MDW1954 wrote:Gengulphus wrote:Alaric wrote:There isn't agreement on what form a benchmark should take. For a drawdown HYP there are two sources of value, namely the income withdrawn and the capital remaining. For an accumulating HYP there's the accumulated capital value after reinvestment. Or is this disputed because of the HYP mantra "capital doesn't matter"?
Yes, there's no agreement about what benchmark should be used, or even what form it should take (e.g. index, IT, inflation). Indeed, there isn't even agreement on whether to use a benchmark at all - some HYPers are perfectly happy if their HYP is simply fulfilling their needs, without feeling any need to compare against anything else. And as for "capital doesn't matter", there isn't any agreement on that either...
And as far as the HYP Practical guidance this thread is about is concerned, it's silent on benchmarks, capital and a number of other supposed HYP 'mantras' (e.g. "don't tinker" and "strategic ignorance") and details of the rules (e.g. it says that HYP shares "
When bought, should reasonably be expected to sustain, and preferably grow their dividends in the future." without saying what form the reasons for that expectation should take). AFAIAA, this is deliberate, because the board is
intended to cater for HYPers whose approaches vary on those things. Though discussing such differences should IMHO highly preferably be on an agree-to-differ basis, not a heated-argument one!
That isn't quite correct, and as both a moderator *and* the instigator of the removal of the posts in question, I am in a position to know.
The OP of the posts being discussed here felt that the following piece of guidance prevented them from being posted on HYP-P:
For the avoidance of doubt, the practicalities of taking a HYP approach DO NOT include making decisions about whether to use such an approach, nor decisions about whether to stop using one, the effectiveness and performance of HYP strategies versus other strategies, the desirability or otherwise of investment trusts as an alternative to HYP shares, nor discussions of other types of approaches.
I myself am not so sure that he is correct, but I am concerned that the guidelines as worded might be seen as suggesting that a HYP-CTY comparison is not appropriate for HYP-P.
I would be interested in your views on this.
I don't really see what you're saying is not quite correct about what I said. Enough HYPers have posted about benchmarks that I'm certain some HYPers use indices such as the FTSE100, FTSE AllShare or FTSE350 Higher Yield as their benchmark, some use ITs or baskets of ITs like CTY, some use inflation measures like CPI or RPI, some don't use benchmarks, so there isn't agreement on what form a benchmark should take or even whether to use one at all. I know that there isn't agreement about "capital doesn't matter" because some HYPers clearly do believe it and I don't (I'm of the "capital matters, but successfully looking after the income is an adequate way of looking after the capital, and far easier than directly attempting to look after the capital" school). I know that some HYPers believe firmly in "don't tinker" and others (including me) don't. Judging by the number of different ways in which people invoke "strategic ignorance", there isn't even agreement on what it is, let alone whether to use it or not. The HYP Practical guidance doesn't mention "capital", "benchmark", "ignorance" or any synonyms of them. I suppose that pedantically, "
It is acknowledged that individual HYP investors may from time to time see the need to sell individual HYP stocks, ..." is not being entirely silent about tinkering, but whether "may" is supposed to mean "might" or "are allowed to", it implies that "might not" and "are allowed to choose not to" are also OK, so it's silent on the question of whether to tinker or not. It doesn't give any more details of the rule I quote, and while the rest of what it says may be disputable, it is clearly labelled as being the situation as far as I am aware or as being my opinion.
As far as the "posts being discussed here" are concerned, what is being discussed in this thread is the new HYP Practical guidance. There are several different strands to that discussion, and I realise that some of them are about some posts that have been removed and the relevance of the new guidance to those post removals, but my post was prompted by Alaric's comment, to acknowledge that what he said about the lack of agreement on the form of benchmarks was true, and point out that there's no agreement on quite a lot of other things as well, as reflected by what is
not in the guidance.Tracing what Alaric's comment was prompted by back a bit further, it does seem to have been the posts you refer to, starting (I think!) at
viewtopic.php?p=318702#p318702. That post starts "Just to clarify" and I'm not entirely certain what previous statement he was clarifying, but a plausible chain leading up to it is
viewtopic.php?p=317344#p317344 (my comment about a superfluous "just" in some advice you'd given about not posting on HYP Practical excessively restricting the situations it applies to),
viewtopic.php?p=317345#p317345 (Alaric's reply to my comment asking whether the idea was that some people shouldn't read any board other than HYP Practical),
viewtopic.php?p=317461#p317461 (I'm puzzled how your advice that some people should not post on HYP Practical could possibly be read that way), then Alaric posts to clarify that he was asking about the acceptability of posting on HYS&S, specifically in relation to some posts there. And all of that is well over 100 posts into this thread - I'm sure that if I chased things back further, I would find several more shifts of exactly what was being discussed!
I'm not trying to say that anything wrong was done there (*) - my point is that with a fairly broad subject like this thread's, the discussion will wander between different aspects of the subject. Alaric's comment "
There isn't agreement on what form a benchmark should take. For a drawdown HYP there are two sources of value, namely the income withdrawn and the capital remaining. For an accumulating HYP there's the accumulated capital value after reinvestment. Or is this disputed because of the HYP mantra "capital doesn't matter"?" that I quoted before what I said was about whether there was agreement on the form benchmarks should take, and mentioned another thing that I know there's no agreement on. I picked up on that aspect of HYP Practical and of its guidance (for the latter, it shows up in what is
not in the guidance), and I really don't think you should expect my post to be about any of the previously-discussed aspects! Basically, the quote indicates what I was trying to discuss (which IMHO is the main job of quotes, and incidentally what is wrong with quoting the entirety of big posts just to comment on one aspect of them - doing so can make it hard for readers to work out which aspect one is addressing).
Anyway, on the issues you mention, I have three main views. The first is on the general issue of people feeling that they're excluded from posting on HYP Practical - as I've said previously, I feel that the sentence "
If you are not a HYP investor, then do not post here." plays the man rather than the ball, and should be replaced with something about what the poster is going to say, not what the poster is. That changes it from something that excludes whole classes of people from the board, which is not something we have on TLF (**), to just a strong reminder to stay on-topic for the board. It also makes it into a rule that moderators have the information required to do their job: they can always see what a post says, they can't always see what type of investor the poster is.
My second main view is that quite a few aspects of the rules could do with subsidiary guidance, but such guidance only exists for a few of them (selling and LTBH in the paragraph following the bullet list, FTSE100 and share yields in the following note about yields). For instance, there's no guidance about diversification - all mention of 15 shares in 15 sectors has vanished, without any other numbers taking their place. Some guidance about this and other matters is probably a good idea - I think the way I would probably do this is by producing a second post for the thread, starting something like:
"
Subsidiary guidance
The following guidance is about various aspects of how the rules should be interpreted and how they interact with some practical aspects of taking a HYP approach. Please consult it if you have difficulty understanding or applying the rules, and ask on the Biscuit Bar if it doesn't help.
Selling and LTBH: It is acknowledged that individual HYP investors may from time to time see the need to sell individual HYP stocks, perhaps in response to adverse performance, portfolio imbalance, or a corporate action, e.g. takeover. It is further acknowledged that it would be unrealistic to rule that discussion of such actions is outside the board’s remit. It is stressed, however, that HYP investing was always intended to be a LTBH strategy.
Yield: There are multiple sources for FTSE 100 yield data, although they don’t always agree. Posters are asked to make clear when discussing yield whether they are referring to historic yield (as quoted by many data sources), forecast yield, or some other yield such as yield on bought cost. For the avoidance of doubt, the FTSE 100 index referred to is the normal, widely-quoted capitalisation weighted version of the index, and not the less well known equally weighted version, or any other version.
Diversification: This board's standard for good diversification is at least 15 shares in at least 15 sectors. It is acknowledged that individual HYP investors may prefer greater diversification than that, and also that meeting this standard will sometimes take time, for example for a HYP in the early stages of being constructed."
and continuing with whatever other bits of such guidance are wanted. The first post in the thread would be a short statement of the objective and the rules - indeed, shorter than it is at present, since the guidance about selling, LTBH and yield would be moved from it into the subsidiary guidance - and would rarely need to be changed. The subsidiary guidance in the second post would probably end up longer and might be changed rather more often, depending on what further clarifications turn out to be needed. Separating it into two posts isn't strictly speaking necessary, but having a very clear division between "rules you really need to know" and "stuff to consult if you have problems" would help IMHO.
My third main view is that I think there's an unwritten, rather commonsense rule that applies to all boards (not just HYP Practical) that brief mentions of off-topic matters are OK provided they're worded as unprovocatively as reasonably possible, and even desirable when they're important background information, but treating those mentions as an invitation to discuss those off-topic matters in detail is not OK. For example, "No tobacco shares, please" is OK, and adding "I have ethical objections" is also OK IMHO: there's some risk either way of provoking questions like "Why no tobacco shares?" or "What are your ethical objections to tobacco shares?", but having some such risk is an unavoidable price of letting people know your preferences to save them from wasting their time suggesting shares you find unacceptable. But "No tobacco shares - I can't see how people who invest in an industry that kills its customers can live with themselves" is definitely too provocative! And replying to
any of those with "How can you object to tobacco shares and not to booze shares, which kill far more of their customers?" or any other response discussing ethical investing in detail is also unacceptable.
I think that same principle applies to benchmarks. Most benchmarks I can think off offhand are either investments themselves or indices that have pretty accurate proxy investments available for them in the form of index trackers, and using benchmarks is a practical management technique many HYPers use to judge how well they're doing. So mentioning them needs to be allowed, but significant discussion of them as investment strategies to be compared with HYP strategies should not be. Suitable subsidiary guidance might be something like:
"
Benchmarks: Many individual HYP investors like to use an inflation measure, stockmarket index or specific investment as a benchmark against which to measure their HYP's performance. It is acceptable to say that you use a particular benchmark and to report briefly how your HYP compared with the benchmark, but avoid discussing the benchmark or a closely-related investment as an investment strategy that might be used instead of a HYP strategy. For example, it is acceptable to use the FTSE100 index as a benchmark and to report that your HYP has underperformed it, but use another board if you want to go on to say that maybe you should be investing in a FTSE100 tracker instead.One final comment: after that, there is doubtless still a grey area between an acceptable HYP strategy vs benchmark comparison and a definitely off-topic HYP strategy vs another investment strategy comparison - it's just a smaller grey area than that left by the current state of the HYP Practical guidance. But don't try to get rid of every grey area in the rules and guidance - that's a hopelessly difficult task!
(*) Pedantically the acceptability of posts on HYS&S is off-topic for this thread, since it's about HYP Practical - but IMHO what's acceptable on HYP Practical and what's acceptable on HYS&S are sufficiently related that there shouldn't be any objection. In any case, I'm not objecting to it!
(**) Unless you count the moderators-only board, which IMHO has to exclude non-moderators to allow moderators to discuss and agree a common approach without being paralysed by it being virtually certain that
every idea suggested on it would attract objections from quite a few users.
Gengulphus