Roger Beep

Monte Carlo Analysis of Major Berkshire Hathaway Holdings

Hi Geoff,

Have you examined Buffett's sell decisions? Do you use his sell decison rules, assuming that QPP can capture those events. In the case of a newly acquired holding, say GSK, how does one differentiate between 'by and hold' and 'it's a dog and time to dump it.' How much homework and monitoring is reqired to maintain the general trend of the portfolio which is presummabley the initial ARR/SD ratio, or is it?

Monte Carlo Analysis of Major Berkshire Hathaway Holdings

Hi Geoff,

Explain how you selected GSK as a new acquisition. Summarize the process, screening parameters, fundamentals etc. that you used to make the final selection?

Monte Carlo Analysis of Major Berkshire Hathaway Holdings

Hi Geoff,

As a learning experience “MC Analysis of Major Berkshire Hathaway Holdings” offers the individual investor insight as to how Warren Buffett developed BRK.A and BRK.B portfolios. With an almost mystical quality, Buffett has concentrated the preponderance of his portfolio in 7 holdings with 13 outer-ring positions supplanting returns. Suffice it to say this is the “Buffett gambit.” Users of QPP will want to examine the 7 core holdings and then selectively add-in the remaining 13 to see how even minor holding tweaks improved BRK’s returns.

Monte Carlo Analysis of Major Berkshire Hathaway Holdings

Hi Geoff,

A retrospective analysis of BRK.A and BRK.B holdings is most interesting. In regard to the individual investor, what is you opinion of holding weightings that are less than 1%? Those weightings seem trite; however they may also be the key to Buffett’s success. Should the individual investor tweak holdings below a certain value, say less than 3%.

The Dow Theory Letters' Richard Russell on Stock Values

Hi Prieur,

If the dollar looses its reserve currency status the Euro will become the world's base currency. Would you propose that one sell long positions and go to all cash sometime prior to that event? How can one determine this unlikely event on a forward looking basis and ride out the pending storm?

What Is Diversification Worth?

Geoff,

This is a very insighful article. Your summary of other quant efforts along side yours cumulatively lays the foundation for more effective individual investor investment strategies.

Question have you comapred QPP's Diversification Metric (DM) to the diversification premium? What is an optimal DM value in relation to diversifiction premium return?

Risk Management Lessons from Bear Stearns

The Bear Stern’s paper correctly points to an underlying investment metric that may assist the individual investor so as to avoid future investment disasters. Additionally, empirical study of this metric on other suspect companies is enthusiastically encouraged!

I would also like to see more analysis on why Bears Stearns went bankrupt and how it fits into the larger economic framework which the article did not address and which to me is primary because of the underlying far reaching consequences of this event. I would prefer a sound analysis on how the mortgage mess got off the ground and why in the U.S. and what it all means, and its corruption and fraud, etc.--in other words we need an objective scholarly assessment of the Bears Stearns bankruptcy in addition to a technically based investor metric that exploits the bankruptcy for future sales purposes. The author is expertly adept at rendering an adroit scholarly summary of the BSC bankruptcy and the subprime debacle.

Fixing Target Date Strategies: 'Target Date Folios'

Geoff;

As an addendum to this paper I would like to see a comparison of the cumulative life time fees associated with the seven target date funds mentioned compared to forecasted return. How much and what percent 'draw down' do the fees have on each fund mentioned?

Fixing Target Date Strategies: 'Target Date Folios'

For the vast majority of investors who are starting out the ‘Target Date Folios’ concept would seem to take the angst out investing and portfolio planning, putting things on autopilot. I have a few questions in the form of ‘system checks’ before one is on the glide path. (1) Initially how is investor’s risk tolerance determined? (2) How are other systems checked out prior to embarking on the glide path; these are embedded financial systems such as household cash flow or budget that may utilize another kind of asset allocation plan. Does FOLIOfn work with their clients and assist them in the development of these subsystems? (3) How often and how is glide path error correction factored into the process over the years? As I recall ESP Planner was an effort at optimizing some of these embedded factors. In that vein, are there similar investor financial systems checks in FOLIOfn’s planning that provides for glide path error correction over the years? Aside from these questions the concept and FOLIOfn’s product seems like a breakthrough for individual investors and the article is exceptionally well written.

Global Giants and Diversifiers To Supercharge a Portfolio

Hi Phil;

I might try it. I have a few concerns about undertaking this project. One concern I have is determine the actual monthly return on the Global Giants and Diversifiers Individual Stock portfolio. If I personally held that portfolio the brokerage firm would tell me what the monthly return was.

Let me step you thought how I might determine the monthly return and then you may wish to comment. Since this portfolio represents several years of investing experience and a few generations of portfolio development as per the Supercharge book I am going to assume $100K in total assets -- in reality it should be more but for the sake of modeling I will stipulate $100K.

Using Yahoo Finance I think I can determine the closing price of a stock for any particular trading day. I will assume I bought all of the holdings on 12/31/2006. I am unclear how I could from a retrospective point of view determine the monthly return on the portfolio, including the dividends.

Additionally, I would like to automate future monthly return data so I did not have to be scheduled in front of my computer to get that month's return data. From where I stand there are some practical considerations that I would need to figure out and for that reason I may not be able to undertake this project at least right away. For example, I anticipate having to write a macro for Excel to call the data that I would need. I am not that skilled at Excel but for a guy that self-taught himself computing in the old DOS days I feel like I could probably take it on. This could be a great learning experience for me after I clear the deck on a couple of other intense projects I have currently under taken.

Also, I appreciate your observations about the extremes, the tail values and what they portend for a porfolio's risk vs. return and the median expected return vs. 1st percentile loss.

Global Giants and Diversifiers To Supercharge a Portfolio

Hi Phi;

I appreciate you thoughts regarding taking a rather unsophisticated view of things, the 1st percentile risk, estimated median returns and endless attention to returns. What I really liked about the flow of the Supercharge book was the emphasis on risk and with examples showing us what to avoid up front and then moving on to core holding portfolios using indexes and ending up with an all stock portfolio that was developed with QPP.

I could live with the "unsophisticated view" that you mentioned if I or perhaps you had developed the Individual Stock Portfolio that appears in the Supercharge book for my personal use. And on a practical level I think you are correct. However, as a purchaser of the Supercharge book and QPP I would like to see more on the predictive validity of QPP using the example portfolios.

That is the reason for advancing a standardized graphical assessment. For example, the standard deviation (S.D.) levels from page 6 of QPP can be visually represented by the frequency envelope about the median using the Excel chart. I believe this can be varied by the user to reflect various S.D. levels. As I recall an X2 (read as “times 2”) frequency envelope is a ± 0.66 S.D. This all done graphically without having to resort to complicated statistical procedures. Most end users would much prefer a picture (chart) of these matters as opposed to confirmatory statistical data or summative comments about declines and gains. The upshot is one would be able to graphically see how QPP tracks to actual returns over time. In other words we would have a graphical picture of QPP’s predictive validity given the portfolio examples in the Supercharge book.

Global Giants and Diversifiers To Supercharge a Portfolio

Hi Phil;

I thought that this was another well written article. In addition to the "inputs" or holdings portion of the portfolio I would like to see a chart of the "outputs" to include the portfolio’s projected return using QPP's forward looking analysis using perhaps the 1st, 5th 10th, 20th and 50th (Median) values from p. 6 of QPP and the actual monthly return. I invite you to examine a standardized Excel chart template for this purpose which is resourced at harderchartingtemplate.../ and listed as SCCFB_mcpm_v7_1.xls. This chart covers a ten year period for each month. See the "LineFree" chart. It appears that BlueLine and LineFree have been switched. It should read "BlueLine." This would allow for comparisons using a standardized charting metric.

A Practical Demonstration of the Value of Portfolio Theory

Phil;

I would like to thank you and Ben writing your latest book. And it goes without saying that Geoff needs a big "Thank You" for having developed QPP.

Question, does Ben have a Seeking Alpha site? I find it to be refreshing that all of us can communicate to those of you who have contributed your time and talent and communicate about these matters. I appreciate you willingness to share and at times 'get hammered' in this process, however at the end of the day the truth surfaces above the background noise. I look forward to your next portfolio up-date on the above porfolios -- maybe in 6 months.

Rebalancing Can Be Hazardous to Your Portfolio

Hi Phil;

Regarding investing dividends in the context of rebalancing and borrowing form a previous post on "opportunistic rebalancing" it seems to me that QPP might be used to identify individual holdings on a forward looking basis that may be down in price in the future.

A possible strategy for identifying potential holding candidates: Each share's closing price could be entered as the "Current Portfolio Value" on page 1 of QPP and a future price forecast using the 5th percentile might be stipulated. For example, a forecasted price of 5% below the current closing price at the 5th percentile might flag a holding for possible future additional purchase or initial acquisition. One is assuming a previously well thought out portfolio using QPP.

The problem of the Opportunistic Rebalancing software for the average investor is that it costs $10,000. Unaforadable.

Rebalancing Can Be Hazardous to Your Portfolio

Phil;

Thanks for your posts.

A parallel question, as a retiree if one does not currently need the dividend income generted by a porfolio is it
(1)better to have the dividends reinvested in the company of orgin or
to (2)wait and invest in low performing stocks within the porfolio (akin to rebalancing) or
(3)buy new stock holdings rounding out the portfolio?