Gyroscopic Investing

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How many times were gold ,equities and bonds bid way up at the same time ? Especially so close to 1 and 2% rates

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.

[deleted]

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 ...

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.

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?

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

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.

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.

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 .

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

mathjak107 wrote: ↑Tue Sep 24, 2019 2:36 am
for most of the pp history , except for some speed pumps along the way , the trend was for rates to fall .

The 1970's were one helluva speed bump.



FWIW, the PP did just fine then as well. Surviving terrible situations for individual components is one of the great benefis of the built-in firewalls. They protect the portfolio when rates rise in the same way they do when stocks crash or gold tanks.

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

Does anyone here know if an analysis has been done of the price correlation between gold and LTTs over at least the past few decades?

I'd be interested to see if the correlation has always been high or if it's increased in recent years.

Lately, based on my own observations of daily closing prices, gold and LTTs move in the same direction probably at least 90% of the time.

Tortoise wrote: ↑Wed Sep 25, 2019 12:59 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

Does anyone here know if an analysis has been done of the price correlation between gold and LTTs over at least the past few decades?

I'd be interested to see if the correlation has always been high or if it's increased in recent years.

Lately, based on my own observations of daily closing prices, gold and LTTs move in the same direction probably at least 90% of the time.

This is from 2017

Tyler wrote: ↑Wed Sep 25, 2019 11:49 am

mathjak107 wrote: ↑Tue Sep 24, 2019 2:36 am
for most of the pp history , except for some speed pumps along the way , the trend was for rates to fall .

The 1970's were one helluva speed bump.



FWIW, the PP did just fine then as well. Surviving terrible situations for individual components is one of the great benefis of the built-in firewalls. They protect the portfolio when rates rise in the same way they do when stocks crash or gold tanks.

since 1980 the trend has been down . that is 40 years of pp history ,.

Tortoise wrote: ↑Wed Sep 25, 2019 12:59 pm Does anyone here know if an analysis has been done of the price correlation between gold and LTTs over at least the past few decades?

I'd be interested to see if the correlation has always been high or if it's increased in recent years.

Lately, based on my own observations of daily closing prices, gold and LTTs move in the same direction probably at least 90% of the time.

Tortoise, portfoliovisualizer provides correlations. I got this graph for TLT and GLD for the last 15 years. Looks like the correlation these days is about as high as ever.

[deleted]

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 .

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 .

In uncharted waters, that's when I'd prefer to use something like the PP. I mean, even if people with money to invest stop buying bonds, they're going to put it somewhere. And if there's less money sloshing around overall, everyone is going to lose anyway; and someone is going to lose the hardest, but I don't think it will be the PP. I think the PP's assets are positioned pretty well to do fine in most situations.

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 .

Do as I say, not as I do, in one paragraph

I'd love to hear more about your investment property.

about 12 years ago we bought a package of 9- co-op apartments over looking central park in a very prestigious building along with the commercial lease rights . we actually bought a business , which is what it amounted to .
. only hitch is they had original rent stabilized tenants in them at break even rents ..they chose not to buy when the building converted to co-op so they remained covered under rent stabilization laws .

all were baby boomers at this stage and we figured many would not be able to live on central park south with no pay checks if they retire .

so we bought this package for cents on the dollar ... we offered 100k to any tenant who wanted to sell us back their lease .

7 out of 9 took advantage over the years and the apartments were sold for 1 to 2.2 million ...so the remaining 2 were at break even rents and had no light for us at the end of the tunnel since they had adult kids living there with succession rights

we finally got an investor group who was interested in buying them . the 2 apartments are worth 2.2 million in total . we are selling both for 350k .... so today is supposed to be the closing ...it was rescheduled from 2 weeks ago .

we also got in the package a 10% stake in the commercial lease rights in the building . we were partners with real estate mogul bernie spitzer in the lease rights ... bernie sold them in 2014 for 18 million dollars .... so the package was an incredible value ... as a real estate investor i was never interested in just collecting rents hoping for appreciation .

mathjak107 wrote: ↑Thu Sep 26, 2019 7:50 am about 12 years ago we bought a package of 9- co-op apartments over looking central park in a very prestigious building along with the commercial lease rights . we actually bought a business , which is what it amounted to .
. only hitch is they had original rent stabilized tenants in them at break even rents ..they chose not to buy when the building converted to co-op so they remained covered under rent stabilization laws .

all were baby boomers at this stage and we figured many would not be able to live on central park south with no pay checks if they retire .

so we bought this package for cents on the dollar ... we offered 100k to any tenant who wanted to sell us back their lease .

7 out of 9 took advantage over the years and the apartments were sold for 1 to 2.2 million ...so the remaining 2 were at break even rents and had no light for us at the end of the tunnel since they had adult kids living there with succession rights

we finally got an investor group who was interested in buying them . the 2 apartments are worth 2.2 million in total . we are selling both for 350k .... so today is supposed to be the closing ...it was rescheduled from 2 weeks ago .

we also got in the package a 10% stake in the commercial lease rights in the building . we were partners with real estate mogul bernie spitzer in the lease rights ... bernie sold them in 2014 for 18 million dollars .... so the package was an incredible value ... as a real estate investor i was never interested in just collecting rents hoping for appreciation .

Cool story, looks like I had it backwards.

yep we are selling , not buying ... we were selling everything off since we don't want to be landlords in retirement . we want only liquid , passive investments that can be sold or swapped with the click of a button .

the new rental laws in new york make being a landlord here not desirable as well . in fact if we did not get a buyer the plan was to just walk away and let the remaining apartments default back to the building , our governor really put the screws to landlords with his new laws and changed the rules in mid stream .

Kriegsspiel wrote: ↑Thu Sep 26, 2019 7:24 am

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 .

In uncharted waters, that's when I'd prefer to use something like the PP. I mean, even if people with money to invest stop buying bonds, they're going to put it somewhere. And if there's less money sloshing around overall, everyone is going to lose anyway; and someone is going to lose the hardest, but I don't think it will be the PP. I think the PP's assets are positioned pretty well to do fine in most situations.

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 .

Do as I say, not as I do, in one paragraph

I'd love to hear more about your investment property.

people don't stop buying assets when they head in to a bear market , they just change the prices they are willing to pay to own those assets .. demand for bonds or stocks or even gold will likely always be there but what investors will pay for those bonds , stocks or gold is another story.

you can't have a sale unless every share has a matching buyer .

interest rate cycles can span very long time frames .. so far in my lifetime as an investor which is 30 plus years i have only known down as far as rates except for those speed bumps ...

mathjak107 wrote: ↑Fri Sep 27, 2019 2:35 am yep we are selling , not buying ... we were selling everything off since we don't want to be landlords in retirement . we want only liquid , passive investments that can be sold or swapped with the click of a button .

the new rental laws in new york make being a landlord here not desirable as well . in fact if we did not get a buyer the plan was to just walk away and let the remaining apartments default back to the building , our governor really put the screws to landlords with his new laws and changed the rules in mid stream .

mathjak:

See in today's Wall Street Journal, p. A11, the article entitled "How to Kill a Housing Market."