RISK

tech/a

That's ok you jog along, and I'll jog alongside, assuming that as a fat b*****d that I can keep up of course.

Obviously you are going to reference TT as the end product of the process.
I shall while you are hard at work sip my coffee and breakdown TT into nice little compartments for those that might be interested in the logic of the exercise.

Analytical model utilized
I think we can agree that TT is predominantly a technical analysis model .........I say predominantly technical analysis, as there may be a component of Quant. within the design that I am not privy to.

Quantification of risk model
Here we will disagree.
I have made my argument on a previous thread that TT is in point of fact a deterministic model while I suspect tech/a & stevo would argue a statistical model
Irrespective of the actual model, an awareness of the risk inherent within the models should be a prerequiste.

Risk management model
Stoplosses
Specific diversification
VAR

Components of risk assumed
Leverage
Liquidity
Marketability
Slippage
Trading costs
Taxes

Systemic Risk
Ignored.

Non-systemic risk
Psychological risk addressed
Open to random event risk

Just to expand on two components of risk management; stoplosses, and diversification.

Stoplosses fulfill our definition of risk, as the outcome is known and not *uncertain* Viz. stoplosses = 100% loss. (not 100% loss of funds).

Diversification;
Unfortunately, the model of diversification offered as an example, was proposed by a fundie (oh dear) but demonstrates a very poor understanding of the *risk* inherent in a poor diversification strategy.

Diversification, can be many things, one of them should include diversification of asset classes, Common stocks, Bonds, Commodities, Esoteric, Real Estate etc. Within the example we have as a major holding LPT's. Now assuming that you are exposed to real estate via the ownership of the family home, or investment properties, you could have correlated across asset classes. Commercial property can under again specific conditions correlate either strongly or weakly with residential property. Have these inherent risks been addressed?
Investment properties can be either residential or commercial, thus will be variable within their correlations to other positions......but you get the idea.

Is this a wise use of diversification? Time will tell.
Is this the purpose (in theory) of diversification? Simple answer no. The reason being, you are not diversifying at all, rather, you are concentrating.

I believe someone mentioned Buffett as an example of a concentrated portfolio............I would suggest you revisit, and think again. Buffett is very broadly diversified.

jog on
d998

Duc,

You might be going off track here. How does residential property, which we know tech invests in, and his tt system have any correlation with regard to the stockmarket?

I'm interested in these points raised:

Risk management models
Stoplosses
Hedging
Diversification
Against the box
Options strategies
Dollar cost averaging
Buy & Hold
VAR
Efficient Frontier

Click to expand...

Snake

You might be going off track here. How does residential property, which we know tech invests in, and his tt system have any correlation with regard to the stockmarket?

Click to expand...

With regards to tech/a and TT, not a great deal, hence it is diversification in the true sense of the word.

However, bullmarket who may or may not have investment property, who may or may not own a family home, will through investments in LPT's carry a reduction within the efficiency of diversification through correlation of the same asset class...........real estate. The correlation is higher if the LPT's are residential, weaker if they are commercial, however, again under specific circumstances, the correlation can rise.

This was an example of claimed diversification and risk management, that was poorly thought out.

I mitigate investment risk through diversification and fundamental analysis (as I described in other threads).

Nowadays I invest with income as my number 1 priority and with my current risk profile I am invested only in LPT's and energy/infrastructure trusts for their high yields.

I mitigate my risk to LPT's by restricting myself to those that meet my criteria which include having no or very little exposure to property development, good quality tennants with long average lease expiry times and price/NTA in the 1.0-1.10 range.

I'm now starting to also look at trusts that invest in the European property market for extra diversification and spread of risk.

Click to expand...

The point being that most of us own, or have a mortgage on our homes.
Some will have additional real estate exposure via investment properties.
If this describes your position, and you overweight in LPT's, is this diversification? The short answer is no.

I'm interested in these points raised:

Click to expand...

What interests you?
Something specific, or just generally?

jog on
d998

ducati916 said:

Snake

With regards to tech/a and TT, not a great deal, hence it is diversification in the true sense of the word.

Click to expand...

Point taken.

However, bullmarket who may or may not have investment property, who may or may not own a family home, will through investments in LPT's carry a reduction within the efficiency of diversification through correlation of the same asset class...........real estate. The correlation is higher if the LPT's are residential, weaker if they are commercial, however, again under specific circumstances, the correlation can rise.

This was an example of claimed diversification and risk management, that was poorly thought out.

The point being that most of us own, or have a mortgage on our homes.
Some will have additional real estate exposure via investment properties.
If this describes your position, and you overweight in LPT's, is this diversification? The short answer is no.

Click to expand...

Clear as crystal.

What interests you?
Something specific, or just generally?

Click to expand...

All generally, but more so hedging and how it can be applied to a normal stock portfolio.

Rock and roll all night!
Snake

Hi ducati

I'm flattered that you are using me as an example but it seems to me you are forming opinions using assumptions which are based on extremely limited information at best

I see you have quite a few 'may or may nots' in your post and you have deliberately excluded assets we have in mrs bullmarket's name

Now obviously I'm not going to disclose those in a forum like this but feel free to make whatever assumptions you like to base your opinions on. I posted earlier that I am happy with the returns I am getting and the level of overall risk my portfolio is carrying

We'll just continue to watch with interest and amusement.

cheers

bullmarket

bullmarket said:

Hi ducati

I'm flattered that you are using me as an example but it seems to me you are forming opinions using assumptions which are based on extremely limited information at best

I see you have quite a few 'may or may nots' in your post and you have deliberately excluded assets we have in mrs bullmarket's name

Now obviously I'm not going to disclose those in a forum like this but feel free to make whatever assumptions you like to base your opinions on. I posted earlier that I am happy with the returns I am getting and the level of overall risk my portfolio is carrying

We'll just continue to watch with interest and amusement.

cheers

bullmarket

Click to expand...

Could you please address the posts with some insight and intelligent reasoining rather than just defending yourself in general and in uninsightful ways.

You may have missed this before so I`ll repost it for you:

Calculating risk is by no means a trvial task and so can require extensive number crunching which the average trader would not even consider doing - and I suppose that is why no-one has posted any algorithms for actually calculating risk for a particular scenario


...being your comment, and an investor I am drawing your attention to the words in red.

Click to expand...

I am truly interested in the above.

I posted earlier that I am happy with the returns I am getting and the level of overall risk my portfolio is carrying

Click to expand...

This may come as a surprise to you but the discussion isnt about you.

Duc was giving good examples of to make his point.

Frankly I doubt anyone here could give two hoots wether your happy with what you do or not.

People are actually interested in veiws other than your own.

deliberately excluded assets

Click to expand...

Hell Duc I didnt know you had access to knowledge of all of Bulldusts assets!

We'll just continue to watch with interest and amusement

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Dont make yourself scarce we all need amusement as well.Even though there is little interest.

no problem tech/a

I just called how I saw ducati's opinion and gave my reasons why....I can't be any fairer than that.

If you see his examples based on his perception of our personal circumstances as good then all well and good and I don't have a problem with that at all

But for me, his view on what we do would have at least some credibility if he wasn't basing his opinion on very limited information on what we have and do....it's as simple as that

see you in the soup.

bullmarket

I mitigate investment risk through diversification and fundamental analysis (as I described in other threads).

Nowadays I invest with income as my number 1 priority and with my current risk profile I am invested only in LPT's and energy/infrastructure trusts for their high yields.

Click to expand...

Is this truly diversified just to add to the diversification element. If so what is the correlation?

Hi snake

Whether it is truly diversified or not is up to you.

As I said in earlier posts, my porfolio is meeting our investment objectives and is well within our personal risk tolerances so for me it is sufficiently diversified for our needs.

Again, let me refer you to my signature below which clearly states my views are based on my personal circumstances only and so may not be appropriate for others.

I am just providing food for thought and people can take it for whatever they think it's worth because at the end of the day it is of no consequence to us at all

And finally, if people want to form opinions based on very limited knowledge of our personal circumstances then that is fine but more than likely they are going to end up lookig foolish like ducati did earlier imo for the reasons I gave earlier.

see you in the swamp

bullmarket

bullmarket

And to think I could slip that little example past you!
You had promised that you were not popping in till the end of the week.

I'm flattered that you are using me as an example but it seems to me you are forming opinions using assumptions which are based on extremely limited information at best

Click to expand...

Excellent, no harm done then.
Limited information........absolutely.
But I am employing some Bayesian reasoning to extrapolate potential asset classes that you may hold, viz. your own family home.
Of course if I am wrong, and you in point of fact rent, my abject apologies, but I've just been itching to utilize the theory (to see if it has any practical relevance you understand)

But for me, his view on what we do would have at least some credibility if he wasn't basing his opinion on very limited information on what we have and do....it's as simple as that

Click to expand...

Yes, I understand, but, you did say;

I'm flattered that you are using me as an example

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So of course, well, gee, you do tend to change your mind so quickly.

But seriously, as tech/a has intimated, this really isn't about you at all, it is simply an example of diversification and correlation and who knows, if you get really unlucky, fat tails and then you might really be in the soup, so to speak................

And finally, if people want to form opinions based on very limited knowledge of our personal circumstances then that is fine but more than likely they are going to end up lookig foolish like ducati did earlier imo for the reasons I gave earlier.

Click to expand...

That's just not possible...........I'm a genius. Hadn't you realized?

jog on
d998

Hi snake

Whether it is truly diversified or not is up to you.

As I said in earlier posts, my porfolio is meeting our investment objectives and is well within our personal risk tolerances so for me it is sufficiently diversified for our needs.

Click to expand...

Bullmarket it is not about you! It is about the discussion. Enough defence!

Again, let me refer you to my signature below which clearly states my views are based on my personal circumstances only and so may not be appropriate for others.

Click to expand...

Yes I am aware that you are an investor, not trader and that people should not follow you. This is why I have asked you to clarify the point about average traders not calculating risk in their trading, but you have failed to respond to the discussion.

I am just providing food for thought and people can take it for whatever they think it's worth

Click to expand...

You don`t provide anything other than defence and antagonism. I have repeatedly asked for you to validate, elucidate your ramblings but to no avail.

And finally, if people want to form opinions based on very limited knowledge of our personal circumstances then that is fine but more than likely they are going to end up lookig foolish like ducati did earlier imo for the reasons I gave earlier.

Click to expand...

Once again it is not about you! It`s the discussion. This in turn makes you look foolish.

So one more time and don`t avoid it.

Could you please address the posts with some insight and intelligent reasoining rather than just defending yourself in general and in uninsightful ways.

You may have missed this before so I`ll repost it for you:

Quote:
Calculating risk is by no means a trvial task and so can require extensive number crunching which the average trader would not even consider doing - and I suppose that is why no-one has posted any algorithms for actually calculating risk for a particular scenario


...being your comment, and an investor I am drawing your attention to the words in red.



I am truly interested in the above.

Click to expand...

Rock on.
Snake

no problem ducati

But you should get your facts straight before posting because I never ever promised anything

I'm retired now so our lifestyle is fairly fluid nowadays and there has been a change of plans today.

cheers

bullmarket

hi snake

you say it's not about me and I agree it shouldn't be but for some reason ducati decided to specifically mention my alias when attempting to justify his opnion in his earlier post when he could easily have chosen a generic example.

All I did is reply to his post saying he was basing his opnion on very limited wishy-washy information surrounded by 'may or may nots' which clearly showed me has next to no idea on what he is talking about since he chose to use his very limited perception of our personal circumstances to base his opinion on. Imo he would have had much more credibility had he used a generic example....it's as simple as that

cheers

bullmarket

bullmarket said:

no problem ducati
But you should get your facts straight before posting because I never ever promised anything
I'm retired now so our lifestyle is fairly fluid nowadays and there has been a change of plans today.

cheers

bullmarket
hi snake

you say it's not about me and I agree it shouldn't be but for some reason ducati decided to specifically mention my alias when attempting to justify his opnion in his earlier post when he could easily have chosen a generic example.

All I did is reply to his post saying he was basing his opnion on very limited wishy-washy information surrounded by 'may or may nots' which clearly showed me has next to no idea on what he is talking about since he chose to use his very limited perception of our personal circumstances to base his opinion on. Imo he would have had much more credibility had he used a generic example....it's as simple as that

cheers

bullmarket

Click to expand...

Once again you are defending yourself instead of adding to the discussion. I`m not interested in your feelings for Duc.

Please answer my posts.

I`ll check in tonight to see your response.
I@m off to see aliens now. :alien2:

bullmarket

Promises, promises, I just feel so deflated that you, whom I have such a high regard for, could mislead me so uncaringly!

But you should get your facts straight before posting because I never ever promised anything

I'm retired now so our lifestyle is fairly fluid nowadays and there has been a change of plans today.

Click to expand...

Of course I understand, all that liquidity engendered via endless forays into soup & swamps. I feel much better now that I understand.

Imo he would have had much more credibility had he used a generic example..

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Absolute nonsense.
Actual examples are just so superior to theoretical examples I use TT all the time and I will use my own later in the thread, just to show that there's no bias (you understand).

If you didn't want your methodology examined, discussed, criticised, what on earth possessed you to post it in the first place?

Snake

I`m not interested in your feelings for Duc.

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You must realize, that, I am his favorite, with tech a close second.
You must not feel rejected because he doesn't want to play with you, but you must ask him questions that he wants to answer.

jog on
d998

no problem snake

I`ll check in tonight to see your response.

Click to expand...

we won't be back home till late tonight so I doubt I'll reply tonight.

cheers

bullmarket

hi ducati

no problem - I agree that normally actual examples are better but using me as an example showed me and those that no us personally that you have next to no idea on what you are talking about because the information you used in your example was extremely limited.......so as I said, we'll continue to watch with interest and amusement

see you in the swamp

bullmarket

Regrettably, this thread seems to be getting increasingly personal. I don't mind a heated debate but lets try and avoid any name calling or vindictiveness.

If you can't get along with someone then it might be an idea simply to ignore them.

Some great discussion in this thread, lets try to keep it on track.

Joe Blow said:

Regrettably, this thread seems to be getting increasingly personal. I don't mind a heated debate but lets try and avoid any name calling or vindictiveness.

If you can't get along with someone then it might be an idea simply to ignore them.

Some great discussion in this thread, lets try to keep it on track.

Click to expand...

Joe,

Your warning above is, I guess, reasonable.
However, at the risk of irritating you further, may I please issue a heartfelt plea to bullmarket to throw his soup in the swamp so that we may never hear of either again. Please, bullmarket?

Julia

Joe Blow said:

Regrettably, this thread seems to be getting increasingly personal. I don't mind a heated debate but lets try and avoid any name calling or vindictiveness.

If you can't get along with someone then it might be an idea simply to ignore them.

Some great discussion in this thread, lets try to keep it on track.

Click to expand...

Joe,

Please join in. It`s good to get some others involved.