Seasonal Musings 2018

[michigande]

I'd be curious to see how Skiehawk's EMA mix would've fared using G instead of F. That would've been a reasonable substitute given what we knew early on in the year with rates.

Awesome update, thanks!

[mjedlin66]

... The G Fund continues its multi-year comeback, although it has a long way to go to reach the best-for-Fund high of 8.89% back in 1990...

Wow, wouldn’t that be something, to sit in the G all year long and earn 8.89%.
Of course there’s a Catch-22, the inflation rate was huge back then.
https://www.thebalance.com/u-s-inflatio ... st-3306093
Thanks Aitrus

High inflation was key to robbing the middle class of their wealth! Give the union a 2% raise and they'll celebrate. Then make inflation 6%.

[evilanne]

For the budget hawks out there, it’s estimated to cost approximately $57 million to do the changeover.

Just wondering where is all this I fund transition money going? TSP? Contractor?

[Mad Maxx]

Aitrus, wondering if you are going to put out your annual Seasonal Musings for 2019. I always look forward to that read.

[Aitrus]

I've been laid out sick for a while, so I haven't been able to focus much on it yet. It's coming, I've started it, but it's got a lot of updates still to go.

[Mad Maxx]

The very best to you on getting well. And a big thanks for all you do to keep us informed.

[Aitrus]

I'd be curious to see how Skiehawk's EMA mix would've fared using G instead of F. That would've been a reasonable substitute given what we knew early on in the year with rates.

Awesome update, thanks!

Sorry, just realized that I hadn't answered this question. Let me rectify that oversight right now.

Well, that Mix uses uses C all year except for Aug and Oct, when it uses F. The EMA stop-loss indicator is used as follows: if the Fund in question is below the 200 day EMA prior to the start of the month, then the Mix goes to G. It's not checked again until the next monthly check. If, at the time of the check, the price is on the borderline, then go for safety over risk.

The only time we would switch out G for F is in Aug and Oct. This Mix's return for 2018 was -2.13%. Using G instead of F, the return would have been -1.51%. A small difference to be sure, but let's see what happens if we substitute G for F over the last 10 years. That's the time when the G Fund has had the lowest returns in it's history, with each return being 0.30% or less.

To start with, the Mix normally has the following returns:
Last 10 years: CAGR 10.64%, PNR of 80%
Last 5 years: CAGR 6.06%, PNR 80%
Best year since 2009: 2013 (30.92%)
Worst year: 2018 (-2.13%)

If we sub out G for F for the last 10 years (2009 - 2018)
Last 10 years: CAGR 11.19%, PNR 80%
Last 5 years: CAGR 5.95%, PNR 80%
Best year since 2009: 2013 (30.87%)
Worst year: 2011 (-2.33%)

The difference isn't much at 10 years at these timescales, but it's measurable. If we go out to the full length of time to include the G Fund's best returns, the results are much the same in terms of slight measurability:

Normal Mix
Since 1988: CAGR 10.23%, PNR 77% (24 of 31)
Last 20 years: CAGR 4.78%, PNR 70%
Best years: 1997 (46.83%), 1998 (40.37%), and 1995 (40.97%)
Worst years: 2002 (-28.00%), 2008 (-26.46%), and 2000 (-12.26%)

With G Fund in Aug / Oct
Since 1988: CAGR 9.93%, PNR 77% (24 of 31)
Last 20 years: CAGR 4.38%, PNR 70%
Best years: 1997 (47.56%), 1998 (40.05%), and 1995 (39.05%)
Worst years: 2002 (-28.28%), 2008 (-24.86%), and 2000 (-13.20%)

The PNRs didn't change at any timescale, meaning that no years went from negative to positive by using the G Fund, and the CAGRs don't change all that much either way. Sometimes the CAGRs went up a bit, and for others it went down. The best years and worst years were all in the same ballpark as they were before.

I would say that if somebody wants to use this Mix with the G Fund in Aug and Oct instead of F, they wouldn't be altering the overall returns by much either up or down, and would gaining a measure of safety in the bargain. Not a bad tradeoff, all things considered.

Good question, michigande.