Asset Allocation in the Most Painful Month

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Tyler
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Asset Allocation in the Most Painful Month

Post by Tyler » Mon Mar 23, 2020 11:45 am

For anyone watching their Permanent Portfolio balances and wondering how other portfolios are holding up right now, I ran some numbers.

Image

The insights of Harry Browne never cease to amaze me. :)

For lots more info, here's the full writeup: Asset Allocation in the Most Painful Month
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Re: Asset Allocation in the Most Painful Month

Post by ochotona » Mon Mar 23, 2020 12:06 pm

Fantastic bar chart!
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Re: Asset Allocation in the Most Painful Month

Post by Tortoise » Mon Mar 23, 2020 12:27 pm

Behold, the gyroscope!
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Re: Asset Allocation in the Most Painful Month

Post by pmward » Mon Mar 23, 2020 12:34 pm

Great article!
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Re: Asset Allocation in the Most Painful Month

Post by Kevin K. » Mon Mar 23, 2020 12:41 pm

When it comes to being a voice of financial sanity and reason in these unprecedented times you're the CDC, WHO and Dr. Anthony Fauci all rolled into one Tyler. Thank you so much.
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Re: Asset Allocation in the Most Painful Month

Post by LittleDinghy » Mon Mar 23, 2020 1:36 pm

Thank you so much Tyler!
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Re: Asset Allocation in the Most Painful Month

Post by dualstow » Mon Mar 23, 2020 2:32 pm

Fantastic chart, Tyler.
I have a strange urge to go to TGI Fridays now (but I won’t).
Feels like the end of the everything rally.
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Re: Asset Allocation in the Most Painful Month

Post by senecaaa » Mon Mar 23, 2020 3:07 pm

Awesome Tyler, this really helps putting things in perspective again. My EU GB is holding up as well, although it is hard to calculate exactly as I was DCAing during the drop.
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Re: Asset Allocation in the Most Painful Month

Post by sophie » Mon Mar 23, 2020 3:22 pm

I had noticed the same thing - I set my "rebalance check" spreadsheet to report current value of the portfolio compared to a reference date (i.e. the date of last rebalance), and set the portfolio value at that date to $1.

My golden butterfly is shows current value of 0.89 (an 11% drop in value since 1/1/2020). The 60/40 three-fund portfolio (what I use in my gold-restricted retirement accounts) shows current value of 0.81. That's a 19% drop.

There is a reason why we are all here, and this is it!!! This plus the cash allocation makes the PP (and its variant, the GB) pure gold - as it were.
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Re: Asset Allocation in the Most Painful Month

Post by Dieter » Mon Mar 23, 2020 3:32 pm

Thanks Tyler.

And SCV - ouch.

A lesson in expected vs actual or some such.
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Re: Asset Allocation in the Most Painful Month

Post by Smith1776 » Mon Mar 23, 2020 5:36 pm

Fantastic stuff as usual, Tyler. Your content is always invaluable.
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Re: Asset Allocation in the Most Painful Month

Post by CT-Scott » Mon Mar 23, 2020 8:14 pm

This certainly looks quite impressive when you compare the PP to the 80-90% stock-holders (that seem oddly prevalent on the Bogleheads forum these days), or compared to numerous other recommendations.

But at the risk of sounding like someone "peeing on the Cheerios" wouldn't a more-perfect strategy produce positive (or, at least, flat) gains during a market-crash scenario?

In a short/medium-term crash timeframe, cash stays flat. I'm very ignorant about gold's past performance to comment on whether that typically goes up/down/flat (please comment on that, so I can learn).

I strongly suspect that there are other investment opportunities (that can't be bought inside of a 401k fund), but I don't have specific thoughts on that, yet.
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Re: Asset Allocation in the Most Painful Month

Post by Xan » Mon Mar 23, 2020 8:38 pm

CT-Scott wrote:
Mon Mar 23, 2020 8:14 pm
This certainly looks quite impressive when you compare the PP to the 80-90% stock-holders (that seem oddly prevalent on the Bogleheads forum these days), or compared to numerous other recommendations.

But at the risk of sounding like someone "peeing on the Cheerios" wouldn't a more-perfect strategy produce positive (or, at least, flat) gains during a market-crash scenario?

In a short/medium-term crash timeframe, cash stays flat. I'm very ignorant about gold's past performance to comment on whether that typically goes up/down/flat (please comment on that, so I can learn).

I strongly suspect that there are other investment opportunities (that can't be bought inside of a 401k fund), but I don't have specific thoughts on that, yet.
We're only a few days into this market crash. Let's see what happens.
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Re: Asset Allocation in the Most Painful Month

Post by Smith1776 » Mon Mar 23, 2020 8:52 pm

During times of stock market panic, people don't sell what they want to sell, they sell what they must to meet margin calls and satisfy their desire to quell their own panic. Everything except for cash itself is on the table.

When the initial panic dies down, that's usually when the safe haven assets start to really react as expected.

Craig said in his TVL podcast interview that it was like the rudder on a ship. The ship takes just a little bit of time to turn.
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Re: Asset Allocation in the Most Painful Month

Post by Dieter » Mon Mar 23, 2020 10:50 pm

I think Sophie posted recently on how long it took Gold and LTT to react in 2008/2009 crash.

It wasn't immediate.
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Re: Asset Allocation in the Most Painful Month

Post by europeanwizard » Tue Mar 24, 2020 1:27 am

Well done, well done!
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Re: Asset Allocation in the Most Painful Month

Post by Maddy » Tue Mar 24, 2020 2:13 am

Revenge against the Bogleheads for all the grief they put us through.
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Re: Asset Allocation in the Most Painful Month

Post by pugchief » Tue Mar 24, 2020 8:32 am

Xan wrote:
Mon Mar 23, 2020 8:38 pm
CT-Scott wrote:
Mon Mar 23, 2020 8:14 pm
This certainly looks quite impressive when you compare the PP to the 80-90% stock-holders (that seem oddly prevalent on the Bogleheads forum these days), or compared to numerous other recommendations.

But at the risk of sounding like someone "peeing on the Cheerios" wouldn't a more-perfect strategy produce positive (or, at least, flat) gains during a market-crash scenario?

In a short/medium-term crash timeframe, cash stays flat. I'm very ignorant about gold's past performance to comment on whether that typically goes up/down/flat (please comment on that, so I can learn).

I strongly suspect that there are other investment opportunities (that can't be bought inside of a 401k fund), but I don't have specific thoughts on that, yet.
We're only a few days into this market crash. Let's see what happens.
There are probably allocations that would do something like that, but would also produce little gains during 'prosperity'. You can't have it both ways.
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Re: Asset Allocation in the Most Painful Month

Post by tarentola » Tue Mar 24, 2020 9:37 am

The view on most investing web sites seems to be that stocks are the main and perhaps the only asset class to invest in, because over an investing lifetime, stocks can go in only one direction. So when an investor suffers a loss, the forum reply is often:

"Just stay the course, it will all come right eventually".
But it might not come right for a long time. Japan, the second-biggest stock market in the world, has never recovered from its losses at the end of the last century (it peaked in 1989). Neither has France's CAC-40, which was just catching up to its year 2000 level before the recent drop. It is now 30% below its year 2000 level.

"But that couldn't happen here."
It might be starting now. Endless QE continues to inflate asset prices, but cheap money may not be enough to maintain high stock valuations, especially in the face of lower supply and lower demand.

"Stocks are the only asset class that beats inflation."
Something that investing sites studiously ignore is a fun fact, at least for PP investors: the best-performing major asset of the 21st century so far is not stocks. The best asset to own this century has been gold. This was true even before the recent crash. From 01/01/2000 to 01/01/2020, the price of gold rose by a factor of 5, while the SP 500 went up about 2.5x and TLT about doubled. Today the SP 500 is at less than 2x its 2000 level. TLT has weathered this crash pretty well, and gold is even further ahead now.

"Cherry-picked dates".
A little, as 2000 was a bad year, but even before the black cherry of March 2020, it seemed clear to me that stocks alone do not a portfolio make.

Welcome to the PP, CT-Scott.
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Re: Asset Allocation in the Most Painful Month

Post by CT-Scott » Tue Mar 24, 2020 4:23 pm

tarentola wrote:
Tue Mar 24, 2020 9:37 am
Welcome to the PP, CT-Scott.
Thanks for the welcome, and your post talking-up Gold is of particular interest to me. I don't want to get this thread side-tracked (I promise I'll create a dedicated thread soon to talk more about my situation), but we basically moved all of our tax-deferred accounts to Stable Value funds or MM on 2/27. Despite today's significant stock bounce, I'm still anticipating things will get worse with stocks for the short-term (or possibly be a "bumpy flat"). I have been considering moving some of my funds to some sort of Treasury funds, but I'm also interested in Gold. So on that last point...

How can I go about doing that, ideally inside of one of my accounts? Our main (largest) employer-linked 401k accounts, of course, don't offer a Gold investment option. But we also have a smaller chunk of money in Vanguard Roth IRA accounts. Can I buy Gold there? And we have some older/smaller 401k accounts that are linked to my side-business (which I haven't really operated and taken new money in with in quite some time, but we still have the 401k accounts sitting there) which is administered with TD Ameritrade, and where I can invest in pretty much anything I want.

Edit: Sorry, I just realized that there's an entire subforum here dedicated to talking about Gold. I should probably do some reading/posting there.
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Re: Asset Allocation in the Most Painful Month

Post by vnatale » Tue Mar 24, 2020 5:28 pm

CT-Scott wrote:
Tue Mar 24, 2020 4:23 pm
tarentola wrote:
Tue Mar 24, 2020 9:37 am
Welcome to the PP, CT-Scott.
Thanks for the welcome, and your post talking-up Gold is of particular interest to me. I don't want to get this thread side-tracked (I promise I'll create a dedicated thread soon to talk more about my situation), but we basically moved all of our tax-deferred accounts to Stable Value funds or MM on 2/27. Despite today's significant stock bounce, I'm still anticipating things will get worse with stocks for the short-term (or possibly be a "bumpy flat"). I have been considering moving some of my funds to some sort of Treasury funds, but I'm also interested in Gold. So on that last point...

How can I go about doing that, ideally inside of one of my accounts? Our main (largest) employer-linked 401k accounts, of course, don't offer a Gold investment option. But we also have a smaller chunk of money in Vanguard Roth IRA accounts. Can I buy Gold there? And we have some older/smaller 401k accounts that are linked to my side-business (which I haven't really operated and taken new money in with in quite some time, but we still have the 401k accounts sitting there) which is administered with TD Ameritrade, and where I can invest in pretty much anything I want.

Edit: Sorry, I just realized that there's an entire subforum here dedicated to talking about Gold. I should probably do some reading/posting there.
I don't believe Vanguard has any gold ownership possibilities that meet Permanent Portfolio proscriptions. Unless you can buy a gold EFT via your account with them. Seems, though, that the TD Ameritrade looks promising in terms of buying Gold EFTs.

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Re: Asset Allocation in the Most Painful Month

Post by Smith1776 » Tue Mar 24, 2020 5:32 pm

Since this is the general PP sub-forum, you should be okay talking about gold here. It's within the context of your overall portfolio after all.

In regards to gold, you may want to make some of your gold holdings physical and the complement digital. This gives you the best of both worlds in regards to tight spreads from the digital, and robustness of the physical.
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Re: Asset Allocation in the Most Painful Month

Post by turbo8214 » Tue Mar 24, 2020 8:34 pm

CT-Scott wrote:
Tue Mar 24, 2020 4:23 pm
tarentola wrote:
Tue Mar 24, 2020 9:37 am
Welcome to the PP, CT-Scott.
Thanks for the welcome, and your post talking-up Gold is of particular interest to me. I don't want to get this thread side-tracked (I promise I'll create a dedicated thread soon to talk more about my situation), but we basically moved all of our tax-deferred accounts to Stable Value funds or MM on 2/27. Despite today's significant stock bounce, I'm still anticipating things will get worse with stocks for the short-term (or possibly be a "bumpy flat"). I have been considering moving some of my funds to some sort of Treasury funds, but I'm also interested in Gold. So on that last point...

How can I go about doing that, ideally inside of one of my accounts? Our main (largest) employer-linked 401k accounts, of course, don't offer a Gold investment option. But we also have a smaller chunk of money in Vanguard Roth IRA accounts. Can I buy Gold there? And we have some older/smaller 401k accounts that are linked to my side-business (which I haven't really operated and taken new money in with in quite some time, but we still have the 401k accounts sitting there) which is administered with TD Ameritrade, and where I can invest in pretty much anything I want.

Edit: Sorry, I just realized that there's an entire subforum here dedicated to talking about Gold. I should probably do some reading/posting there.
You can buy gold via your Vanguard Roth, but it will need to be a Brokerage account. You can convert it to Brokerage if not already one.
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Re: Asset Allocation in the Most Painful Month

Post by CT-Scott » Tue Mar 24, 2020 10:18 pm

turbo8214 wrote:
Tue Mar 24, 2020 8:34 pm
You can buy gold via your Vanguard Roth, but it will need to be a Brokerage account. You can convert it to Brokerage if not already one.
So, I jumped onto Vinny's thread in the Gold subforum here:
viewtopic.php?f=5&t=10119

But, yeah, it looks like my Vanguard Roth IRA account might not work, after all. I just tried simulating exchanging some funds for AAAU and it wasn't coming up as an option. You said that I could "convert it to a Brokerage". Is that true of a Vanguard Roth IRA?

In any case, I think I can still buy gold via my side-business 401k account administered through TD Ameritrade.
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Re: Asset Allocation in the Most Painful Month

Post by turbo8214 » Tue Mar 24, 2020 11:14 pm

CT-Scott wrote:
Tue Mar 24, 2020 10:18 pm
turbo8214 wrote:
Tue Mar 24, 2020 8:34 pm
You can buy gold via your Vanguard Roth, but it will need to be a Brokerage account. You can convert it to Brokerage if not already one.
So, I jumped onto Vinny's thread in the Gold subforum here:
viewtopic.php?f=5&t=10119

But, yeah, it looks like my Vanguard Roth IRA account might not work, after all. I just tried simulating exchanging some funds for AAAU and it wasn't coming up as an option. You said that I could "convert it to a Brokerage". Is that true of a Vanguard Roth IRA?
That is true. I did it the other day. :)
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