Just for Fun - The Golden Middle

General Discussion on the Permanent Portfolio Strategy

Moderator: Global Moderator

User avatar
Kbg
Executive Member
Executive Member
Posts: 1578
Joined: Fri May 23, 2014 4:18 pm

Re: Just for Fun - The Golden Middle

Post by Kbg » Mon Jul 27, 2020 9:31 pm

Not sure where you say PV doesn’t have mid-cap, they do and it beats the GB in return but not sharpe...statistically, pretty much a draw. To gauge performance one should find out when SCV funds started and start your backtest then.

A good backtesting technique for actually trading something is to find out when the method was commercialized and start there. Prior to that is interesting as to good possibilities but closer to reality is what happens when the factor/whatever began to be exploited.
Kevin K.
Executive Member
Executive Member
Posts: 185
Joined: Mon Apr 26, 2010 2:37 pm

Re: Just for Fun - The Golden Middle

Post by Kevin K. » Tue Jul 28, 2020 9:18 am

Kbg wrote:
Mon Jul 27, 2020 9:31 pm
Not sure where you say PV doesn’t have mid-cap, they do and it beats the GB in return but not sharpe...statistically, pretty much a draw. To gauge performance one should find out when SCV funds started and start your backtest then.

A good backtesting technique for actually trading something is to find out when the method was commercialized and start there. Prior to that is interesting as to good possibilities but closer to reality is what happens when the factor/whatever began to be exploited.
I said Portfolio Visualizer doesn't have Mid Cap Blend and it doesn't (only MC value or growth).

Yeah I know the well-worn argument that the small and value premiums only apply through the rear-view mirror as the market jumped on them after Fama and French revealed their existence, but the claim that one can only do viable backtesting once a given asset class is something that ordinary investors can invest in, if taken seriously, would mean that most of the asset class data we have is useless given how few years it has been possible to invest in them. I mean 30 year Treasuries have only been around since 1978 so forget them, gold was illegal to own until the mid-70's, sector mutual funds like SC, SCV and mid-caps are often less than a decade old, on and on.

It seems to me that one of the many aspects of Harry Browne's genius was that while the initial idea for the PP doubtless had plenty of backtesting behind it with the best tools available at the time, it's fundamentally based on having assets that respond to particular economic conditions rather than being based purely on backtesting as is the case with so many Bogleheads and MPT allocations. So then the things worth discussing are the kinds of issues William Bernstein and Tyler have brought up: e.g. that gold isn't actually an inflation hedge but more non-correlated STF insurance, that all economic stressors aren't equally likely to occur or equal in cost to insure against (Bernstein) - meaning that allocating equal amounts of the portfolio to them is inadvisable (basically an endorsement of tilting towards the most likely scenario, prosperity, as the GB does).

And yeah, having upped the equities to 40% from 25% which ones to use becomes a lot more important. If you believe the small and value premiums tend to persist over long periods of time then the GB's TSM/SCV barbell or a more extreme QQQ/IJR one makes sense if you truly have conviction in it, but I can also see why someone might just increase the TSM from 25% to 40% and leave everything else alone. Speaking just for myself I was attracted to the PP to begin with because of being fundamentally conservative and risk-averse, after seeing my complex, slice-and-dice, thoroughly backtested "conservative" internationally-diversified, small and value tilted MPT-style 40/60 (bonds/stock) portfolio that *couldn't* lose more than 8% incur 23% losses during the 2008 market crash. Simplicity and the symmetry of equal weighting are appealing to me. Many roads to Rome and all that.
Kevin K.
Executive Member
Executive Member
Posts: 185
Joined: Mon Apr 26, 2010 2:37 pm

Re: Just for Fun - The Golden Middle

Post by Kevin K. » Tue Jul 28, 2020 1:13 pm

Interesting article on how wider dissemination of once-arcane info may have substantially contributed to the decline in value premia. The full report mentioned is behind a paywall.

https://www.marketwatch.com/story/value ... =home-page
pp4me
Executive Member
Executive Member
Posts: 224
Joined: Wed Apr 29, 2020 4:12 pm

Re: Just for Fun - The Golden Middle

Post by pp4me » Tue Jul 28, 2020 1:56 pm

Kevin K. wrote:
Tue Jul 28, 2020 1:13 pm
Interesting article on how wider dissemination of once-arcane info may have substantially contributed to the decline in value premia. The full report mentioned is behind a paywall.

https://www.marketwatch.com/story/value ... =home-page
So should I abandon the GB and go back to the pure PP or ignore the predictions of poor future performance for SCV the same as I do Bonds and Gold?
User avatar
Hal
Executive Member
Executive Member
Posts: 477
Joined: Tue May 03, 2011 1:50 am

Re: Just for Fun - The Golden Middle

Post by Hal » Tue Jul 28, 2020 2:10 pm

pp4me wrote:
Tue Jul 28, 2020 1:56 pm
Kevin K. wrote:
Tue Jul 28, 2020 1:13 pm
Interesting article on how wider dissemination of once-arcane info may have substantially contributed to the decline in value premia. The full report mentioned is behind a paywall.

https://www.marketwatch.com/story/value ... =home-page
So should I abandon the GB and go back to the pure PP or ignore the predictions of poor future performance for SCV the same as I do Bonds and Gold?
How about running a pure PP and consider the SCV as a variable portfolio.
Then pull out your trusty Benjamin Graham texts, study the "Enterprising Investor" sections and run the VP accordingly?
Aussie GoldSmithPP - 25% PMGOLD, 75% VDCO
User avatar
Kbg
Executive Member
Executive Member
Posts: 1578
Joined: Fri May 23, 2014 4:18 pm

Re: Just for Fun - The Golden Middle

Post by Kbg » Tue Jul 28, 2020 6:47 pm

Kevin K. wrote:
Tue Jul 28, 2020 9:18 am
Kbg wrote:
Mon Jul 27, 2020 9:31 pm
Not sure where you say PV doesn’t have mid-cap, they do and it beats the GB in return but not sharpe...statistically, pretty much a draw. To gauge performance one should find out when SCV funds started and start your backtest then.

A good backtesting technique for actually trading something is to find out when the method was commercialized and start there. Prior to that is interesting as to good possibilities but closer to reality is what happens when the factor/whatever began to be exploited.
I said Portfolio Visualizer doesn't have Mid Cap Blend and it doesn't (only MC value or growth).
"Select Asset" then select "US Mid Cap" = mid cap blend
Kevin K.
Executive Member
Executive Member
Posts: 185
Joined: Mon Apr 26, 2010 2:37 pm

Re: Just for Fun - The Golden Middle

Post by Kevin K. » Wed Jul 29, 2020 9:43 pm

Thanks Kbg! I don’t know how I missed that. I apologize.
User avatar
Kbg
Executive Member
Executive Member
Posts: 1578
Joined: Fri May 23, 2014 4:18 pm

Re: Just for Fun - The Golden Middle

Post by Kbg » Wed Jul 29, 2020 10:40 pm

No worries!

Unfortunately I did not achieve my goal of making Tyler’s list. :'( ;)

Speaking of commercialization...for the oldest small cap etf funds from Ishares...IWM beats both growth and value ETFs for the Russell 2K, while IJT SP600 value beats growth and blend options.
Last edited by Kbg on Wed Jul 29, 2020 10:55 pm, edited 1 time in total.
User avatar
Tyler
Executive Member
Executive Member
Posts: 1907
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Just for Fun - The Golden Middle

Post by Tyler » Wed Jul 29, 2020 10:44 pm

Kbg wrote:
Wed Jul 29, 2020 10:40 pm
Unfortunately I did not achieve my goal of making Tyler’s list. :'( ;)
It's an exclusive list! O0 But you don't have to be on a list to have good ideas.
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
User avatar
Kbg
Executive Member
Executive Member
Posts: 1578
Joined: Fri May 23, 2014 4:18 pm

Re: Just for Fun - The Golden Middle

Post by Kbg » Wed Jul 29, 2020 10:58 pm

Tyler wrote:
Wed Jul 29, 2020 10:44 pm
Kbg wrote:
Wed Jul 29, 2020 10:40 pm
Unfortunately I did not achieve my goal of making Tyler’s list. :'( ;)
It's an exclusive list! O0 But you don't have to be on a list to have good ideas.

But Tyler I go to the top of YOUR algorithm...come ON, do I have to write a book? >:D
pp4me
Executive Member
Executive Member
Posts: 224
Joined: Wed Apr 29, 2020 4:12 pm

Re: Just for Fun - The Golden Middle

Post by pp4me » Fri Jul 31, 2020 9:55 am

Hal wrote:
Tue Jul 28, 2020 2:10 pm
pp4me wrote:
Tue Jul 28, 2020 1:56 pm
Kevin K. wrote:
Tue Jul 28, 2020 1:13 pm
Interesting article on how wider dissemination of once-arcane info may have substantially contributed to the decline in value premia. The full report mentioned is behind a paywall.

https://www.marketwatch.com/story/value ... =home-page
So should I abandon the GB and go back to the pure PP or ignore the predictions of poor future performance for SCV the same as I do Bonds and Gold?
How about running a pure PP and consider the SCV as a variable portfolio.
That idea came up when I was thinking about switching to the GB. Unfortunately, the SCV doesn't qualify as a VP because I don't consider it money I can afford to lose.
Then pull out your trusty Benjamin Graham texts, study the "Enterprising Investor" sections and run the VP accordingly?
Not familiar with this but maybe I will take a look. I do finally have a little money to play around with in my Roth IRA's and since I'm bored to death right now it might be a good time to start a real VP.

BTW I just bought some more SCV this morning. My comment about whether or not I should ignore the predictions of poor future performance the same as I do Gold and Bonds was tongue-in-cheek.
User avatar
Mark Leavy
Executive Member
Executive Member
Posts: 815
Joined: Thu Mar 01, 2012 10:20 pm
Location: US Citizen, Permanent Traveler

Re: Just for Fun - The Golden Middle

Post by Mark Leavy » Fri Jul 31, 2020 5:31 pm

Kbg, do you know of a 3x fund for the S&P 600? There seem to be some for the Russell 2000, but I'm not interested in that.
It looks like I could do it myself with e-mini futures, but that is a lot of downside risk. I'd rather use an ETF.

Just noodling for now. No implementation plans.

Thanks,
Mark
Post Reply