sat Jun 25, 2022 9:43 pm I did not say guaranteed free lunch. It is your claim that rebalancing bonus is not possible. It is just a behavioral perception.
It's possible. But on average, over an investment horizon, it isn't there.
Vulcan,

It did happened in March 2020.

"But on average, over an investment horizon, it isn't there."

We only live once. We only get one sequence of returns. The average does not apply to us. We have to live at least 20 times before average can be useful to us.

KlangFool
"The average does not apply to us."
All of your current investment rules and strategies are based on the past average, every single one.
smitcat,

That may apply to you. It does not to me.

I save 1 year of expense every year. I keep my personal inflation rate at near 0%. I do not need to rely on the average return for my portfolio success.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

tvubpwcisla wrote: Sun Jun 26, 2022 7:55 am After the -50% drop over the next two years, do they predict what will happen after that?
1) Why should we care?

2) Are you prepared?

3) I am prepared for the drop and whatever might happened later. So, it won't matter to me.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Nowizard
Posts: 4842
Joined: Tue Oct 23, 2007 5:33 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Nowizard »

Climber2020: Reading your referenced thread did trigger a behavioral response when someone posted that "It is not different this time, you are different." That is an excellent place to start when dealing with concerns about market directions that affect many/most of us in one way or another.

Tim
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by smitcat »

KlangFool wrote: Sun Jun 26, 2022 8:00 am
smitcat wrote: Sun Jun 26, 2022 7:56 am
KlangFool wrote: Sat Jun 25, 2022 9:51 pm
Vulcan wrote: Sat Jun 25, 2022 9:47 pm
KlangFool wrote: Sat Jun 25, 2022 9:43 pm I did not say guaranteed free lunch. It is your claim that rebalancing bonus is not possible. It is just a behavioral perception.
It's possible. But on average, over an investment horizon, it isn't there.
Vulcan,

It did happened in March 2020.

"But on average, over an investment horizon, it isn't there."

We only live once. We only get one sequence of returns. The average does not apply to us. We have to live at least 20 times before average can be useful to us.

KlangFool
"The average does not apply to us."
All of your current investment rules and strategies are based on the past average, every single one.
smitcat,

That may apply to you. It does not to me.

I save 1 year of expense every year. I keep my personal inflation rate at near 0%. I do not need to rely on the average return for my portfolio success.

KlangFool
"I save 1 year of expense every year."
This has no affect at all on the issue of rebalancing.

"I keep my personal inflation rate at near 0%."
You cannot keep a personal inflation rate at 0% long term without significant life changes

"I do not need to rely on the average return for my portfolio success."
OK then, what does your math relay on?
In the past you have posted your plans and they have been the standard AA's with the historical returns. You have also said you would retire as soon as you reached the 25X as a great issue with your positions was "why work when you do not need to?"
What is your new plan based on then?
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by smitcat »

KlangFool wrote: Sun Jun 26, 2022 7:57 am
smitcat wrote: Sun Jun 26, 2022 7:50 am
KlangFool wrote: Sat Jun 25, 2022 8:48 pm
smitcat wrote: Sat Jun 25, 2022 6:53 pm
KlangFool wrote: Sat Jun 25, 2022 6:36 pm

Please do not confuse a back test as a mathematical fact.

What happened to rebalancing bonus if the stock market is oscillating and going side way or down for the next 10 years?

KlangFool
Please tell us what happens by....
Please provide a model similar to the ones above with the market going 'sideways' for an extended period of time demonstrating the advantage/disadvantage to the rebalancing.
AA = 60/40, Portfolio = 100K, 60K stock and 40K bond.

The stock market drops 30% and then went up by 30% -> Side way . The bond did nothing.

A) No rebalancing.

60K * 0.7 * 1.3 = 54.6K + 40K = 94.6K

B) With rebalancing

60K stock drop to 42K stock (60K * 0.7)

Rebalance to

49.2K stock and 32.8K bond

Stock goes up 30 % -> 49.2K * 1.3 = 63.96K

Bond = 32.8K

Total = 96.76K

KlangFool
A one swing model? Not at all relevant.
Perhaps read up on the subject a bit.
Generally, when rebalancing between 'stocks and bonds' you can expect a lower overall gain and a lower overall risk.
A) Someone claim that it is impossible.

B) I just need to show that it happened at least once.

"A one swing model? Not at all relevant. "

C) Unless you can predict the future, how would you know that it would not happen again?

D) With every swing, the gap widen.

"Generally, when rebalancing between 'stocks and bonds' you can expect a lower overall gain and a lower overall risk."

E) We all live through 2020. And, it impacted our portfolio depending on whether we rebalanced in March 2020. We do not need to discuss in general.

KlangFool

"B) I just need to show that it happened at least once"
If you goal is to come out ahead in one swing without understanding the big picture that would be good. Or you could do some research with the numerous articles published with extensive work on the subject.

"E) We all live through 2020. And, it impacted our portfolio depending on whether we rebalanced in March 2020. We do not need to discuss in general."
You could choose to not discuss this and/or understand it in general - or you could read some extensive modeling done by the various authors on how rebalancing within various 'buckets' affects the outcome. All of them are similar but may I suggest you read Kitces as one example - please read at least 3-4 of his articles on rebalancing at a minimum as they all address slightly differing aspects.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

smitcat wrote: Sun Jun 26, 2022 8:09 am
"I keep my personal inflation rate at near 0%."
You cannot keep a personal inflation rate at 0% long term without significant life changes

"I do not need to rely on the average return for my portfolio success."
OK then, what does your math relay on?
In the past you have posted your plans and they have been the standard AA's with the historical returns. You have also said you would retire as soon as you reached the 25X as a great issue with your positions was "why work when you do not need to?"
What is your new plan based on then?
smitcat,

<< "I keep my personal inflation rate at near 0%."
You cannot keep a personal inflation rate at 0% long term without significant life changes>>

A) The word, "significant", is subjective. Whatever is significant to you may not be significant to me.

B) I have been doing this for the past 10+ years.

"What is your new plan based on then?"

My mortgage would be paid off this year or next. Hence, my portfolio would be 33X without counting social security and 66X with social security.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by KlangFool »

smitcat wrote: Sun Jun 26, 2022 8:19 am
"B) I just need to show that it happened at least once"
If you goal is to come out ahead in one swing without understanding the big picture that would be good. Or you could do some research with the numerous articles published with extensive work on the subject.

"E) We all live through 2020. And, it impacted our portfolio depending on whether we rebalanced in March 2020. We do not need to discuss in general."
You could choose to not discuss this and/or understand it in general - or you could read some extensive modeling done by the various authors on how rebalancing within various 'buckets' affects the outcome. All of them are similar but may I suggest you read Kitces as one example - please read at least 3-4 of his articles on rebalancing at a minimum as they all address slightly differing aspects.
smitcat,

All the modeling done about "no rebalancing bonus" broke down in a highly volatile side way market. That is the mathematical fact. The only way to argue against it is it is impossible for this to happen. But, we cannot predict the future. It is unknowable. Hence, we cannot claim that it is impossible.

It is very simple.

If the stock market goes up or down X% and then reverse course in the same magnitude within a short time (side way market), there will be rebalancing bonus. And, if this happened many times, the rebalancing bonus would be significant.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by smitcat »

KlangFool wrote: Sun Jun 26, 2022 8:29 am
smitcat wrote: Sun Jun 26, 2022 8:19 am
"B) I just need to show that it happened at least once"
If you goal is to come out ahead in one swing without understanding the big picture that would be good. Or you could do some research with the numerous articles published with extensive work on the subject.

"E) We all live through 2020. And, it impacted our portfolio depending on whether we rebalanced in March 2020. We do not need to discuss in general."
You could choose to not discuss this and/or understand it in general - or you could read some extensive modeling done by the various authors on how rebalancing within various 'buckets' affects the outcome. All of them are similar but may I suggest you read Kitces as one example - please read at least 3-4 of his articles on rebalancing at a minimum as they all address slightly differing aspects.
smitcat,

All the modeling done about "no rebalancing bonus" broke down in a highly volatile side way market. That is the mathematical fact. The only way to argue against it is it is impossible for this to happen. But, we cannot predict the future. It is unknowable. Hence, we cannot claim that it is impossible.

It is very simple.

If the stock market goes up or down X% and then reverse course in the same magnitude within a short time (side way market), there will be rebalancing bonus. And, if this happened many times, the rebalancing bonus would be significant.

KlangFool
You could choose to not discuss this and/or understand it in general - or you could read some extensive modeling done by the various authors on how rebalancing within various 'buckets' affects the outcome. All of them are similar but may I suggest you read Kitces as one example - please read at least 3-4 of his articles on rebalancing at a minimum as they all address slightly differing aspects.
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by smitcat »

KlangFool wrote: Sun Jun 26, 2022 8:22 am
smitcat wrote: Sun Jun 26, 2022 8:09 am
"I keep my personal inflation rate at near 0%."
You cannot keep a personal inflation rate at 0% long term without significant life changes

"I do not need to rely on the average return for my portfolio success."
OK then, what does your math relay on?
In the past you have posted your plans and they have been the standard AA's with the historical returns. You have also said you would retire as soon as you reached the 25X as a great issue with your positions was "why work when you do not need to?"
What is your new plan based on then?
smitcat,

<< "I keep my personal inflation rate at near 0%."
You cannot keep a personal inflation rate at 0% long term without significant life changes>>

A) The word, "significant", is subjective. Whatever is significant to you may not be significant to me.

B) I have been doing this for the past 10+ years.

"What is your new plan based on then?"

My mortgage would be paid off this year or next. Hence, my portfolio would be 33X without counting social security and 66X with social security.

KlangFool
"B) I have been doing this for the past 10+ years."
You cannot keep personal inflation at 0% long term without changing your life plan. You do have other posts on how you are changing your life so that inflation is minimized.

"My mortgage would be paid off this year or next"
A mortgage generally does not affect most retirement plans of equal wealth significantly.

"Hence, my portfolio would be 33X without counting social security and 66X with social security."
A great way to deal with inflation - is it not?
Your goals were to retire at 25X and not any longer, it was one of your 'inflexible goals' which you projected on others at times.
Now that you have not retired at 25X and younger you have other issues to consider that you said were 'not affecting you' in the past.
Fremdon Ferndock
Posts: 1181
Joined: Fri Dec 24, 2021 11:26 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Fremdon Ferndock »

In my working career in academics, I contributed to TIAA-CREF. You chose how much went to the TIAA fixed account and how much to CREF stock. Not knowing what to do, I just went 50/50. All those years: 50/50. We never knew about "rebalancing". Even if we had, it would have been difficult to move money back and forth from TIAA to CREF. After all those many years, it turned out just fine. And John Bogle agrees: you don't really need to mess around with rebalancing. Just set and forget. Come back in a couple decades and it will turn out just fine.
"Risk is what’s left over when you think you’ve thought of everything." ~ Morgan Housel
User avatar
HomerJ
Posts: 21281
Joined: Fri Jun 06, 2008 12:50 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by HomerJ »

Klang buddy...

On average, there is no rebalancing bonus.

Yes, it happens now and then.

This is the wrong hill for you to make a huge stand.

Don't take every post against your position so personally.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
User avatar
HomerJ
Posts: 21281
Joined: Fri Jun 06, 2008 12:50 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by HomerJ »

Fremdon Ferndock wrote: Sun Jun 26, 2022 9:58 am In my working career in academics, I contributed to TIAA-CREF. You chose how much went to the TIAA fixed account and how much to CREF stock. Not knowing what to do, I just went 50/50. All those years: 50/50. We never knew about "rebalancing". Even if we had, it would have been difficult to move money back and forth from TIAA to CREF. After all those many years, it turned out just fine. And John Bogle agrees: you don't really need to mess around with rebalancing. Just set and forget. Come back in a couple decades and it will turn out just fine.
Hmm, I don't think I agree with that last statement.

It DID turn out fine...

It very probably will turn out fine in the future.

But you don't KNOW it will turn out fine.

But everyone has their own method.

I'm 50/50 as well, and I rebalance only on the way up, locking in gains, increasing my safe money as the stock side grows as well. This reduces my returns, but keeps my risk profile constant.

When the market crashes, I don't rebalance in the other direction, even though, so far, in the past, it would have increased my returns.

Because one day, maybe the market doesn't recover, or takes 20-30 years to recover. So I don't want to throw all my saved fixed-income money (cash\CDs\bonds) into a crashing stock market hoping to make more money when it recovers. Because what if it doesn't recover, and I just lost a huge chunk of my safe money as well?

I do put NEW money 100% into stocks (401k contributions) during a crash. But I don't rebalance with my existing money.

Other people do it differently.

It's all good.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Fremdon Ferndock
Posts: 1181
Joined: Fri Dec 24, 2021 11:26 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Fremdon Ferndock »

HomerJ wrote: Sun Jun 26, 2022 6:19 pm
Fremdon Ferndock wrote: Sun Jun 26, 2022 9:58 am In my working career in academics, I contributed to TIAA-CREF. You chose how much went to the TIAA fixed account and how much to CREF stock. Not knowing what to do, I just went 50/50. All those years: 50/50. We never knew about "rebalancing". Even if we had, it would have been difficult to move money back and forth from TIAA to CREF. After all those many years, it turned out just fine. And John Bogle agrees: you don't really need to mess around with rebalancing. Just set and forget. Come back in a couple decades and it will turn out just fine.
Hmm, I don't think I agree with that last statement.

It DID turn out fine...

It very probably will turn out fine in the future.

But you don't KNOW it will turn out fine.

But everyone has their own method.

I'm 50/50 as well, and I rebalance only on the way up, locking in gains, increasing my safe money as the stock side grows as well. This reduces my returns, but keeps my risk profile constant.

When the market crashes, I don't rebalance in the other direction, even though, so far, in the past, it would have increased my returns.

Because one day, maybe the market doesn't recover, or takes 20-30 years to recover. So I don't want to throw all my saved fixed-income money (cash\CDs\bonds) into a crashing stock market hoping to make more money when it recovers. Because what if it doesn't recover, and I just lost a huge chunk of my safe money as well?

I do put NEW money 100% into stocks (401k contributions) during a crash. But I don't rebalance with my existing money.

Other people do it differently.

It's all good.
I agree with that strategy. I remember that Larry Swedroe once said he uses the one-way rebalancing strategy as well, citing the Japan example.
"Risk is what’s left over when you think you’ve thought of everything." ~ Morgan Housel
Chadnudj
Posts: 1269
Joined: Tue Oct 29, 2013 11:22 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Chadnudj »

sfnerd wrote: Sat Jun 25, 2022 10:07 pm Michael Burry might be saying the sky is falling, but he’s also loading up on tech and travel stocks in his portfolio.

Remember that these gurus are making these high level predictions, but rarely are they “all in” or all out as the case may be.

These experts use complicated derivative strategies to try to profit if some of these big problems materialize, but usually only with a small portion of their capital.
Wow, it's almost as if by discouraging others from buying/telling others to sell, Burry is able to buy more shares cheaper.....
Topic Author
Isabela
Posts: 7
Joined: Thu Jun 23, 2022 10:17 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Isabela »

Chadnudj wrote: Sun Jun 26, 2022 7:37 pm
sfnerd wrote: Sat Jun 25, 2022 10:07 pm Michael Burry might be saying the sky is falling, but he’s also loading up on tech and travel stocks in his portfolio.

Remember that these gurus are making these high level predictions, but rarely are they “all in” or all out as the case may be.

These experts use complicated derivative strategies to try to profit if some of these big problems materialize, but usually only with a small portion of their capital.
Wow, it's almost as if by discouraging others from buying/telling others to sell, Burry is able to buy more shares cheaper.....
I also have a feeling that they just want to bring more bad news because they are known as stock celebrities and they are buying when is - 20%, - 30% is more rare and - 40% so rare that nobody has guts to stay uninvested for let's say for a decate...
Will never forget sneaky Musk saying that he is in depression that stock fell and then he bought it when was down-Tesla. It would be redicilous that he would be thinking to stop being CEO at top story telling and pro selling of his vision. At least I assume was like that...
Fallible
Posts: 8798
Joined: Fri Nov 27, 2009 3:44 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by Fallible »

Isabela wrote: Mon Jun 27, 2022 12:10 pm
Chadnudj wrote: Sun Jun 26, 2022 7:37 pm
sfnerd wrote: Sat Jun 25, 2022 10:07 pm Michael Burry might be saying the sky is falling, but he’s also loading up on tech and travel stocks in his portfolio.

Remember that these gurus are making these high level predictions, but rarely are they “all in” or all out as the case may be.

These experts use complicated derivative strategies to try to profit if some of these big problems materialize, but usually only with a small portion of their capital.
Wow, it's almost as if by discouraging others from buying/telling others to sell, Burry is able to buy more shares cheaper.....
I also have a feeling that they just want to bring more bad news because they are known as stock celebrities and they are buying when is - 20%, - 30% is more rare and - 40% so rare that nobody has guts to stay uninvested for let's say for a decate...
Will never forget sneaky Musk saying that he is in depression that stock fell and then he bought it when was down-Tesla. It would be redicilous that he would be thinking to stop being CEO at top story telling and pro selling of his vision. At least I assume was like that...
Isabella,

As poster Chadnudj says, "Remember that these gurus are making these high level predictions, but rarely are they “all in” or all out as the case may be.

"These experts use complicated derivative strategies to try to profit if some of these big problems materialize, but usually only with a small portion of their capital." [/quote]

These are reasons my earlier advice to you is to realize that Burry, etc., will do what's right for them, while you need to know what's right for you. It can be fun to know what these pros say, but dangerous if an average investor tries to follow them.
Last edited by Fallible on Mon Jun 27, 2022 4:01 pm, edited 1 time in total.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by smitcat »

HomerJ wrote: Sun Jun 26, 2022 6:19 pm
Fremdon Ferndock wrote: Sun Jun 26, 2022 9:58 am In my working career in academics, I contributed to TIAA-CREF. You chose how much went to the TIAA fixed account and how much to CREF stock. Not knowing what to do, I just went 50/50. All those years: 50/50. We never knew about "rebalancing". Even if we had, it would have been difficult to move money back and forth from TIAA to CREF. After all those many years, it turned out just fine. And John Bogle agrees: you don't really need to mess around with rebalancing. Just set and forget. Come back in a couple decades and it will turn out just fine.
Hmm, I don't think I agree with that last statement.

It DID turn out fine...

It very probably will turn out fine in the future.

But you don't KNOW it will turn out fine.

But everyone has their own method.

I'm 50/50 as well, and I rebalance only on the way up, locking in gains, increasing my safe money as the stock side grows as well. This reduces my returns, but keeps my risk profile constant.

When the market crashes, I don't rebalance in the other direction, even though, so far, in the past, it would have increased my returns.

Because one day, maybe the market doesn't recover, or takes 20-30 years to recover. So I don't want to throw all my saved fixed-income money (cash\CDs\bonds) into a crashing stock market hoping to make more money when it recovers. Because what if it doesn't recover, and I just lost a huge chunk of my safe money as well?

I do put NEW money 100% into stocks (401k contributions) during a crash. But I don't rebalance with my existing money.

Other people do it differently.

It's all good.
"I'm 50/50 as well, and I rebalance only on the way up, locking in gains, increasing my safe money as the stock side grows as well. This reduces my returns, but keeps my risk profile constant."

Interesting - where has your 'safe money been invested lately? Where was your safe money invested in 1970-1980 ?
User avatar
HomerJ
Posts: 21281
Joined: Fri Jun 06, 2008 12:50 pm

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by HomerJ »

smitcat wrote: Mon Jun 27, 2022 1:13 pm
HomerJ wrote: Sun Jun 26, 2022 6:19 pm
Fremdon Ferndock wrote: Sun Jun 26, 2022 9:58 am In my working career in academics, I contributed to TIAA-CREF. You chose how much went to the TIAA fixed account and how much to CREF stock. Not knowing what to do, I just went 50/50. All those years: 50/50. We never knew about "rebalancing". Even if we had, it would have been difficult to move money back and forth from TIAA to CREF. After all those many years, it turned out just fine. And John Bogle agrees: you don't really need to mess around with rebalancing. Just set and forget. Come back in a couple decades and it will turn out just fine.
Hmm, I don't think I agree with that last statement.

It DID turn out fine...

It very probably will turn out fine in the future.

But you don't KNOW it will turn out fine.

But everyone has their own method.

I'm 50/50 as well, and I rebalance only on the way up, locking in gains, increasing my safe money as the stock side grows as well. This reduces my returns, but keeps my risk profile constant.

When the market crashes, I don't rebalance in the other direction, even though, so far, in the past, it would have increased my returns.

Because one day, maybe the market doesn't recover, or takes 20-30 years to recover. So I don't want to throw all my saved fixed-income money (cash\CDs\bonds) into a crashing stock market hoping to make more money when it recovers. Because what if it doesn't recover, and I just lost a huge chunk of my safe money as well?

I do put NEW money 100% into stocks (401k contributions) during a crash. But I don't rebalance with my existing money.

Other people do it differently.

It's all good.
"I'm 50/50 as well, and I rebalance only on the way up, locking in gains, increasing my safe money as the stock side grows as well. This reduces my returns, but keeps my risk profile constant."

Interesting - where has your 'safe money been invested lately? Where was your safe money invested in 1970-1980 ?
Well I was in grade school most of the time from 1970-1980, so I guess my safe money was invested in my piggy bank, and I think I may have had a bank account (remember when your parents could teach you the power of compound interest when bank accounts paid 5% a year?)

My "safe" money for the past year or two has been in cash, I Bonds, Stable-value fund in our 401ks, Short-term treasury, and Total Bond Market.

Total Bond is the only one that has dropped a lot, Short-term treasury dropped some. The others have gained in nominal terms.

But I will admit a lot of that is luck. I was in stable-value funds in our 401ks because they didn't have good Total Bond options, and I had built up a large cash cushion because I thought I might retire very soon.

Well, I guess the cash part wasn't luck.. I built up a 4-year cash cushion JUST IN CASE a crash happened right as I retired, and so it when it happened this year, I was prepared and didn't lose that money in Total Stock or Total Bond. I will admit I was surprised by how far and how fast Total Bond dropped, but I did know that was possible, which was why I was using cash for my short-term "safe" money. Total Bond will recover. It's already paying more each month in dividends.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: At least -50% in next 2 years - Michael Burry and David Wright

Post by smitcat »

HomerJ wrote: Mon Jun 27, 2022 2:14 pm
smitcat wrote: Mon Jun 27, 2022 1:13 pm
HomerJ wrote: Sun Jun 26, 2022 6:19 pm
Fremdon Ferndock wrote: Sun Jun 26, 2022 9:58 am In my working career in academics, I contributed to TIAA-CREF. You chose how much went to the TIAA fixed account and how much to CREF stock. Not knowing what to do, I just went 50/50. All those years: 50/50. We never knew about "rebalancing". Even if we had, it would have been difficult to move money back and forth from TIAA to CREF. After all those many years, it turned out just fine. And John Bogle agrees: you don't really need to mess around with rebalancing. Just set and forget. Come back in a couple decades and it will turn out just fine.
Hmm, I don't think I agree with that last statement.

It DID turn out fine...

It very probably will turn out fine in the future.

But you don't KNOW it will turn out fine.

But everyone has their own method.

I'm 50/50 as well, and I rebalance only on the way up, locking in gains, increasing my safe money as the stock side grows as well. This reduces my returns, but keeps my risk profile constant.

When the market crashes, I don't rebalance in the other direction, even though, so far, in the past, it would have increased my returns.

Because one day, maybe the market doesn't recover, or takes 20-30 years to recover. So I don't want to throw all my saved fixed-income money (cash\CDs\bonds) into a crashing stock market hoping to make more money when it recovers. Because what if it doesn't recover, and I just lost a huge chunk of my safe money as well?

I do put NEW money 100% into stocks (401k contributions) during a crash. But I don't rebalance with my existing money.

Other people do it differently.

It's all good.
"I'm 50/50 as well, and I rebalance only on the way up, locking in gains, increasing my safe money as the stock side grows as well. This reduces my returns, but keeps my risk profile constant."

Interesting - where has your 'safe money been invested lately? Where was your safe money invested in 1970-1980 ?
Well I was in grade school most of the time from 1970-1980, so I guess my safe money was invested in my piggy bank, and I think I may have had a bank account (remember when your parents could teach you the power of compound interest when bank accounts paid 5% a year?)

My "safe" money for the past year or two has been in cash, I Bonds, Stable-value fund in our 401ks, Short-term treasury, and Total Bond Market.

Total Bond is the only one that has dropped a lot, Short-term treasury dropped some. The others have gained in nominal terms.

But I will admit a lot of that is luck. I was in stable-value funds in our 401ks because they didn't have good Total Bond options, and I had built up a large cash cushion because I thought I might retire very soon.

Well, I guess the cash part wasn't luck.. I built up a 4-year cash cushion JUST IN CASE a crash happened right as I retired, and so it when it happened this year, I was prepared and didn't lose that money in Total Stock or Total Bond. I will admit I was surprised by how far and how fast Total Bond dropped, but I did know that was possible, which was why I was using cash for my short-term "safe" money. Total Bond will recover. It's already paying more each month in dividends.
So safe is not always safe dependent upon the timing and time frame.

"remember when your parents could teach you the power of compound interest when bank accounts paid 5% a year?"
I can remember when safe bank accounts paid 5% a year and inflation was twice that % - not sure what I learned then.
Post Reply