Gold / Stock / Bonds at highs or near highs?

General Discussion on the Permanent Portfolio Strategy

Moderator: Global Moderator

User avatar
Tyler
Executive Member
Executive Member
Posts: 1943
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Gold / Stock / Bonds at highs or near highs?

Post by Tyler » Tue Oct 08, 2019 12:57 pm

I hear ya. It's true that we don't have a lot of data for rising rates. But we do have a full decade of truly skyrocketing rates. And during that time the PP still stayed right within its normal band of returns.

Personally, I don't think the PP was driven by falling rates any more than it was driven by gold coming off the gold standard or the record stock bubble in the 90's. With any portfolio, one can point out reasons to doubt any individual asset. To me, the beauty of the PP is that it truly internalizes this doubt and doesn't place its bets on any of them. And that's exactly how it is so stable over time even in the face of market turmoil.
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
User avatar
ochotona
Executive Member
Executive Member
Posts: 3177
Joined: Fri Jan 30, 2015 5:54 am

Re: Gold / Stock / Bonds at highs or near highs?

Post by ochotona » Tue Oct 08, 2019 2:41 pm

pugchief wrote:
Mon Oct 07, 2019 1:36 pm
ochotona wrote:
Sun Oct 06, 2019 11:26 am
sophie wrote:
Sun Oct 06, 2019 10:18 am
Another strategy: wait until the PP as a whole goes through a negative performing couple of months and then buy in.
This is a great idea.
I disagree. I think this is a terrible idea. What if the next time the PP has sustained negative returns is 10 years from now? You think waiting 10 years for that event is better than just jumping in or DCA?
Didn't mean to try to wait years before jumping in. I meant start buying when everyone on the forum is complaining, which is several times a year.

End of 2015. End of 2016. One year ago. Those times. Did you forget already? Usually coincident with whats-his-name "Budd" being an ash.
User avatar
Kbg
Executive Member
Executive Member
Posts: 1749
Joined: Fri May 23, 2014 4:18 pm

Re: Gold / Stock / Bonds at highs or near highs?

Post by Kbg » Tue Oct 08, 2019 3:44 pm

This isn't unique to the PP but every time the PP has had a bad year, the next year has been one of its best years. However, given the DDs experienced historically I don't see any point to waiting to invest.
Pet Hog
Executive Member
Executive Member
Posts: 218
Joined: Tue May 28, 2013 4:08 pm

Re: Gold / Stock / Bonds at highs or near highs?

Post by Pet Hog » Wed Oct 09, 2019 9:41 am

Tyler wrote:
Tue Oct 08, 2019 12:57 pm
I hear ya. It's true that we don't have a lot of data for rising rates. But we do have a full decade of truly skyrocketing rates. And during that time the PP still stayed right within its normal band of returns.

Personally, I don't think the PP was driven by falling rates any more than it was driven by gold coming off the gold standard or the record stock bubble in the 90's. With any portfolio, one can point out reasons to doubt any individual asset. To me, the beauty of the PP is that it truly internalizes this doubt and doesn't place its bets on any of them. And that's exactly how it is so stable over time even in the face of market turmoil.
I wonder what would be the result if we modeled the PP going back in time from today. My gut instinct is that it wouldn't be too bad, even though stock and bond prices would go pretty much downhill all the way. Rebalancing and reinvestment of higher dividends might save the day. Tyler, is that something easy for you to try modeling?
User avatar
Tyler
Executive Member
Executive Member
Posts: 1943
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Gold / Stock / Bonds at highs or near highs?

Post by Tyler » Wed Oct 09, 2019 1:43 pm

Pet Hog wrote:
Wed Oct 09, 2019 9:41 am
I wonder what would be the result if we modeled the PP going back in time from today. My gut instinct is that it wouldn't be too bad, even though stock and bond prices would go pretty much downhill all the way. Rebalancing and reinvestment of higher dividends might save the day. Tyler, is that something easy for you to try modeling?
Interesting idea. I'll have to think about it. My first impression is that calculating bond returns with reversed interest rate movements isn't too hard, but I have major doubts that the exercise would meaningful without also finding some way to account for how a prolonged period of rising rates might have also affected the stock and gold markets. Assets don't operate in a vacuum.
Last edited by Tyler on Wed Oct 09, 2019 4:24 pm, edited 2 times in total.
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
User avatar
ochotona
Executive Member
Executive Member
Posts: 3177
Joined: Fri Jan 30, 2015 5:54 am

Re: Gold / Stock / Bonds at highs or near highs?

Post by ochotona » Wed Oct 09, 2019 1:55 pm

Kbg wrote:
Tue Oct 08, 2019 3:44 pm
This isn't unique to the PP but every time the PP has had a bad year, the next year has been one of its best years. However, given the DDs experienced historically I don't see any point to waiting to invest.
The volatility is so mild relative to other options, timing the purchase is really a palliative step. It's psyching yourself out in a good way.
User avatar
vnatale
Executive Member
Executive Member
Posts: 3982
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Sat Mar 14, 2020 6:57 pm

Pet Hog wrote:
Thu Sep 19, 2019 2:05 pm
vnatale wrote:
Wed Sep 18, 2019 8:24 pm
For those of you who have FULLY embraced the Permanent Portfolio and made your investment all at once can you reveal where each of the three volatile investments stood at the time of your investment? In other words, how close was each to its market high or low at the time of your investment.
I completed buying all the components of my PP in May 2013. Within about three months I was down 7%. Ouch. I guess I bought at some highs. (I'm now at almost 4% real annualized over the six years.) So I understand your concerns and everything you say sounds reasonable and well thought out.

Sure, I think we're due for some dramatic market turbulence in the next couple of years, but there seems to be so much doom and gloom in the personal finance world these days that perhaps it's already factored in (i.e., if everyone thinks we're going to crash it's unlikely to happen). If I were to make some bold predictions, I think treasury yields could go to zero or negative, gold could double, and stocks could halve. In that case, the PP would do very well and a rebalance or two would happen into then-very-affordable stocks. If we muddle through the next few years, then the PP will probably function as usual.

My experience has been that there wasn't a time during the last six years when it was possible to say, "now is a great time to invest in the PP!" -- it's always been seemingly overvalued/scary. But I'm very content with my holdings and I expect to do OK going forward. I'm not going to cash out my PP today; flip that logic on its head and I would have to be happy to buy into it today. With the three volatile assets seemingly overvalued, I suspect that you prefer to hold 100% cash. Given the two choices, I'll stick with the PP. Who knows what will happen. Not me!
Are you a prophet??!! Another one in which "the next couple of years" comes to fruition in less than six months!

Vinny
"I only regret that I have but one lap to give to my cats."
User avatar
vnatale
Executive Member
Executive Member
Posts: 3982
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Sat Mar 14, 2020 7:20 pm

mathjak107 wrote:
Wed Sep 25, 2019 11:12 am
Nasty day today for gold and long term treasuries....this is what scares me about the way they seem to be joined at the hip...the supposed yin and yang can be quite powerful and nasty when things that are supposedly uncorrelated stay bedfellows

You somewhat echoed this in something you wrote somewhere today?

Vinny
"I only regret that I have but one lap to give to my cats."
Pet Hog
Executive Member
Executive Member
Posts: 218
Joined: Tue May 28, 2013 4:08 pm

Re: Gold / Stock / Bonds at highs or near highs?

Post by Pet Hog » Tue Mar 24, 2020 3:50 pm

vnatale wrote:
Sat Mar 14, 2020 6:57 pm
Pet Hog wrote:
Thu Sep 19, 2019 2:05 pm
Sure, I think we're due for some dramatic market turbulence in the next couple of years, but there seems to be so much doom and gloom in the personal finance world these days that perhaps it's already factored in (i.e., if everyone thinks we're going to crash it's unlikely to happen). If I were to make some bold predictions, I think treasury yields could go to zero or negative, gold could double, and stocks could halve. In that case, the PP would do very well and a rebalance or two would happen into then-very-affordable stocks. If we muddle through the next few years, then the PP will probably function as usual.
Are you a prophet??!! Another one in which "the next couple of years" comes to fruition in less than six months!

Vinny
I wish! I would have traded the last month so profitably (prophetably?). I like my prediction in red. No, I have just held tightly to my 4x25 PP. I am up YTD after today's huge gains in stocks and gold.
User avatar
vnatale
Executive Member
Executive Member
Posts: 3982
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Thu Apr 23, 2020 9:11 pm

jhogue wrote:
Fri Sep 20, 2019 9:46 am
vnatale,
If there is any “flaw” in your thinking, it is that you have not fully considered the role that Cash plays in the HBPP. You are correct: all of the “volatile” PP assets are at/near all time highs. On the other hand, Cash is at/near an all time low. Years of ZIRP have convinced the consensus-driven herd on Wall Street that cash is trash. That should be the signal to you to invest in a high level of safe and liquid cash as you transition your portfolio to the HBPP.

I don’t worship at the altar of Warren Buffett, but I will note that there is a good and simple reason why this famous value investor is reportedly holding over $100 billion in Treasurys: he can’t find anything cheap to buy either. So don’t just be fearful when others are greedy. Be patient while others are impatient. Hold Cash and lots of it. You won't sorry when one of those high-flying assets comes crashing back to earth.
Rereading what you wrote....but first reflecting on what I initially wrote to start this....Cash and equities have gone done while long-term bonds and gold have increased. Which is somewhat is supposed to happen almost all the time under Permanent Portfolio theory? Some down while some up?

However, is not what you are advocating called market timing? Holding cash and waiting for the right time to buy something? If so, the eternal question is whenever is the "right time"?

Vinny
"I only regret that I have but one lap to give to my cats."
User avatar
vnatale
Executive Member
Executive Member
Posts: 3982
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Thu Apr 23, 2020 9:16 pm

sophie wrote:
Sat Sep 21, 2019 7:08 am
At any given time, at least one of the PP assets will be at an "all time high". That's called "getting returns on your investments". It kind of makes me laugh, because the phrase "all time high" suggests an exceptional situation, not something that's expected - it's why you're buying that asset in the first place, isn't it?

The problem is you can't predict where each asset will go, except you can be pretty confident that at least one asset will go down. There's no pre-defined ceiling on any of the assets. Did anyone at the start of this year predict the transient bump in bonds, with the 30 year dropping to a 2% yield? I bet not. We all thought bonds were at their bottom. Similarly, no one thought gold would be going up. Might it go up further? Sure, why not? The current shock in the money market system might well trigger something like that, and if it doesn't, something else could. A week ago we didn't have any idea that a crisis was about to hit money markets.

So what if gold and bonds do go down? If they are, it means stocks are rising, probably a lot. Cash also provides a good ballast. In 2013 there was a big drop in gold, but with the PP's structure the portfolio was (as usual) quite stable. My own PP was actually flat for the year, plus I got to tax loss harvest.

If you're a bit skittish about buying in, then transferring in gradually over time might be easier than holding your nose and jumping all in. It does help to set things up in a way that will let you tax loss harvest when appropriate.
I say that the above proved to be a descriptive forecast of what has actually taken place over the last month or two! Our Prophetess Sophie strikes again!

Vinny
"I only regret that I have but one lap to give to my cats."
User avatar
vnatale
Executive Member
Executive Member
Posts: 3982
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Thu Apr 23, 2020 9:24 pm

Kriegsspiel wrote:
Sat Sep 21, 2019 2:52 pm
When I started the PP:

VTI was at $75.04
30 year Treasuries were at 2.95%
Gold spot was $1,730
1 year Treasuries were at 0.18%

VTI was over $154 July this year. I think it was about at it's peak at the time I started the PP, around what it was in 2007 before it crashed.

Bonds hit 2.09% in July 2016, and recently were at 1.95% earlier this month. I think 2.95%, was considered very low then.

Gold was pretty much at its peak when I bought my first hoard, then it crashed in 2013 and kinda bobbed around between 1100 and 1400 until its recent gains this year.

Prior to 2017, cash was yielding below 1%. Hell, for the first few years I used the PP, a 1 year Treasury yielded about 0.12% ;D It's steadily crept up since then.
Now when I read this one and knowing where prices are today (somewhat) all I can think about is: "plus ça change, plus c'est la même chose"!!!!

Vinny
"I only regret that I have but one lap to give to my cats."
Post Reply