Knuckleheads PP thread resurrected

General Discussion on the Permanent Portfolio Strategy

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Re: Knuckleheads PP thread resurrected

Post by pp4me » Fri Jul 31, 2020 11:34 am

I see they now have a "Beware the Hype of Gold" thread that was begun by the much respected Taylor Lattimore.

Since he had good things to say about the PP in a review of the book I'm going to assume he means you might want to think twice about rushing into it at $2k/ounce if you don't own any.

That would probably be good advice but if you actually did want to start the PP right now, what asset class wouldn't you be worried about?
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Re: Knuckleheads PP thread resurrected

Post by dualstow » Fri Jul 31, 2020 11:39 am

pp4me wrote:
Fri Jul 31, 2020 11:34 am
...
I'm going to assume he means you might want to think twice about rushing into it at $2k/ounce if you don't own any.

That would probably be good advice but if you actually did want to start the PP right now, what asset class wouldn't you be worried about?
Always seems to be the case, doesn’t it. O0
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Re: Knuckleheads PP thread resurrected

Post by Kevin K. » Fri Jul 31, 2020 12:45 pm

I chimed in on that thread with the modest suggestion that "Beware the Hype of the Three-Fund Portfolio" might be a more beneficial thread given its atrocious risk-adjusted performance, drawdowns and dismal safe withdrawal rates compared to not just the PP but all the other portfolios that include gold on Portfolio Charts.

There are a few other PP fans and some others expressing an agnostic or at least non-allergic approach to gold but for the most part it's same old, same old. That forum is fundamentalism sans "fun."
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Re: Knuckleheads PP thread resurrected

Post by Smith1776 » Fri Jul 31, 2020 2:59 pm

craigr wrote:
Fri Jul 31, 2020 6:28 am

Bill Bernstein and I are friends and when I am visiting in town where he lives I have gone to his house for dinner with him and his lovely wife. I talked to him quite a bit when he wrote the book Deep Risk and am mentioned in the acknowledgements which is why is why it has my overtones in it I suspect.

I think Bill's main critique of the PP is that it has tracking error vs. a more conventional portfolio. This is completely valid to me. This is probably why the portfolio tends to attract very engineer/technical/introvert types that are able to detach themselves emotionally I feel. It takes a certain personality to take the Red Pill and just let go of trying to predict the markets. It also takes a certain kind of person that is OK with a portfolio that just tries to ride the middle and doesn't get worked up when Bob in Accounting is bragging about their 22.7% gains in TechCorp stock that year.

I think the PP really incorporates philosophy of being very detached yet prepared for the unexpected. One thing I've always liked about the portfolio is that it gives you options to respond to extraordinary scenarios. You can hang tight, but if things are going truly off the rails you aren't so locked into a single asset that you lose everything. It's important in a crisis to always have options available to respond even if you don't have to use them. For me, that PP does exactly that.
Interesting insights as always. I had never considered that the PP would have special appeal to those who are technical/introvert/math/science types. That would explain a lot on my part!

I try to explain to people that indeed the PP is a portfolio that is detached but prepared. It's neutral to the future. However, most people think it's a doomsday portfolio which it is no such thing.
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Re: Knuckleheads PP thread resurrected

Post by mathjak107 » Fri Jul 31, 2020 3:41 pm

pp4me wrote:
Fri Jul 31, 2020 11:34 am
I see they now have a "Beware the Hype of Gold" thread that was begun by the much respected Taylor Lattimore.

Since he had good things to say about the PP in a review of the book I'm going to assume he means you might want to think twice about rushing into it at $2k/ounce if you don't own any.

That would probably be good advice but if you actually did want to start the PP right now, what asset class wouldn't you be worried about?
Anyone who stays invested is actually buying in each day at the current price ....there so no logic at all in thinking that somehow it is different if you first buy in ....that balance is all ours at any point in time ...if it falls thousands of dollars from here our balance is down the same amount whether we bought in now or 20 years ago .

Some one may be buying 20k of Gld today who sold a total market fund and made 20k .

You may be up 20k in gld ........either way if it falls 5k we are both down 5k in net worth
.

So every day at the open in effect we are buying in at that days prices

Let this sink in
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Re: Knuckleheads PP thread resurrected

Post by Smith1776 » Fri Jul 31, 2020 3:59 pm

mathjak107 wrote:
Fri Jul 31, 2020 3:41 pm

Anyone who stays invested is actually buying in each day at the current price ....there so no logic at all in thinking that somehow it is different if you first buy in ....that balance is all ours at any point in time ...if it falls thousands of dollars from here our balance is down the same amount whether we bought in now or 20 years ago .

Some one may be buying 20k of Gld today who sold a total market fund and made 20k .

You may be up 20k in gld ........either way if it falls 5k we are both down 5k in net worth
.

So every day at the open in effect we are buying in at that days prices

Let this sink in
That's a very good point that Larry Swedroe also liked to hammer home, but few really took to heart.

Every day you decide to continue holding is the same thing as deciding to buy that day.
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Re: Knuckleheads PP thread resurrected

Post by mathjak107 » Fri Jul 31, 2020 4:35 pm

Investors make this silly statement all the time as they stay invested every day but tell others they wouldn’t invest new money at this price ..DUH.
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Re: Knuckleheads PP thread resurrected

Post by dualstow » Fri Jul 31, 2020 5:30 pm

mathjak107 wrote:
Fri Jul 31, 2020 4:35 pm
Investors make this silly statement all the time as they stay invested every day but tell others they wouldn’t invest new money at this price ..DUH.
Well, I’m holding NEE (variable portfolio) and I would not invest new money. I am happy to hold it and collect dividends. If it should drop, even precipitously, I can still sell it at a profit.
I don’t want to buy more gold at 1994/oz, but I’m happy to hold that too. That’s part of the pp so I’ll go by the bands or at the very least, an annual checkup.

Maybe it’s an illusion but I’m sticking with it.
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Re: Knuckleheads PP thread resurrected

Post by mathjak107 » Fri Jul 31, 2020 5:33 pm

Not wanting anymore invested in an asset is different ....that would be true at any price ........

But each day all our investments add up to a certain value .....if they fall we are down the same whether new money or old money in them..

Our balance does not care what part of that balance is profit or what you started with ....down is down
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Re: Knuckleheads PP thread resurrected

Post by dualstow » Fri Jul 31, 2020 5:35 pm

yep
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Re: Knuckleheads PP thread resurrected

Post by technovelist » Fri Jul 31, 2020 5:44 pm

pp4me wrote:
Fri Jul 31, 2020 11:34 am
I see they now have a "Beware the Hype of Gold" thread that was begun by the much respected Taylor Lattimore.

Since he had good things to say about the PP in a review of the book I'm going to assume he means you might want to think twice about rushing into it at $2k/ounce if you don't own any.

That would probably be good advice but if you actually did want to start the PP right now, what asset class wouldn't you be worried about?
The piece "Wild About Harry" by Bill Bernstein (http://www.efficientfrontier.com/ef/0adhoc/harry.htm) covers that ground pretty well, I think.
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Re: Knuckleheads PP thread resurrected

Post by Kevin K. » Fri Jul 31, 2020 9:51 pm

craigr wrote:
Fri Jul 31, 2020 6:28 am
Kevin K. wrote:
Sun Apr 12, 2020 12:42 pm
It was indeed great fun to read the witty William Bernstein quote! If only the rest of the crew on that forum had a fraction of Bernstein's brilliance and sincere appreciation of risk parity portfolios like the PP. His book "Deep Risk" is essentially a dialogue with Craig's writing on the PP and Browne's work itself and for me anyway helped me appreciate the PP more and, especially, made me realize how brilliant the Golden Butterfly iteration of the PP is.
Bill Bernstein and I are friends and when I am visiting in town where he lives I have gone to his house for dinner with him and his lovely wife. I talked to him quite a bit when he wrote the book Deep Risk and am mentioned in the acknowledgements which is why is why it has my overtones in it I suspect.

I think Bill's main critique of the PP is that it has tracking error vs. a more conventional portfolio. This is completely valid to me. This is probably why the portfolio tends to attract very engineer/technical/introvert types that are able to detach themselves emotionally I feel. It takes a certain personality to take the Red Pill and just let go of trying to predict the markets. It also takes a certain kind of person that is OK with a portfolio that just tries to ride the middle and doesn't get worked up when Bob in Accounting is bragging about their 22.7% gains in TechCorp stock that year.

I think the PP really incorporates philosophy of being very detached yet prepared for the unexpected. One thing I've always liked about the portfolio is that it gives you options to respond to extraordinary scenarios. You can hang tight, but if things are going truly off the rails you aren't so locked into a single asset that you lose everything. It's important in a crisis to always have options available to respond even if you don't have to use them. For me, that PP does exactly that.
It's always a treat to read your posts Craig! Let me add my gratitude to that others have expressed here for everything you've done to get the word out about the PP and Harry Browne.

Tracking error regret is one thing that Bernstein mentions but I think his more important quibbles with the PP as expressed in "Deep Risk" are that the 4 x 25% PP errs in allocating equal parts of the portfolio to deal with events that are anything but equally likely to occur, aren't equally devastating if the do occur, and involve different costs to defend against. Then there's the not-incidental matter that Browne spoke of gold as offering inflation protection when cash and stocks perform that function.

Bernstein does a much better job critiquing the PP than he does of providing actionable alternatives, but if memory serves he recommends a larger allocation to stocks (including international and tilts to small and value) and oodles of liquidity (i.e. cash). I see the Golden Butterfly as the best integration of Bernstein's ideas thus far in that it tilts towards prosperity (the most likely economic condition over time) and includes a sizable chunk of value stocks. Higher returns than the PP but more interestingly much higher safe withdrawal rates and much faster recoveries from drawdowns as well.
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