Let's debate the Permanent Portfolio

[doodle]

What I know is that the intra day volatility of the PP is better than many other portfolios so this is a risk management strategy not a market timing strategy.

It isn't a market timing strategy in the sense that it doesnt predict the timeline of future events, but by setting rebalancing points it does in fact profit off of market volatility when it occurs. This makes a lot more sense to me...I don't have to predict or time when something will happen, rather just react when it does.

For an asset that I count on that reacts well to the pricing in of a recession I rely on the USDCAD. When credit deteriorates what you can count on is that people have to start raising cash and as long as the USD is dominant when it comes to doing business then the demand for the USD will be high during this event relative to the CAD. The Canada-US relationship is a special one which can be counted on.

Is there a way to hold this relationship as an asset class?

[doodle]

Can anyone backtest

TLT, GLD, VTI and short FXC? I'm not sure how to test that using a short position.

[Cortopassi]

[Cortopassi]

I would have to throw in right now it seems the market is just broken and being played around with.

200, 300, 400, 500 point up and down days on Nasdaq? Crazy.

[Kbg]

I would have to throw in right now it seems the market is just broken and being played around with.

200, 300, 400, 500 point up and down days on Nasdaq? Crazy.

Nah...this ain't anything compared to 1999-2002 thus far.

[doodle]

Here's the PP with 50% long USDCAD position.

It's important to consider that USDCAD is also correlated to oil prices and a 3% movement in CL is roughly correlated to a 1% move in the CAD.

The biggest drawdowns incorporating this into the PP will be during times like we're facing now when oil prices are rising but gold is not.

Can you just backtest trad portfolio with "BIL" and identical other assets. Just curious how they look back to back.

[doodle]

What if during a falling rate environment, growth stocks were more appropriate like HB recommended. But perhaps during a rising rate environment you need to switch to predominantly value stocks to get better intra day volatility.

Interesting idea...

[doodle]

How does small cap value compare with large cap value during rising rate environments?

[mathjak107]

The problem is how do you know when the rising rate environment is just that and not just a speed bump ...all we had for 40 years so far is a few speed bumps in a falling environment...

Do you sell growth and buy value at every hiccup ?

The problem is we don’t know what’s is a real trend until after the fact

[doodle]

The problem is how do you know when the rising rate environment is just that and not just a speed bump ...all we had for 40 years so far is a few speed bumps in a falling environment...

Do you sell growth and buy value at every hiccup ?

The problem is we don’t know what’s is a real trend until after the fact

Very true. Which is why a set it and forget it with strict rebalancing bands is probably the best strategy.

Got to keep reminding oneself that future is unpredictable.

[sophie]

Re "Let's debate the Permanent Portfolio"

Let's not.

Xan can you put this thread into the Variable Portfolio subforum where it belongs? Thanks.

[mathjak107]

Wait why?

This thread is meant to discuss all things Permanent Portfolio that we were highjacking MJ's day trading thread for...

I don’t mind ...I am open to any discussions ..don’t think of it as hijacking my thread

[buddtholomew]

The whole site is dedicated to the PP. Why select a single thread above all others to discuss what is already presented elsewhere?

[Smith1776]

The Permanent Portfolio is the best core investment strategy there is. There. Debate done.

[mathjak107]

The Permanent Portfolio is the best core investment strategy there is. There. Debate done.

Jury is still out as far as I am seeing but we beat that to death.. we may have turned a corner this year as far as rates and that can be a whole new era for interest rate sensitive investments .I hope not , as I have a ton of money in them but I won’t declare a winner until this war gets fought..

[mathjak107]

Jury is still out as far as I am seeing but we beat that to death.. we may have turned a corner this year as far as rates and that can be a whole new era for interest rate sensitive investments .I hope not , as I have a ton of money in them but I won’t declare a winner until this war gets fought..

Did you check rates as you were posting this?

Sure did and they are up a lot from the lows we had as they trend back up.. in fact the 10 year has tripled ..30 year almost doubled so far

[doodle]

The Permanent Portfolio is the best core investment strategy there is. There. Debate done.

I think since the PP is drawing down right now, it is clear that the current conditions are not favorable for the PP.

It’s also a good time for us to consider if current conditions can persist, and whether it is sufficient for us to say that it is only rising yields that is the issue.

Harry Browne said the only condition that the PP won’t do well in is a tight money recession. Are we in one? If not, what kind of condition are we in and is it akin to a tight money situation?

Tight money!? Lol...as government just helicopter drops 2 trillion dollars.

I think we have a market that is utterly confused about inflation and deflation and a fed that has interfered in bond markets to keep economy humming and a government that has become fiscally untethered..and a stock market that has then adjusted to historically low rates and perpetual deficits all of which have created wackadoodle valuations across all asset classes. In fact, I don't think valuations even matter anymore in this market. I browse through reddit stock boards for shits and giggles every night and there is no discussion of valuations at all. People just blindly throwing money at stonks. I get such a strong 2000 tech bubble vibe over there. Personally I think cash is your friend in this environment...but I have not been following that advice the last week trickling back into long bonds which has been like throwing money in a paper shredder. Painful! Oh well...it's just money...at least I still have my health!

An interesting aside that I didn't realize...apparently there is a lot of international debts denominated in dollars that we forget about. So in a rising rate environment with a variety of potential asset bubbles, it is possible there could be a rush for cash should rates rise and assets flounder.....tight money? I don't know...hard to conceive of that since it apparently grows on trees nowadays.

[doodle]

.tight money? I don't know...hard to conceive of that since it apparently grows on trees nowadays.

I agree it seems an outlandish thought exercise.

it is possible there could be a rush for cash should rates rise and assets flounder.....tight money? I don't know...

This is what I was trying to get at. Perhaps markets are increasingly pricing in tighter conditions because things couldn't get much looser from what was being priced in around last August?

I'm starting to wonder if there is really much logic at all to the movements in this market. Humans love to create narratives to explain things, but I get the feeling that the fickle lizard brain emotions of fear and greed are driving movements rather than any kind of economic fundamentals or reasoned analysis... combined with a great deal of uncertainty and confusion regarding what exactly is going on. Honestly, by the huge spectrum of opinions Im not sure even trained economists are exactly sure what is going on...

I'm not usually one to get wrapped up in market hype but I catch myself struggling of late with FOMO. It's really tough to manage oneself in these times when so many people are making ridiculous sums of money.

The PP might not be the winningest strategy, but it is familiar to me, has served me reasonably well through a number of hard times in the market and I trust it. Honestly, sometimes a boring diversified portfolio (even if it does lose money for a couple years) can help preserve sanity in an environment where it constantly feels like you are going to get sideswiped by some unknown surprise.

[doodle]

The PP might not be the winningest strategy, but it is familiar to me, has served me reasonably well through a number of hard times in the market and I trust it.

Fair enough.

If there are any PP nerds left on this forum that really want to get down to the nitty gritty of things you can reach out to me. I know a lot of people have left the forum and there's been a struggle to keep up with the intellectual discussions.

Honestly, sometimes a boring diversified portfolio (even if it does lose money for a couple years) can help preserve sanity in an environment where it constantly feels like you are going to get sideswiped by some unknown surprise.

I do think that it is a mistake to think that the PP offers any kind of safety in the sense that you aren't going to get sideswiped.

I think there is a general sense that the PP been debated to death and this was given as one of the reasons why there has been increasingly fewer intellectual discussion. But I have read much of what is on this site and I believe we've only scratched the surface.

When someone is ready to engage, I'll just say that I am willing to defend or challenge the PP and take either side of the debate.

In the fitness industry they say the best exercise program is the one that you will actually do. I'm sure there are all sorts of strategies one can come up with that might make "logical" sense but once you start getting into strategies that require constant monitoring...options, futures, momentum etc. you automatically lose almost anyone that has to actually work for a living or like me isn't really motivated heavily by squeezing every ounce of efficiency out of their money...I have enough to satisfy my needs and don't need much.

That said, I do think the current environment might be tough on the portfolio in that rising rates could put the squeeze on a number of it's assets simultaneously. Of course, that's all conjecture and experience has taught me to expect the unexpected. I think covid was the latest example of that. This portfolio provided me a very lucrative rebalance opportunity from treasuries to stocks. No model could have predicted that. And as much as we can try to predict the events of tomorrow we have no idea what is going to happen. What if one of these variant covid strains suddenly has a death rate closer to 2% for general population and evades all our vaccines? What if China starts to exert it's presence on world stage more forcefully? What if the Biden keels over and dies? There are so many unknowns that are impossible to predict.

Personally my reaction at the moment has been to keep my cash balances a little higher and lower exposure to stocks and bonds a bit and to slowly sell off winners and buy losers...

Remember the wisdom of Lou Mannheim, from wall street....

Quick buck artists come and go with every bull market, it's the steady players that make it through the bear markets...


https://youtu.be/XCSOsFe42P8

[mathjak107]

The PP might not be the winningest strategy, but it is familiar to me, has served me reasonably well through a number of hard times in the market and I trust it.

Fair enough.

If there are any PP nerds left on this forum that really want to get down to the nitty gritty of things you can reach out to me. I know a lot of people have left the forum and there's been a struggle to keep up with the intellectual discussions.

Honestly, sometimes a boring diversified portfolio (even if it does lose money for a couple years) can help preserve sanity in an environment where it constantly feels like you are going to get sideswiped by some unknown surprise.

I do think that it is a mistake to think that the PP offers any kind of safety in the sense that you aren't going to get sideswiped.

I think there is a general sense that the PP been debated to death and this was given as one of the reasons why there has been increasingly fewer intellectual discussion. But I have read much of what is on this site and I believe we've only scratched the surface.

When someone is ready to engage, I'll just say that I am willing to defend or challenge the PP and take either side of the debate.

I agree 100%..tell me which side you want me to argue and I can ...which is why I go by what it means to my money

[mathjak107]

.tight money? I don't know...hard to conceive of that since it apparently grows on trees nowadays.

I agree it seems an outlandish thought exercise.

it is possible there could be a rush for cash should rates rise and assets flounder.....tight money? I don't know...

This is what I was trying to get at. Perhaps markets are increasingly pricing in tighter conditions because things couldn't get much looser from what was being priced in around last August?

I'm starting to wonder if there is really much logic at all to the movements in this market. Humans love to create narratives to explain things, but I get the feeling that the fickle lizard brain emotions of fear and greed are driving movements rather than any kind of economic fundamentals or reasoned analysis... combined with a great deal of uncertainty and confusion regarding what exactly is going on. Honestly, by the huge spectrum of opinions Im not sure even trained economists are exactly sure what is going on...

I'm not usually one to get wrapped up in market hype but I catch myself struggling of late with FOMO. It's really tough to manage oneself in these times when so many people are making ridiculous sums of money.

The PP might not be the winningest strategy, but it is familiar to me, has served me reasonably well through a number of hard times in the market and I trust it. Honestly, sometimes a boring diversified portfolio (even if it does lose money for a couple years) can help preserve sanity in an environment where it constantly feels like you are going to get sideswiped by some unknown surprise.

While it always feels like we can get sideswiped any minute the fact is we have not had a down year in equities since 2008 ...

So once again in practice thinking this time is different has been costly.

I too gave up a bit of those gains by cutting back equities As I got nearer to heading in to retirement

[Tyler]

While it always feels like we can get sideswiped any minute the fact is we have not had a down year in equities since 2008 ...

You mean 2018?

[doodle]

.tight money? I don't know...hard to conceive of that since it apparently grows on trees nowadays.

I agree it seems an outlandish thought exercise.

it is possible there could be a rush for cash should rates rise and assets flounder.....tight money? I don't know...

This is what I was trying to get at. Perhaps markets are increasingly pricing in tighter conditions because things couldn't get much looser from what was being priced in around last August?

I'm starting to wonder if there is really much logic at all to the movements in this market. Humans love to create narratives to explain things, but I get the feeling that the fickle lizard brain emotions of fear and greed are driving movements rather than any kind of economic fundamentals or reasoned analysis... combined with a great deal of uncertainty and confusion regarding what exactly is going on. Honestly, by the huge spectrum of opinions Im not sure even trained economists are exactly sure what is going on...

I'm not usually one to get wrapped up in market hype but I catch myself struggling of late with FOMO. It's really tough to manage oneself in these times when so many people are making ridiculous sums of money.

The PP might not be the winningest strategy, but it is familiar to me, has served me reasonably well through a number of hard times in the market and I trust it. Honestly, sometimes a boring diversified portfolio (even if it does lose money for a couple years) can help preserve sanity in an environment where it constantly feels like you are going to get sideswiped by some unknown surprise.

While it always feels like we can get sideswiped any minute the fact is we have not had a down year in equities since 2008 ...

So once again in practice thinking this time is different has been costly.

I too gave up a bit of those gains by cutting back equities As I got nearer to heading in to retirement

"While it always feels like we can get sideswiped any minute the fact is we have not had a down year in equities since 2008 ..."

Trees don't grow to the sky. Every year that stocks climb far and above real growth rates they are robbing those returns from the future. You can can have big returns up front and fast or big returns stretched out over a long period of time...but you can't have perpetual big returns stretched out forever.

The permanent portfolio has kept me in equities in this bull market a lot longer than I would have stayed otherwise. I remember after 2008 when the market was hitting 1800 (having nearly tripled) people were calling for a pop...then again around 3000...now we touching on 4000....up nearly 100 percent in less than a year. This cannot go on forever...maybe a year or two more...maybe three...maybe it ends tomorrow...who knows. If it does I still hold stocks...I'm not out entirely. It's been a good run. I made good returns the last few years. I know you are focused on daily balances but if you pull back a bit the trend line overall on all our portfolios has been very generous. Not saying it isnt tough to lose money, but I really think it's best to resign oneself to the reality that we really have no control over any of this. We really are ships out on the ocean. The PP is a slow stout vessel that can take a lot of punishment. I've had my doubts over the years at times but she has weathered everything so far and given me plenty of pleasant surprises.


This bull market will come to an end sooner or later.

[mathjak107]

While trees don’t grow to the sky , piers collapse waiting for that ship to come in too

[mathjak107]

Well 12 years in the bull is alive .

In defense of the pp , I am starting it 12 years in so maybe we are closer to that reversal ....