Gold / Stock / Bonds at highs or near highs?

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

Post by InsuranceGuy » Sat Sep 21, 2019 10:12 am

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?
Very well put. I ran some stats a while back and it showed that 85% of the time at least one of the 3 volatile assets are at an all-time high, and 42.5% of the time two or more of the 3 volatile assets are at an all time high.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by mathjak107 » Sat Sep 21, 2019 1:46 pm

How many times were gold ,equities and bonds bid way up at the same time ? Especially so close to 1 and 2% rates
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Re: Gold / Stock / Bonds at highs or near highs?

Post by Kriegsspiel » 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.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by InsuranceGuy » Sat Sep 21, 2019 3:07 pm

mathjak107 wrote:
Sat Sep 21, 2019 1:46 pm
How many times were gold ,equities and bonds bid way up at the same time ? Especially so close to 1 and 2% rates
It looks like about 7.5% of the time (since 1969) all three risky assets were within 5% of the all-time high. There have been very few times in history with 1-2% rates so we aren't likely to have many data points to compare against.

One other thing to consider is that gold is not currently within 5% of the all-time high, it is about 19% below the high back in August 2011.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by mathjak107 » 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 ...
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Re: Gold / Stock / Bonds at highs or near highs?

Post by zosoo7 » 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.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by jhogue » Mon Sep 23, 2019 11:39 am

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 ...
If we have so few data points, what makes you so sure that intermediate term Treasurys are a good buy right now?
“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 mathjak107 » Mon Sep 23, 2019 1:49 pm

I don’t think they are a good buy either right now ...... but once they got back to 3% or so I would mix them with long term bonds instead of all long term bonds
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Re: Gold / Stock / Bonds at highs or near highs?

Post by KevinW » Mon Sep 23, 2019 11:34 pm

All I can say is, I've been talking about the PP online since 2008 (11 years and counting!) and the entire time, people have been constantly asking this question. "I like the PP but this moment seems like a bad time to buy in because reasons, what should I do?"

Throughout this time the PP has worked as predicted. After some time passes, it almost always turns out that the moment in question was a fine time to buy in. While it's true that there have been a few brief single-digit dips, the portfolio recovered and reverted to the mean. (And this modest negative volatility is predicted as well.)

The market clearing price is the one that puts bull and bear attitudes in balance. So at any given moment one can make a bearish argument that convinces roughly half of market participants, or a bullish argument that accomplishes the same. The premise of the PP is that it allows you to act without necessarily buying into any of these narratives.
zosoo7 wrote:
Sun Sep 22, 2019 11:52 pm
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).
This is a good example of how this usually pans out.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by zosoo7 » Tue Sep 24, 2019 1:04 am

I've been trying to think about what else you could do to enter the portfolio with confidence. If you plan on using various ETFs in the portfolio (e.g. SPY, TLT, IAU), you may be able to use options if and only if you understand them and are comfortable with them. Of course I would consider this strategy speculating, but if you're bearish on the non-cash allocations, and your end goal is to actually be in the PP, you could sell OTM puts for each PP ETF at the strike price you feel is a safer entry price. Additionally the premium collected on the sale of the option would lower your cost basis to own the ETF should you get assigned if the option is in the money. There's upside risk here because if the stock works against you and goes up, you miss out on the gains that you would have had in the PP. It also requires that you are able to purchase 100 shares of the stock per options contract you sell because you are wanting to be assigned the underlying stock after expiration.

An alternative, and probably a far better option, is to enter the PP and buy some deep in-the-money protective puts to act as insurance for whatever duration you feel is necessary (3 months to a year our expiration maybe?). I think this is a decent use of funds in the variable portion that Harry Browne supported. This would be an all out hedge against the PP that would eat into your total account, but it does provide some peace of mind and could really come in handy if there is an untimely meltdown.

As I mentioned, only explore these ideas if you know how options work. I'm not a fiduciary, so take it all with a grain of salt, lol, but I do think these are legit options that provide known risk. I do think however that the PP is well hedged in itself.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by mathjak107 » 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 .

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

Post by mathjak107 » 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
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