600 Members Coming Up

General Discussion on the Permanent Portfolio Strategy

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blue_ruin17
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Re: 600 Members Coming Up

Postby blue_ruin17 » Fri Aug 11, 2017 5:33 pm

600 members... is that all?

Bogleheads forum has 62,090. The PP isn't just niche, it's fringe.

This ratio is astounding... but also reassuring.

Astounding, why? Because the Permanent Portfolio is beautiful.

For me, the PP is more than just a utilitarian investment vehicle for my life savings. It isn't the investment equivalent of a toaster: in other words, it isn't a financial appliance that exists merely to serve a singular utility, and which can't be appreciated on any other level.

No, the PP is more like a mechanical work of art, in the same way that a medieval trebuchet was: both serve a tactical/strategic purpose, but there is also subtle, hidden genius behind their respective counter-balancing mechanisms. As a system the PP is one of the most fascinating machines I've ever had the pleasure of deconstructing.

To this day I continue to discover secret tunnels, trap doors and hidden passageways that expand my understanding of this deceivingly simple portfolio. At first you think you are learning about an investment portfolio, but before you know it you realize you're actually studying a philosophy. The PP becomes a prism through which you interpret economics, politics, psychology, ect. When you realize that the PP has as much to do with Taoism as it does modern portfolio theory, you know you've stumbled upon something special.

And that's the astounding part: no one seems to notice! Surely not 1 in a 1000 people on the street have ever even heard of the PP, let alone appreciate it. And within the online investing community, while most have heard of the PP and are probably familiar with the basic concept, few really understand it, let alone appreciate its beauty.

And that leads to the reassuring part:

The PP remains the best kept secret in the investing world. It is like an oasis in the desert that is routinely dismissed as a mirage. Thirsty, tired travelers pass by in droves without further investigation, and even when we try to alert people that there is water and shade and protection from the harsh desert environment, most travelers scoff and say "impossible, this is the desert afterall!"....

The PP will never be a crowded trade because it is just too counter-intuitive and contrarian, especially for "advanced" and "experienced" investors. And that means the PP will keep working.

600 members... I'm fine with that. I say keep the PP-to-conventional-portfolio ratio below the 1:100 ratio.
Last edited by blue_ruin17 on Fri Aug 11, 2017 8:01 pm, edited 2 times in total.
"Of course, the market narrative exists whether you pay attention to it or not. But when you embrace the great unknown, you’re able to disengage and observe the mania for what it is: the Jungian collective unconscious acting to manifest its own destiny."
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dualstow
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Re: 600 Members Coming Up

Postby dualstow » Fri Aug 11, 2017 7:36 pm

Nice post, Blue! Almost Medium Texasian (my highest compliment O0 ).
Most people are simply too greedy to deploy such a defensive portfolio as this.
And as you said, it's counterintuitive, so not all defense seekers go for it, whittling down our population further.
Why don't we have more followers? (Locked). Ans.: because we have no logo.
"'Your life is tedious and brief.' All sundial mottos are sad like that."
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blue_ruin17
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Re: 600 Members Coming Up

Postby blue_ruin17 » Fri Aug 18, 2017 5:54 pm

And that is the highest compliment I could receive, thank you.

I credit the PP community (here and elsewhere) for exorcising many investment 'inner-demons' which I had carried with me for years.

For example: in high school, I remember having a class on personal finances. In it, we learned about how investing in the stock market would grow your money at about 10% a year, as long as you kept your money in the market "for the long run". There was a slick chart that demonstrated how, if we invested some small amount of money in the stock market every month starting at age 18, how we would be multi-millionaires by age 65. The chart was so gorgeous, and that exponential curve so beautiful -- I fell in love. I determined then and there to become a dutiful investor, with the same resolve of a monk or a knight.

But, even though I was only 16 years old (or something like that), something didn't quite sit right. Even though I was still almost totally ignorant about economics or investing, I could sense that I wasn't being told the full story. "It couldn't be that easy", I thought to myself. "If it were, everyone would be millionaires." And I also had the sneaking suspicion that the past wasn't an indicator of the future. "Why is it guaranteed that stocks will be so stellar for my generation, just because they did for the last?" I never asked any of these questions, probably because my subconscious recognized that my teacher had no grasp of the subject herself.

I graduated in the summer of 2008 and started university in September of that same year... well, it goes without saying that any scraps of faith that I had in "100% stocks for the long run" were eviscerated. For those who lived through that crisis, you will remember that it wasn't just the 40% drawdown that was disturbing, that's just a number: it was the atmospheric tinge of APOCALYPSE that hung on the air-waves and oozed from the newspapers that I'll never forget. At the time, no one knew just how far this implosion was going to go. It could have been the end of the financial system as we knew it. I was terrified, and I didn't even have a dime in the market.

After that experience, I felt like a desert wanderer with no home to settle my savings into. Nothing was safe, nothing made sense. No portfolio or asset allocation system relieved my doubts. They all made me feel like I was being taught about the "glories" of the stock market by my personal finance teacher in high school again.

When I stumbled upon the PP, the internal logic of it appealed to me immediately. It was so contrarian, so bizarre, so utterly insane that I knew immediately that it warranted investigation, since everything that was mainstream had to that point failed to seduce me in anyway. The community answered most of the questions about it, and I never felt like I was being sold fishy, suspicious reasoning. I felt like I found home, finally.

A few lingering questions remained though. That's where MediumTex comes in.

It is him, in particular, who resolved many of the final "tough questions" that I had regarding the portfolio, especially related to the subject of Peak Oil. I owe a lot to the PP community, but especially to Tex for reconciling all of my fears, objections and hesitancies.
"Of course, the market narrative exists whether you pay attention to it or not. But when you embrace the great unknown, you’re able to disengage and observe the mania for what it is: the Jungian collective unconscious acting to manifest its own destiny."
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Re: 600 Members Coming Up

Postby sophie » Sat Aug 19, 2017 7:51 am

Blue Ruin, thank you for this post. There is a lot of wisdom in it.

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