Gold / Stock / Bonds at highs or near highs?
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- mathjak107
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Re: Gold / Stock / Bonds at highs or near highs?
yes , the issue is the behavior that is recommended to be used is ironic ... the irony is that it is an all weather portfolio designed never to have a bad time so to speak .. but human nature being what it is tends to do what feels good many times and not what is the best logically or financially .
so the brains start taking a portfolio that is supposed to eliminate timing and turns it exactly in to that by trying to time the time frame to enter by waiting for that day it dips low enough that may never come .
so the brains start taking a portfolio that is supposed to eliminate timing and turns it exactly in to that by trying to time the time frame to enter by waiting for that day it dips low enough that may never come .
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Re: Gold / Stock / Bonds at highs or near highs?
It has not gone negative this year, for example. At least for me.
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Re: Gold / Stock / Bonds at highs or near highs?
exactly my point.....
Re: Gold / Stock / Bonds at highs or near highs?
Trying to market-time one's transition into the PP is like deciding to go on one last bender before finally going sober.
- vnatale
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Re: Gold / Stock / Bonds at highs or near highs?
Thank you for YOUR well thought out response! It alleviated a lot of my concerns!
Vinny
Vinny
Pet Hog wrote: ↑Thu Sep 19, 2019 2:05 pmI 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.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.
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!
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Gold / Stock / Bonds at highs or near highs?
Thank you for this response.
I'm basically a binary person, which means in just about everything I do I'm either all in or all out. Therefore, in embracing the Permanent Portfolio that would mean FULLY implementing it in ALL ways, and not making a gradual transition to it.
Vinny
I'm basically a binary person, which means in just about everything I do I'm either all in or all out. Therefore, in embracing the Permanent Portfolio that would mean FULLY implementing it in ALL ways, and not making a gradual transition to it.
Vinny
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.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Gold / Stock / Bonds at highs or near highs?
Thank you for your response. This one also helps allay my "highs" concerns.
Vinny
Vinny
zosoo7 wrote: ↑Sun Sep 22, 2019 11:52 pm I understand your hesitation. I am in a similar situation with my non-retirement accounts and decided to move forward and go all in on PP last week. I personally feel the PP can be entered into at any time because the underlying belief is to remove speculation, and the 4 assets classes theoretically give you protection against drastic losses.
While purely anecdotal and historical, I moved all my retirement accounts into the PP ~ 1 year ago. At the time, it was against all logic to put 25% of my savings into long term treasuries, I mean interest rates could only go up causing bond prices to drop, right? At the time, TLT was trading for $119 a share, and now look at it (~ $141). It's an example of why I like the PP so much, it accepts the irrationality of the market and prevents you from having to worry about it. So I agree it's unsettling seeing stocks, gold, and long term treasuries "high" right now, but the truth is nobody knows what's going to happen next.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Gold / Stock / Bonds at highs or near highs?
Well over 15 years ago I was (good) brainwashed into the belief of NO market timing!
Therefore as I stated earlier tonight, when I finally go Permanent Portfolio I will be going into it fully with no transitioning into it over a period of time. To the contrary, once I start implementing I want to do it ALL in as short a time period as possible.
Vinny
Therefore as I stated earlier tonight, when I finally go Permanent Portfolio I will be going into it fully with no transitioning into it over a period of time. To the contrary, once I start implementing I want to do it ALL in as short a time period as possible.
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
Re: Gold / Stock / Bonds at highs or near highs?
Remember this is for people who are hesitant about jumping into the PP. There is a cost to going in gradually from cash too, don't forget.
For the record I bought in all at once in 2012. Gold, stocks and bonds all looked like they were overvalued at the time (relative to the recent past), and cash was yielding nothing. It felt like a crazy thing to do, because no asset class looked attractive. We all thought interest rates were at rock bottom and we still had that post-2009 deep suspicion of stocks. Gold seemed like the safest bet. Look how that turned out!
Re: Gold / Stock / Bonds at highs or near highs?
I recently added a new chart to the site, and I think it might be helpful for this discussion.
![Image](https://portfoliocharts.com/wp-content/uploads/2019/10/PP-Equalizer.jpg)
The dark line represents every inflation-adjusted annual return for the PP since 1970. Each light gray line represents the annual returns for one of the four underlying assets in the PP.
To me the big takeaway is that trying to time the portfolio by watching the individual assets is not only a losing proposition but also misses the point of how the PP works. By owning several unpredictable, volatile assets, the PP is specifically designed to be far less volatile than stocks, bonds, or gold on their own. You can sorta think of it as noise cancellation applied to portfolio theory, and buying into each asset separately just won't have the same effect as committing to the full program.
So if you're going to DCA, I would recommend purchasing every asset in the right proportion with each new contribution. And if you buy in at once, make an effort to not look at the returns of the individual assets. Focus on the portfolio as a whole (that has been remarkably consistent for nearly 50 years) and you'll be fine.
![Image](https://portfoliocharts.com/wp-content/uploads/2019/10/PP-Equalizer.jpg)
The dark line represents every inflation-adjusted annual return for the PP since 1970. Each light gray line represents the annual returns for one of the four underlying assets in the PP.
To me the big takeaway is that trying to time the portfolio by watching the individual assets is not only a losing proposition but also misses the point of how the PP works. By owning several unpredictable, volatile assets, the PP is specifically designed to be far less volatile than stocks, bonds, or gold on their own. You can sorta think of it as noise cancellation applied to portfolio theory, and buying into each asset separately just won't have the same effect as committing to the full program.
So if you're going to DCA, I would recommend purchasing every asset in the right proportion with each new contribution. And if you buy in at once, make an effort to not look at the returns of the individual assets. Focus on the portfolio as a whole (that has been remarkably consistent for nearly 50 years) and you'll be fine.
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Re: Gold / Stock / Bonds at highs or near highs?
tyler , with 40 of those 50 years actually in a down trend in rates i think the high correlations we see when rates rise may play out very differently ...
those speed bumps the last 50 years were really just that as rates continued lower and lower right up until today . in my opinion i dont think we actually have enough past data in decades of rising rates to really tell a thing about future consistency . i mean you can ski down the last 40 years it
is so sloped downward . in my opinion i think counting on the consistency of the past and the decades of the lowering of rates we saw , would be a bet in itself on low rates continuing for decades longer ... we just don't know how things will react or where they go but it seems to me by design the portfolio is heavily weighted towards low rates continuing .
![Image](https://photos.smugmug.com/photos/i-TV9D5Xw/4/b4b2c62b/XL/i-TV9D5Xw-XL.png)
those speed bumps the last 50 years were really just that as rates continued lower and lower right up until today . in my opinion i dont think we actually have enough past data in decades of rising rates to really tell a thing about future consistency . i mean you can ski down the last 40 years it
is so sloped downward . in my opinion i think counting on the consistency of the past and the decades of the lowering of rates we saw , would be a bet in itself on low rates continuing for decades longer ... we just don't know how things will react or where they go but it seems to me by design the portfolio is heavily weighted towards low rates continuing .
![Image](https://photos.smugmug.com/photos/i-TV9D5Xw/4/b4b2c62b/XL/i-TV9D5Xw-XL.png)
Re: Gold / Stock / Bonds at highs or near highs?
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.
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.
Re: Gold / Stock / Bonds at highs or near highs?
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.
Re: Gold / Stock / Bonds at highs or near highs?
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.
Re: Gold / Stock / Bonds at highs or near highs?
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?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.
Re: Gold / Stock / Bonds at highs or near highs?
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.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?
Last edited by Tyler on Wed Oct 09, 2019 4:24 pm, edited 2 times in total.
Re: Gold / Stock / Bonds at highs or near highs?
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.
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Re: Gold / Stock / Bonds at highs or near highs?
Are you a prophet??!! Another one in which "the next couple of years" comes to fruition in less than six months!Pet Hog wrote: ↑Thu Sep 19, 2019 2:05 pmI 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.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.
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!
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Gold / Stock / Bonds at highs or near highs?
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
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
Re: Gold / Stock / Bonds at highs or near highs?
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.vnatale wrote: ↑Sat Mar 14, 2020 6:57 pmAre you a prophet??!! Another one in which "the next couple of years" comes to fruition in less than six months!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.
Vinny
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Re: Gold / Stock / Bonds at highs or near highs?
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?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.
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
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Gold / Stock / Bonds at highs or near highs?
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!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.
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Gold / Stock / Bonds at highs or near highs?
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"!!!!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%It's steadily crept up since then.
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Gold / Stock / Bonds at highs or near highs?
Maybe the "prudent" thing to say? But mathjak does not get the "prophet" crown for this one.mathjak107 wrote: ↑Sun Sep 22, 2019 3:52 am exactly my point ... we have little in the way of data points with all 3 moving up together when bond rates are so low . bonds at this level are the ones i worry about the most ..we saw tlt plunge 7% in a matter of days before a bounce ...at these levels i would be very careful with long term treasuries and go mostly intermediate term ...
VInny
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Re: Gold / Stock / Bonds at highs or near highs?
Now today at $170!!!zosoo7 wrote: ↑Sun Sep 22, 2019 11:52 pm I understand your hesitation. I am in a similar situation with my non-retirement accounts and decided to move forward and go all in on PP last week. I personally feel the PP can be entered into at any time because the underlying belief is to remove speculation, and the 4 assets classes theoretically give you protection against drastic losses.
While purely anecdotal and historical, I moved all my retirement accounts into the PP ~ 1 year ago. At the time, it was against all logic to put 25% of my savings into long term treasuries, I mean interest rates could only go up causing bond prices to drop, right? At the time, TLT was trading for $119 a share, and now look at it (~ $141). It's an example of why I like the PP so much, it accepts the irrationality of the market and prevents you from having to worry about it. So I agree it's unsettling seeing stocks, gold, and long term treasuries "high" right now, but the truth is nobody knows what's going to happen next.
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."