Purpose of the PP

General Discussion on the Permanent Portfolio Strategy

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dualstow
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Re: Purpose of the PP

Post by dualstow » Thu Dec 06, 2018 10:12 am

I just want to make sure I have this right:
Overall, you're saying you love the pp.
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buddtholomew
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Re: Purpose of the PP

Post by buddtholomew » Thu Dec 06, 2018 10:19 am

dualstow wrote:
Thu Dec 06, 2018 10:12 am
I just want to make sure I have this right:
Overall, you're saying you love the pp.
Haha
It is what it is.
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buddtholomew
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Re: Purpose of the PP

Post by buddtholomew » Thu Dec 06, 2018 10:36 am

Just look at it:

Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.
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dualstow
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Re: Purpose of the PP

Post by dualstow » Thu Dec 06, 2018 10:42 am

buddtholomew wrote:
Thu Dec 06, 2018 10:36 am
Just look at it:

Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.
I have a little bit of buyer's remorse myself, but when stocks are soaring, it doesn't feel like the right time to go all stocks. When stocks are plummeting, I also don't want to be all in stocks. I guess I don't hate the pp that much because aside from trimming my long bonds as they hit breakeven (and keeping the really profitable ones), I have not dismantled it.

If and when gold comes back in my lifetime, that will be the true test of whether or not I am satisfied. If I simply sell off the gold at breakeven, then no.
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Cortopassi
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Re: Purpose of the PP

Post by Cortopassi » Thu Dec 06, 2018 11:09 am

budd, from Zero Hedge, graph of the dislocation of long bonds and market the past couple months, and they are inferring a bond rally is coming.

Or not...

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Re: Purpose of the PP

Post by Tyler » Thu Dec 06, 2018 11:31 am

buddtholomew wrote:
Thu Dec 06, 2018 10:36 am
Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.
That one is easy -- on a day when stocks tank, 3/4 of your portfolio is protected. And it will do the same on bad days for gold or bonds, too. Unlike the vast majority of asset allocations that are heavily dependent on market cycles, the PP keeps doing its thing no matter how the winds blow.

BTW, it's important to not confuse uncorrelation with negative correlation. No two assets will ever perfectly mirror each other on a daily basis, and if they did the portfolio wouldn't work.
PortfolioCharts.com : a picture is worth a thousand calculations
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buddtholomew
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Re: Purpose of the PP

Post by buddtholomew » Thu Dec 06, 2018 12:25 pm

Tyler wrote:
Thu Dec 06, 2018 11:31 am
buddtholomew wrote:
Thu Dec 06, 2018 10:36 am
Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.
That one is easy -- on a day when stocks tank, 3/4 of your portfolio is protected. And it will do the same on bad days for gold or bonds, too. Unlike the vast majority of asset allocations that are heavily dependent on market cycles, the PP keeps doing its thing no matter how the winds blow.

BTW, it's important to not confuse uncorrelation with negative correlation. No two assets will ever perfectly mirror each other on a daily basis, and if they did the portfolio wouldn't work.
It’s not that easy...50% of the portfolio is already negative YTD so how exactly is that protected during a stock market decline. Seems to be blowing in the wind to me.
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Cortopassi
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Re: Purpose of the PP

Post by Cortopassi » Thu Dec 06, 2018 1:44 pm

buddtholomew wrote:
Thu Dec 06, 2018 12:25 pm
Tyler wrote:
Thu Dec 06, 2018 11:31 am
buddtholomew wrote:
Thu Dec 06, 2018 10:36 am
Gold is going red and LTT’s now only .8 from 1.13 while stocks tank. Are you happy with the PP? Please explain how.
That one is easy -- on a day when stocks tank, 3/4 of your portfolio is protected. And it will do the same on bad days for gold or bonds, too. Unlike the vast majority of asset allocations that are heavily dependent on market cycles, the PP keeps doing its thing no matter how the winds blow.

BTW, it's important to not confuse uncorrelation with negative correlation. No two assets will ever perfectly mirror each other on a daily basis, and if they did the portfolio wouldn't work.
It’s not that easy...50% of the portfolio is already negative YTD so how exactly is that protected during a stock market decline. Seems to be blowing in the wind to me.
budd,

Seems maybe a better course of action for you and some is to just buy puts as insurance? Go 100% stock market and buy an equivalent amount of protection with puts. Always going to eat away a good percentage of your gains, but you can sleep better?

I look at the PP as a smoothing function. Below is my allocation vs. S&P. Sure, still negative. But... the heightened sense of loss I would have right now knowing I *could* have sold out of my stocks in September at 10% gain, vs. being negative again...even though there's no way to have known...would be anxiety producing.

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Re: Purpose of the PP

Post by stuper1 » Thu Dec 06, 2018 2:16 pm

Cortopassi,

Could you extend the start date of your graph back to 1/1/2000 to illustrate to Buddtholomew why some people have a little more faith in the PP than he does?
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Re: Purpose of the PP

Post by Cortopassi » Thu Dec 06, 2018 4:04 pm

I can't. This is from Personal Capital which I only started using late last year. But, we can use Portfolio Charts to shown the drawdown pain. Of course the CAGR is lower for the straight PP, but the ulcer index describes me perfectly and gives a good sense of the smoothing.

People might say gold is dead, and bonds multi-decade bull run is over, but who knows.

The stock market sure popped back today.

100% stocks:

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Straight PP

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Re: Purpose of the PP

Post by stuper1 » Thu Dec 06, 2018 4:30 pm

Here's an image from Portfolio Visualizer showing the PP performance vs the S&P 500 for 2000 to 2018 (I hope that worked; I don't show images often):

Image

Actually the PP has a higher CAGR and Sharpe ratio and quite a lower maximum drawdown. Of course, that start date is cherry picked, but comeon somebody has to give the PP a little love.
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Re: Purpose of the PP

Post by Cortopassi » Thu Dec 06, 2018 4:48 pm

The image didn't take. I think this is the same as you setup. Portfolio 1 is PP, 2 is 100% US Market

Image
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