XFool wrote:Specifically wrt HYP troubles -
I hope I can be forgiven for sticking my oar into this nest of vipers!
I am not a HYP investor, this could be both an advantage and a disadvantage. I am genuinely disinterested - that I am not a HYP investor means nothing about by attitude or opinion of HYP investment or posters. I have no opinion either way, for or against. OTOH, not being involved means my understanding of the issues could be quite naive. Anyway, here goes...
I noticed mention of problematical discussions on "total return" and how a statement: "capital doesn't matter" was ridiculous, or somesuch. This intrigued me.
Outsider I may be, but I still remember HYP's origins on UK TMF. I remember the original suggestion came from poster Pyad on that site. As I remember it was to use a fixed capital sum to buy a portfolio of individual, dividend paying company shares from the FTSE-100. Big, reliable companies unlikely to go bust, likely to continue paying out dividends. The purpose of such a HYP was to act long term as an addition/alternative to/replacement for an annuity (very likely a pension annuity).
In that original context "capital doesn't matter" seems to make sense (provided the idea works out long term!). For, just like an annuity, the original capital has been foregone following purchase. What matters - the only thing that matters - is the continuing income stream.
Let me supply that original context. It's an article by TMFPyad (as he was then, due to being a TMF staff member at the time), an archived copy of which can be found at https://web.archive.org/web/20140219210 ... 01106c.htm
. If you read it, you'll find that it neither
says "capital doesn't matter
contains the idea that capital doesn't matter. On the contrary, it puts forward the continued availability of the capital as one of the advantages of the strategy, e.g. by saying "Anyone with a lump sum available to invest for income upon which they depend must therefore try and find a source that will grow that income and also offer some easy access to the capital. Inflation is the obvious reason that it is essential, for those that do depend heavily on the income, to try and ensure that it will grow. Having the capital available may be important at some future point if, for example, you have to go into a care home.
What it does
say is "Do not worry about the fluctuations in the underlying capital value of your shares that are certain to occur
". If one wants a short, pithy way of expressing that, "Pay no attention to capital
" is considerably more accurate than "Capital doesn't matter
", though not quite as brief. Unfortunately (IMHO), the latter is the one that has become associated with the strategy...
I'm not saying that your "What matters - the only thing that matters - is the continuing income stream
" summary is deliberately misrepresenting the original proposal - it's exactly what I think my memory would have morphed into under exposure to "Capital doesn't matter
" if I hadn't looked at the original proposal again quite a few times over the years! But to represent it reasonably accurately, something like "What primarily matters is the continuing income stream; the capital is still available and may end up mattering, but don't pay attention to it
" is needed.
It may also be worth noting that what that proposal actually suggests a HYP as an addition/alternative to/replacement for is "some kind of insurance company product such as guaranteed income bonds or the like
". Under the pension rules of the time, buying a pension annuity with the bulk (75%) of one's pension was compulsory, so that just about the last thing most sensible pensioners wanted to do with their 25% tax-free lump sum was buy another all-income/no-capital investment! So it seems to me that your summary of the purpose of a HYP in the original proposal can be shortened to "to act long term as an addition/alternative to an annuity (very likely a pension annuity)
", dropping "replacement for".
All readers: please note that I'm saying the above just to help XFool (and anyone else who is interested) get an accurate idea of what pyad's original proposal actually said - not
to express support for what it said. And as fair warning, IMHO any arguments either in favour of or against what it said would be thoroughly off-topic both for this thread and this board - if anyone wants to put forward such arguments, I'd suggest High Yield Share Strategies as the best place.
XFool wrote:After this original Pyadic HYP idea was floated, if I remember correctly (I may not) two things happened. Possibly the most significant in the current context is that some took the original HYP idea and ran with it (suitably modified) as a long term investment portfolio strategy. Which AFAICS is not what the original idea of HYP was about. Again, I make no comment and have no opinion as to the virtue or otherwise of such an investment approach, other than to point out it was very different from the original HYP conception.
It's probably worth pointing out that the "some" who did that included pyad himself - an archived copy of an article he wrote about it in February 2007 can be found at https://web.archive.org/web/20071231131 ... avers.aspx
(and I'm pretty certain that he wrote posts on the subject from time to time as well, though the chances of any of those surviving the loss of the TMF boards are low, and chances of any that might have survived being findable even lower). You're quite right that it wasn't the original idea, but it was quite a mainstream development of that idea - which might not be the impression readers will get from your use of "some".
XFool wrote:As an aside, on TMF over time, HYP was subjected to modifications of the original (suggested) 'rules', both in the case of the original Pyadic HYP and its transition by some into a general investment strategy (necessarily so in the latter case).
The original proposal (linked to above) was a fairly specific strategy, though not one with every last detail tied down - e.g. "You don't want excessive debt, for example.
" leaves some scope for even HYPers who are trying to follow that proposal precisely to have different views on how much debt is "excessive". When the original High Yield Portfolio discussion board was set up on TMF, discussion naturally branched out from that in multiple directions, and eventually it branched out so far that major "should use HYP" vs "shouldn't use HYP" arguments erupted on the board. Those arguments interfered badly with some uses people wanted to make of the board - e.g. "I'm running a HYP and need to decide how to deal with this rights issue from one of my shares" would get a response along the lines of "Running a HYP is your mistake, so deal with it by selling your entire HYP and running something else instead", which would be closely followed by rapid "Nonsense, HYP is an excellent strategy", "Isn't", "Is too", ..., type exchanges (to describe them highly succinctly - they were generally much longer!). And the original question got lost in the crossfire...
That's what led to the board being split in 2008, the basic idea being that High Yield - HYP Practical was for questions about running a HYP in practice, with "should use HYP" vs "shouldn't use HYP" arguments strictly forbidden on that board, and High Yield - Share Strategies for anything else about high-yield share strategies, which among other things would give those who wanted to pursue those arguments somewhere they could legitimately do so. In the process, High Yield - HYP Practical needed to acquire a definition of what constitutes a "HYP", as otherwise the "should use HYP" vs "shouldn't use HYP" arguments would simply morph into "should use what User1 chooses to call HYP" vs "should use something entirely different that User2 chooses to call HYP" arguments. And that's more-or-less what we've got today, with some slight changes to the board names and rewritten board guidance as a result of the move from TMF to TLF. (The rewritten board guidance is broadly on the same lines as the TMF board guidance, but substantially shorter due to a mixture of not using an 'FAQ' format, providing far fewer pointers to which other boards one might use instead, getting rid of some lists of examples and some less-necessary conditions, etc.)
My point in giving that fairly long description of what happened is to say that yes, pyad's original 'rules' about how to run a HYP were modified, more or less from the word go (which is basically inevitable as soon as a strategy is let loose for multiple investors to use), but no, what are generally thought of now as the HYP 'rules' are not a modification of pyad's original 'rules' about how to run a HYP. They're not rules about how to run an investment strategy at all - they're instead rules about what is allowed to be discussed on the HYP Practical board.
XFool wrote:I'm sure all this is likely well known to many (most?) posters on TLF HYP boards. But to everyone? When I see arguments over "total return" and "capital doesn't matter" it makes me wonder if these differences have been lost over time or are not appreciated by newer posters, causing people to argue 'past' each other. I seem to remember that on TMF these same arguments resulted in some kind of split in the HYP boards, possibly between 'Pyad HYP' and 'Other HYP', but this is where my memory definitely lets me down.
Hopefully the above account of how board split came about will refresh your memory. I do realise that I haven't been able to back it up with much concrete evidence, but I've tried to keep it as objective as I can - e.g. saying that the arguments erupted and what sort of problems they caused, but not laying blame on either side. What evidence I can supply is just that I was quite involved in coming up with the TMF board split and so ought to know what I'm talking about, and that the TMF board split was along the lines I describe - see the TMF High Yield - HYP Practical guidance
and the TMF High Yield - Share Strategies guidance
from the time, noting the acknowledgements at their ends for evidence of my involvement.
As an aside, a detail of those two bits of TMF guidance is that the High Yield - HYP Practical guidance was post 2 on that board (I think post 1 was a standard "Welcome to the board" type of message) while the "High Yield - Share Strategies" board was post 52212 on that board. The reason for that was that the High Yield - Share Strategies board was a renaming of the original High Yield Portfolio board, while the High Yield - HYP Practical board was new - done that way so that existing threads (and especially the raging arguments) would remain on-topic for their board after the split.
XFool wrote:The only thing I can think to suggest now is that these two broadly different versions of HYP be explicitly resurrected in the TLF boards (Merely saying 'Pyad HYP' now won't help newcomers)
Hi Yield Portfolio as an Annuity (Pyad HYP)
Hi Yield Portfolio Investing (HYP)
Under those two umbrellas there could still be room for different streams of 'modifications' to both those two broad categories.
I would suggest that if you want to pursue that idea, you review it in the light of the links I've provided above, as the "Hi Yield Portfolio as an Annuity" name in particular seems to be based on a memory of the original proposal that has been significantly distorted by subsequent exposure to "Capital doesn't matter"... And I would suggest that if you still want to pursue it after that review, you propose it in a new thread to avoid it getting tangled up with all the other issues in this thread!