Gold / Stock / Bonds at highs or near highs?

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

Post by vnatale » Thu Apr 23, 2020 10:07 pm

mathjak107 wrote:
Tue Sep 24, 2019 2:36 am
The kryptonite to the pp today is rising rates .. in that case time will tell but it may not be very well hedged under todays conditions and that is the scary part ...as rates go lower and lower the odds of them reversing course become greater and greater ... i think counting on negative rates here would be the long shot... as Bernstein said , the problem is you are placing equal amounts of money on outcomes that stand anything but equal amounts of chances of playing out ... so as much as we like to think the pp is neutral , at times it may not be as rising rates can hurt all 3 asset classes at once and with the pull each asset class has act like a 75% equities portfolio would under the wrong outcome as the 3 classes get yanked down together . we saw that recently when rates headed up past 3% ... . .

for most of the pp history , except for some speed pumps along the way , the trend was for rates to fall .

Image
On the other hand, I've read this one by mathjak several times and each time I read it it comes across as full of sound logic.

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

Post by vnatale » Thu Apr 23, 2020 10:09 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

However, on the flip side.....

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

Post by vnatale » Thu Apr 23, 2020 10:13 pm

mathjak107 wrote:
Thu Sep 26, 2019 2:42 am
plus not only are gold and rates joined at the hip but we have equities at a high at the same time ... that makes for some wild moves in the pp which can be right on par with high equity portfolio volatility wise . yesterday we saw a .70% move in the pp with gold losing almost 2% and bonds losing 1.50%, that .70 % move is almost like a 200 point move in the dow for comparison gain or loss wise on 100% equity .

so we are really in uncharted waters with the pp .. so i can see why those deciding to enter the pp now are looking at this and questioning whether they are guaranteeing themselves losses from here for years to come unless the remote odds of negative interest rates happen .

40 years of pp history since the 1980's having a trending down in rates for the most part may have little in common with the future
once rates bottom and reverse with so much correlation between powerful asset classes .

we are also now uncharted in the instantaneous news world as well as uncharted social media influence on investments.

time will tell but it can be a wild ride if this keeps up .

i think if i was looking to invest a sizable sum today ,which i will be if our closing goes through today on some investment property , i would divide it in 3 . i would only put 1/3 in something like the pp at this stage , 1/3 in my fidelity insight income model which is a more conventional 25% equity model with far shorter duration's and no gold and the last 1/3 in to the insight 60/40 growth and income model which also has far shorter durations on the bond side .
From the point of view of today how "remote" do those possibilities now seem?

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

Post by vnatale » Thu Apr 23, 2020 10:17 pm

mathjak107 wrote:
Tue Oct 01, 2019 5:09 am
it is not the issue of it being at a high . in this case the pp has very little history with rising rates as a trend the last 40 years ... that is my concern .

we had from the 1980's what amounted to speed bumps not trends in rising rates . it is rising rates that can be the pp's kryptonite . those who are using the pp for low volatility may be in for a much wilder ride when 3 asset classes move at once in the up or down direction . up is good but down may give the portfolio users much more of a ride then they bargained for ...TLT and GLD can be very volatile when they make 1-2% moves together and you have cash doing nothing and equities potentially down too if rates climb .

while the portfolio may still do okay i think users will have to get used to a lot more volatility as the new normal unless they adjust a bit in to intermediate term treasuries . so i think we are pretty much in uncharted waters today unlike the past and i would never go by what any asset did in the past even under similar conditions if we had them .

i will go on record here saying that my opinion is i think holding to much in long term treasuries is betting on the long shot of having negative rates here or betting on low rates to continue .. the portfolio which really is supposed to be neutral in design has ended up being a bet on low and lower rates and no longer neutral in the way assets are becoming strange bedfellows .

So far that particular bet has seemed to have paid off?

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

Post by vnatale » Thu Apr 23, 2020 11:20 pm

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.
Another one of those "gem" paragraphs by Tyler.

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

Post by vnatale » Thu Apr 23, 2020 11:22 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.
DD's = ????

Daily drawdowns?

Daily dips?

??????

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

Post by Vil » Thu Apr 23, 2020 11:52 pm

vnatale wrote:
Thu Apr 23, 2020 11:22 pm
DD's = ????
Think its just DrawDown. The same way as MDD is Max DrawDown. Those are the notations I have seen so far..
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Re: Gold / Stock / Bonds at highs or near highs?

Post by Vil » Thu Apr 23, 2020 11:55 pm

By the way, do not know about the others, but I found it nice the way you ressurect some old stuff. That really helps lazy guys like me ^-^
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Re: Gold / Stock / Bonds at highs or near highs?

Post by ppnewbie » Fri Apr 24, 2020 12:30 am

I think there is a decent probability rates go negative. In real terms they are already negative. Return free risk anyone? And with the fed essentially admitting that there really aren’t any rules (at least for now). They gleefully say “we can just create unlimited ledger entries”. I don’t think they are following any specific rules.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by Vil » Fri Apr 24, 2020 2:16 am

ppnewbie wrote:
Fri Apr 24, 2020 12:30 am
I think there is a decent probability rates go negative.
You may know better than me, but isn't there a sort of law (or regulation?) forbidding the rates going negative in US ? Can recall read this somewhere - was something like a law/regulation change have to be voted by Congress.. I am not necessarily saying that Congress cannot vote it, if that's what they see as needed.
But IMHO, in a country where people are used to make money out of other money, suddenly to expose a rule "you are taken money if you keep your account with us" will be hugely unpopular move and may have quite unpredictable market responses...
I am not good enough in economics but cannot see something dramatically improved here in Europe (or in Japan,etc) with negative rates in place, so I guess those guiding examples would be taken into account too...
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Re: Gold / Stock / Bonds at highs or near highs?

Post by Kriegsspiel » Fri Apr 24, 2020 7:55 am

Vil wrote:
Fri Apr 24, 2020 2:16 am
ppnewbie wrote:
Fri Apr 24, 2020 12:30 am
I think there is a decent probability rates go negative.
You may know better than me, but isn't there a sort of law (or regulation?) forbidding the rates going negative in US ? Can recall read this somewhere - was something like a law/regulation change have to be voted by Congress.. I am not necessarily saying that Congress cannot vote it, if that's what they see as needed.
But IMHO, in a country where people are used to make money out of other money, suddenly to expose a rule "you are taken money if you keep your account with us" will be hugely unpopular move and may have quite unpredictable market responses...
I am not good enough in economics but cannot see something dramatically improved here in Europe (or in Japan,etc) with negative rates in place, so I guess those guiding examples would be taken into account too...
I feel like I bring it up often (it's a fascinating concept to me), but the USA is one of the few places on the planet where we don't have experience with negative rates. Europe in particular I'm sure of, because in the medieval times they had demurrage currencies based on stocks of wheat. They'd lose value as time went on because of the cost of storage, wheat stores spoiling, or hungry rats. IIRC demurrage currencies were a big reason cathedrals and other structures got built.
You there, Ephialtes. May you live forever.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by Vil » Fri Apr 24, 2020 8:40 am

Kriegsspiel wrote:
Fri Apr 24, 2020 7:55 am
Europe in particular I'm sure of
Yes, we're quite inventive in that aspect, there are different weird ways of taking away money from people. Can recall how surprised I was, when saw a 'stamp duty' was applied on trades done from within Swiss accounts. Those 'stamp duties' came from centuries ago, think was the British Empire that invented them and they've applied them widely ...
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Re: Gold / Stock / Bonds at highs or near highs?

Post by jhogue » Fri Apr 24, 2020 10:03 am

vnatale wrote:
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
Vinny,
I am not advocating market timing. I am advocating a strategy that could get you over your fears of jumping into the PP at what you feared was the wrong time.

Think of it this way: Instead of moving straight into a 25/25/25/25 mix, create a 70/10/10/10 mix with cash high and and the equal amounts of stocks/bonds/ gold. As you begin to feel more confident with the PP's principles, use your cash to add to each of the volatile assets over a time period that you feel comfortable embracing.
Last edited by jhogue on Fri Apr 24, 2020 10:11 am, edited 1 time in total.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Fri Apr 24, 2020 10:07 am

jhogue wrote:
Fri Apr 24, 2020 10:03 am
vnatale wrote:
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
Vinny,
I am not advocating market timing. I am advocating a strategy that might get you over your fears of jumping into the PP at what you feared back in September 2019 was the wrong time.

Think of it this way: Instead of moving straight into a 25/25/25/25 mix, create a 70/10/10/10 mix with cash high and and the equal amounts of stocks/bonds/ gold.
But won't it still be market timing to decide when to go to 25 /25 /25/ 25? Once I finally go Permanent Portfolio I will do it in a pure, black and white way. No decisions to make on my part. The next part, though, may sound paradoxical. I will be doing so once I finish this long quest of asking questions, getting answers, making some tentative decisions along the way, and internalizing as much necessary information as possible.

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

Post by jhogue » Fri Apr 24, 2020 10:17 am

Vinny,

Just. Do. It.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Fri Apr 24, 2020 10:32 am

jhogue wrote:
Fri Apr 24, 2020 10:17 am
Vinny,

Just. Do. It.
Not a simple task on my end, starting with having 7 different retirement accounts covering every possible different tax treatment for each of them.

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

Post by vnatale » Fri Apr 24, 2020 10:35 am

vnatale wrote:
Fri Apr 24, 2020 10:32 am
jhogue wrote:
Fri Apr 24, 2020 10:17 am
Vinny,

Just. Do. It.
Not a simple task on my end, starting with having 7 different retirement accounts covering every possible different tax treatment for each of them.

Whenever I'm going to do something of consequence I take my time to get all my questions answered, don't rush into it, and, consequently, generally have ZERO regrets or wish I'd done it differently. I've too oftentimes seen others rush into doing it then wish they'd done it differently. Not my style.


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

Post by stpeter » Fri Apr 24, 2020 11:07 am

vnatale wrote:
Fri Apr 24, 2020 10:32 am
jhogue wrote:
Fri Apr 24, 2020 10:17 am
Vinny,

Just. Do. It.
Not a simple task on my end, starting with having 7 different retirement accounts covering every possible different tax treatment for each of them.

Whenever I'm going to do something of consequence I take my time to get all my questions answered, don't rush into it, and, consequently, generally have ZERO regrets or wish I'd done it differently. I've too oftentimes seen others rush into doing it then wish they'd done it differently. Not my style.


Vinny
Do what you're comfortable with. I DCA'd my way into the PP over a few years and that worked for me, whereas others just take the plunge. IMHO neither method is "right".
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Re: Gold / Stock / Bonds at highs or near highs?

Post by pmward » Fri Apr 24, 2020 11:08 am

Vil wrote:
Fri Apr 24, 2020 2:16 am
ppnewbie wrote:
Fri Apr 24, 2020 12:30 am
I think there is a decent probability rates go negative.
You may know better than me, but isn't there a sort of law (or regulation?) forbidding the rates going negative in US ? Can recall read this somewhere - was something like a law/regulation change have to be voted by Congress.. I am not necessarily saying that Congress cannot vote it, if that's what they see as needed.
But IMHO, in a country where people are used to make money out of other money, suddenly to expose a rule "you are taken money if you keep your account with us" will be hugely unpopular move and may have quite unpredictable market responses...
I am not good enough in economics but cannot see something dramatically improved here in Europe (or in Japan,etc) with negative rates in place, so I guess those guiding examples would be taken into account too...
Long bond rates are not set by the Fed. Matter of fact, if you look back at history, the Fed follows the market NOT the other way around. Every time the Fed tries to ignore the market and do their own thing (think Q4 2018 as the most recent example) the market eventually forces them to comply. If the market takes rates negative, the Fed will take rates negative. The market is what controls rates, the idea that the Fed controls rates is an illusion. Moreover, by buying bonds, they are actually helping to force rates down... So it may very well be the Fed itself that creates the situation where they have to go negative. It's not a coincidence that the countries with negative rates also have done extreme levels of QE. What are we doing now? Extreme levels of QE.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by ochotona » Fri Apr 24, 2020 12:09 pm

jhogue wrote:
Fri Apr 24, 2020 10:17 am
Vinny,

Just. Do. It.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by ppnewbie » Fri Apr 24, 2020 12:31 pm

It’s interesting the markets may not actually be markets anymore. The fed is suppressing (buying) the entire treasury market, they are buying the corporate bond market, maybe the muni bond market, I hear they are buying stocks through special purpose vehicles and angling to make it legal to directly buy stocks.

The only actual market left could be physical gold. And that could be made illegal.

Yikes!
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