Fancy Schmancy PPs

General Discussion on the Permanent Portfolio Strategy

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Kbg
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Fancy Schmancy PPs

Post by Kbg » Wed Sep 04, 2019 9:37 pm

Yeah stupid title I know however, the content of this link is good. Worth some of your daily internet time I believe.

https://alphaarchitect.com/2019/09/03/c ... -part-2-2/
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europeanwizard
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Re: Fancy Schmancy PPs

Post by europeanwizard » Thu Sep 05, 2019 12:54 am

Even the summary is a bit over my head, but in their strategy they use long puts, right?
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Smith1776
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Re: Fancy Schmancy PPs

Post by Smith1776 » Thu Sep 05, 2019 2:07 am

I understood some of those words.
Early to bed and early to rise makes a man healthy, wealthy, and wise.
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Kbg
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Re: Fancy Schmancy PPs

Post by Kbg » Thu Sep 05, 2019 9:08 am

Smith1776 wrote:
Thu Sep 05, 2019 2:07 am
I understood some of those words.
Schmancy is pretty technical, sorry for the jargon. ;)

On a more serious note, the main take away for a PPer is that long bonds and gold aren't that great a stock hedge and there are better methods. See the chart right after "Why does it matter?"

Let's do some math to make it very concrete for us here.

Average draw downs/draw ups? annualized
Stocks: -45%
Long bonds: +10.6%
Gold: +9%

With a 25% weighting for each at the portfolio level the draw down/ups are below:
Stocks -11.25%
LBs +2.65%
Gold + 2.25%

Therefore in a typical stock market draw down we can expect to be down across the entire PP portfolio -6.35% (2.65+2.25-11.25 annualized).

Check out the the draw downs tab with a standard PP...pretty darn close to average with a couple of exceptions.
https://www.portfoliovisualizer.com/bac ... allocation

More evidence that we can expect the classic PP to provide a pretty smooth ride in exchange for reduced upside.
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