Permanent Portfolio concept continues to live on

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doodle
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Permanent Portfolio concept continues to live on

Post by doodle » Fri Apr 30, 2021 9:34 am


https://www.youtube.com/watch?v=SkfgEZtJ9LA



Worth a listen for anyone doubting the permanent portfolio.

Imagine being furnished with generational wealth under one condition – you must choose only one asset allocation for your portfolio and stick with it for 100 years. Where would you even start? Chris Cole, CIO and founder of Artemis Capital Management, returns to Real Vision to answer that very question. He sits down with Danielle Booth of Quill Intelligence to discuss the optimal portfolio construction for the long run, regardless of market condition. With uncertainty everywhere despite all-highs in the market, Cole discusses how to navigate Charlie Munger’s "death of the efficient frontier." He explains the allegory of the Hawk and Serpent and breaks down the construction of his 100-year portfolio. Cole and Booth provide viewers with the tools to traverse the "incremental death of alpha," and markets that are increasingly subject to the amplified volatility of increasingly passive investments. This piece is a much-watch for the pension fund or endowment that has no long-volatility exposure in their portfolio. Filmed on February 7, 2020 in Austin, Texas.
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Re: Permanent Portfolio concept continues to live on

Post by I Shrugged » Fri Apr 30, 2021 12:42 pm

Thank you, I will watch it later. The description hits on some things that have been part of my thinking, so I'll probably like it.
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Re: Permanent Portfolio concept continues to live on

Post by Tortoise » Fri Apr 30, 2021 1:03 pm

Here's the paper they refer to in that interview. It's been mentioned in at least a couple of other threads here in recent months:

The Allegory of the Hawk and Serpent: How to Grow and Protect Wealth for 100 Years

By the way, I've recently been one of the PP doubters. As I mentioned in another thread recently, I've been seriously doubting the value of the LTT piece of the PP now that the remarkably linear trend line for 30-year Treasury yield over the past 40 years is now approaching zero.

But I had to rebalance one of my accounts recently and couldn't bring myself to abandon the 4x25 allocation. I just didn't have the balls. So I plugged my nose and rebalanced into LTTs.

I'm not yet 100% convinced that abandoning LTTs is the right move, and I've been invested in 4x25 for over 10 years -- so I figured it probably won't kill me to stay invested in it for now while I continue to mull things over.
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Re: Permanent Portfolio concept continues to live on

Post by vnatale » Fri Apr 30, 2021 3:10 pm

Tortoise wrote:
Fri Apr 30, 2021 1:03 pm

Here's the paper they refer to in that interview. It's been mentioned in at least a couple of other threads here in recent months:

The Allegory of the Hawk and Serpent: How to Grow and Protect Wealth for 100 Years

By the way, I've recently been one of the PP doubters. As I mentioned in another thread recently, I've been seriously doubting the value of the LTT piece of the PP now that the remarkably linear trend line for 30-year Treasury yield over the past 40 years is now approaching zero.

But I had to rebalance one of my accounts recently and couldn't bring myself to abandon the 4x25 allocation. I just didn't have the balls. So I plugged my nose and rebalanced into LTTs.

I'm not yet 100% convinced that abandoning LTTs is the right move, and I've been invested in 4x25 for over 10 years -- so I figured it probably won't kill me to stay invested in it for now while I continue to mull things over.


Many thanks for all you disclose here. Quite valuable to me.
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Re: Permanent Portfolio concept continues to live on

Post by Hal » Fri Apr 30, 2021 3:48 pm

Tortoise wrote:
Fri Apr 30, 2021 1:03 pm
By the way, I've recently been one of the PP doubters. As I mentioned in another thread recently, I've been seriously doubting the value of the LTT piece of the PP now that the remarkably linear trend line for 30-year Treasury yield over the past 40 years is now approaching zero.
Hi Tortoise,

This article may be of help.
<snip>
My firm expresses this opinion by owning the long-end of the Treasury yield curve – 10-year and 30-year bonds. In Treasury bonds, you get paid to wait. If you were short stocks instead, you have to pay the dividend to wait. When “risk-on” product becomes risky again, there are only a few reliable appreciating assets; the U.S. Treasury market being the best. 10-year U.S. Treasury yields fell 367 and 324 basis points respectively surrounding the last two major stock market drawdowns in 2000 and 2008. The 10-year U.S. Treasury has a yield of 1.58% now (4/19/2021). It falling the average 346 basis points would take it to -1.87%. I am not suggesting it gets that deeply negative, but there is certainly plenty of room for Treasury bonds to appreciate (prices rise as yields fall).
<snip>

https://www.zerohedge.com/markets/lulle ... everywhere
Aussie GoldSmithPP - 25% PMGOLD, 75% VDCO
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Sat May 01, 2021 3:55 am

Paid to wait ? You may wait so long for the lower interest rate ship to come in the pier collapses ….

Unless rates fall which may not happen there is no paid to wait ..the last cycle took 40 years.

What you end up doing is what happens to those who wait for the proverbial crash to buy stocks …they wait so long that they gave up more than they could ever get ..

Plus if you are waiting for that flight to safety you are going to be timing to grab that gain because as we know as soon as the smoke clears the gains in safety assets vanish .

So at what point do you sell ? That is all timing , that is what I do …sometimes you win and sometimes you lose but it is timing..

Odds are you will rebalance to early or to late to really harvest much out of that spike ….so I never see it as paid to wait unless odds are good that what I am waiting for can actually not only pan out but I can actually capture enough to undo the damage of waiting .

Fighting the fed when they are allowing rates on bonds to rise can be tough and the more in the hole an asset goes the harder it is to undo the damage.

I mean those who bought in the last flight to safety in august have an awful lot of damage to undo just to get even.

remember even in a spike they are not harvesting the entire run up , they are only rebalancing a portion so getting back may be very hard .

the one year is down 16% on tlt
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Re: Permanent Portfolio concept continues to live on

Post by doodle » Sat May 01, 2021 7:33 am


What you end up doing is what happens to those who wait for the proverbial crash to buy stocks …they wait so long that they gave up more than they could ever get ..

Plus if you are waiting for that flight to safety you are going to be timing to grab that gain because as we know as soon as the smoke clears the gains in safety assets vanish .
Seems like a pretty good argument to hold four assets that react to different economic situations and periodically rebalance.

When covid hit my shares of EDV skyrocketed. They went up like 40% in a month....pretty much inverse to stocks 40% decline. Swapping those two assets out and rebalancing was probably the best trade of my life....

To use your argument...you also might be waiting forever for rates to rise or stocks to rebound after a crash.(Chris Cole at Artemis Capital found that buying the dip in stocks would have led to bankruptcy three times over the last 100 years...your experience with stocks always going up is particular to your time era) The fact is that you have no idea what the future will bring. You have convinced yourself that inflation is a foregone conclusion and that rates will rise....yet there are many economists whose economic models point towards long term debt deflation. Others who say we will experience hyperinflation and currency collapse.

You got lucky to invest and capture that 40 year bull market....my guess is the next 40 years won't be nearly as easy for investors.
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Re: Permanent Portfolio concept continues to live on

Post by doodle » Sat May 01, 2021 7:44 am

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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Sat May 01, 2021 7:48 am

doodle wrote:
Sat May 01, 2021 7:33 am

What you end up doing is what happens to those who wait for the proverbial crash to buy stocks …they wait so long that they gave up more than they could ever get ..

Plus if you are waiting for that flight to safety you are going to be timing to grab that gain because as we know as soon as the smoke clears the gains in safety assets vanish .
Seems like a pretty good argument to hold four assets that react to different economic situations and periodically rebalance.

When covid hit my shares of EDV skyrocketed. They went up like 40% in a month....pretty much inverse to stocks 40% decline. Swapping those two assets out and rebalancing was probably the best trade of my life....

To use your argument...you also might be waiting forever for rates to rise or stocks to rebound after a crash.(Chris Cole at Artemis Capital found that buying the dip in stocks would have led to bankruptcy three times over the last 100 years...your experience with stocks always going up is particular to your time era) The fact is that you have no idea what the future will bring. You have convinced yourself that inflation is a foregone conclusion and that rates will rise....yet there are many economists whose economic models point towards long term debt deflation. Others who say we will experience hyperinflation and currency collapse.

You got lucky to invest and capture that 40 year bull market....my guess is the next 40 years won't be nearly as easy for investors.
Interest rate cycles and commodity/gold cycles tend to take many many years if you want to back test …all things being equal if I could only bet on one horse today and was not retired it would still be equities
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Re: Permanent Portfolio concept continues to live on

Post by doodle » Sat May 01, 2021 8:13 am

mathjak107 wrote:
Sat May 01, 2021 7:48 am
doodle wrote:
Sat May 01, 2021 7:33 am

What you end up doing is what happens to those who wait for the proverbial crash to buy stocks …they wait so long that they gave up more than they could ever get ..

Plus if you are waiting for that flight to safety you are going to be timing to grab that gain because as we know as soon as the smoke clears the gains in safety assets vanish .
Seems like a pretty good argument to hold four assets that react to different economic situations and periodically rebalance.

When covid hit my shares of EDV skyrocketed. They went up like 40% in a month....pretty much inverse to stocks 40% decline. Swapping those two assets out and rebalancing was probably the best trade of my life....

To use your argument...you also might be waiting forever for rates to rise or stocks to rebound after a crash.(Chris Cole at Artemis Capital found that buying the dip in stocks would have led to bankruptcy three times over the last 100 years...your experience with stocks always going up is particular to your time era) The fact is that you have no idea what the future will bring. You have convinced yourself that inflation is a foregone conclusion and that rates will rise....yet there are many economists whose economic models point towards long term debt deflation. Others who say we will experience hyperinflation and currency collapse.

You got lucky to invest and capture that 40 year bull market....my guess is the next 40 years won't be nearly as easy for investors.
Interest rate cycles and commodity/gold cycles tend to take many many years if you want to back test …all things being equal if I could only bet on one horse today and was not retired it would still be equities
That isn't surprising...you have had a lifetime of conditioning in a secular boom environment. Stocks always go up and buying the dip always works out. Not every era was that lucky...look around the world. Plenty of examples of stock markets that don't behave like ours has. China has had massive real growth a a relatively flat market...Japan still hasn't eclipsed highs set 30 years ago
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Sat May 01, 2021 1:05 pm

We ain’t any other place but america …i will continue to bet on America…
As far as the other assets go , meh , I think once again staying less interest rate sensitive is the way to go or you are betting to much on interest rates. I would sooner bet on equities not doing to badly then betting so heavy on rates going lower.

My opinion is there is to much risk in long bonds. With gold tied to rates too I rather go equities as my horse , short term bonds and some intermediate treasuries and some gold but not 25% …likely no more than 10-15% would be my choice …

Basically what I had with a bit of gold in light of the pressure on rates ….
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Re: Permanent Portfolio concept continues to live on

Post by jalanlong » Sat May 01, 2021 5:31 pm

doodle wrote:
Sat May 01, 2021 8:13 am
mathjak107 wrote:
Sat May 01, 2021 7:48 am
doodle wrote:
Sat May 01, 2021 7:33 am

What you end up doing is what happens to those who wait for the proverbial crash to buy stocks …they wait so long that they gave up more than they could ever get ..

Plus if you are waiting for that flight to safety you are going to be timing to grab that gain because as we know as soon as the smoke clears the gains in safety assets vanish .
Seems like a pretty good argument to hold four assets that react to different economic situations and periodically rebalance.

When covid hit my shares of EDV skyrocketed. They went up like 40% in a month....pretty much inverse to stocks 40% decline. Swapping those two assets out and rebalancing was probably the best trade of my life....

To use your argument...you also might be waiting forever for rates to rise or stocks to rebound after a crash.(Chris Cole at Artemis Capital found that buying the dip in stocks would have led to bankruptcy three times over the last 100 years...your experience with stocks always going up is particular to your time era) The fact is that you have no idea what the future will bring. You have convinced yourself that inflation is a foregone conclusion and that rates will rise....yet there are many economists whose economic models point towards long term debt deflation. Others who say we will experience hyperinflation and currency collapse.

You got lucky to invest and capture that 40 year bull market....my guess is the next 40 years won't be nearly as easy for investors.
Interest rate cycles and commodity/gold cycles tend to take many many years if you want to back test …all things being equal if I could only bet on one horse today and was not retired it would still be equities
That isn't surprising...you have had a lifetime of conditioning in a secular boom environment. Stocks always go up and buying the dip always works out. Not every era was that lucky...look around the world. Plenty of examples of stock markets that don't behave like ours has. China has had massive real growth a a relatively flat market...Japan still hasn't eclipsed highs set 30 years ago
So are we better off betting on the continuation of what has happened for most of our lifetimes in this country or betting on the tide changing in the time we have left?

I have been listening to people for 30 years tell me that hyperinflation and/or a massive stock collapse worse than 1929 are right around the corner. If I had listened to them I would be a lot poorer. If I had completely ignored them I’d be a lot richer. Instead I’m somewhere in-between!
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Re: Permanent Portfolio concept continues to live on

Post by I Shrugged » Sat May 01, 2021 5:40 pm

I think it should be more along the lines of continuing to look at all weather investing such as the PP. While allowing for refinement and new info. I try to keep an open mind, and not to over-value my personal beliefs about inflation, interest rates, and the like. One of the truest things HB said was, "Anything can happen, and nothing has to happen."
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Re: Permanent Portfolio concept continues to live on

Post by Xan » Sat May 01, 2021 6:14 pm

jalanlong wrote:
Sat May 01, 2021 5:31 pm
I have been listening to people for 30 years tell me that hyperinflation and/or a massive stock collapse worse than 1929 are right around the corner. If I had listened to them I would be a lot poorer. If I had completely ignored them I’d be a lot richer. Instead I’m somewhere in-between!
Somewhere in-between is a great place to be. If you had a choice between:
a) flipping a coin between being filthy rich and being dirt poor
b) being reasonably well-off for certain

wouldn't you take b?
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Sat May 01, 2021 6:51 pm

We need a c option , which is just okay or less, which could potentially be the pp outcome in an extended rising rate , rising inflation perceived outcome
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Re: Permanent Portfolio concept continues to live on

Post by jalanlong » Sun May 02, 2021 9:59 am

Xan wrote:
Sat May 01, 2021 6:14 pm
jalanlong wrote:
Sat May 01, 2021 5:31 pm
I have been listening to people for 30 years tell me that hyperinflation and/or a massive stock collapse worse than 1929 are right around the corner. If I had listened to them I would be a lot poorer. If I had completely ignored them I’d be a lot richer. Instead I’m somewhere in-between!
Somewhere in-between is a great place to be. If you had a choice between:
a) flipping a coin between being filthy rich and being dirt poor
b) being reasonably well-off for certain

wouldn't you take b?
In a true 50/50 coin flip scenario of course I would take b. Unfortunately I have to live with the fact that everything in my gut for the last 30 years has told me to be all in on stocks. The only reason I had LTT or Gold at all is that I became convinced that I need to play it "safe" and be prepared for black sawn events. If I had just gone with my own feelings I would be filthy rich. But I get too caught up in doomsday scenarios which I am quite sure one day will happen but as I age it looks increasing like they may not happen in my lifetime.
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Re: Permanent Portfolio concept continues to live on

Post by I Shrugged » Sun May 02, 2021 10:16 am

jalanlong wrote:
Sun May 02, 2021 9:59 am
Xan wrote:
Sat May 01, 2021 6:14 pm
jalanlong wrote:
Sat May 01, 2021 5:31 pm
I have been listening to people for 30 years tell me that hyperinflation and/or a massive stock collapse worse than 1929 are right around the corner. If I had listened to them I would be a lot poorer. If I had completely ignored them I’d be a lot richer. Instead I’m somewhere in-between!
Somewhere in-between is a great place to be. If you had a choice between:
a) flipping a coin between being filthy rich and being dirt poor
b) being reasonably well-off for certain

wouldn't you take b?
In a true 50/50 coin flip scenario of course I would take b. Unfortunately I have to live with the fact that everything in my gut for the last 30 years has told me to be all in on stocks. The only reason I had LTT or Gold at all is that I became convinced that I need to play it "safe" and be prepared for black sawn events. If I had just gone with my own feelings I would be filthy rich. But I get too caught up in doomsday scenarios which I am quite sure one day will happen but as I age it looks increasing like they may not happen in my lifetime.

LTT has had a great run. Gold hasn't done too bad either, depending when you got it.
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Re: Permanent Portfolio concept continues to live on

Post by jalanlong » Sun May 02, 2021 11:01 am

I Shrugged wrote:
Sun May 02, 2021 10:16 am
jalanlong wrote:
Sun May 02, 2021 9:59 am
Xan wrote:
Sat May 01, 2021 6:14 pm
jalanlong wrote:
Sat May 01, 2021 5:31 pm
I have been listening to people for 30 years tell me that hyperinflation and/or a massive stock collapse worse than 1929 are right around the corner. If I had listened to them I would be a lot poorer. If I had completely ignored them I’d be a lot richer. Instead I’m somewhere in-between!
Somewhere in-between is a great place to be. If you had a choice between:
a) flipping a coin between being filthy rich and being dirt poor
b) being reasonably well-off for certain

wouldn't you take b?
In a true 50/50 coin flip scenario of course I would take b. Unfortunately I have to live with the fact that everything in my gut for the last 30 years has told me to be all in on stocks. The only reason I had LTT or Gold at all is that I became convinced that I need to play it "safe" and be prepared for black sawn events. If I had just gone with my own feelings I would be filthy rich. But I get too caught up in doomsday scenarios which I am quite sure one day will happen but as I age it looks increasing like they may not happen in my lifetime.

LTT has had a great run. Gold hasn't done too bad either, depending when you got it.
They haven’t been disasters. Cash has been meh. But they have all held back my returns. If I would have just invested in stocks and held on which was original plan many years ago, I would be much better off. Assuming I would have not panicked in 2001 and 2008.
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Re: Permanent Portfolio concept continues to live on

Post by jswinner » Sun May 02, 2021 12:25 pm

"Assuming I would have not panicked in 2001 and 2008."

*Most* are not capable of sitting idling buy while their future evaporates, even if you have plenty of time to recover. In fact we all would have unimaginable wealth had we gone yolo into stocks at the bottom(s). But here we all are now, in an all-weather portfolio BB. The simple elegance of the PP system is that it provides a solid foundation for selling high and buying low, and if you let it, not worry as much about your money.
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Re: Permanent Portfolio concept continues to live on

Post by vnatale » Sun May 02, 2021 1:12 pm

jswinner wrote:
Sun May 02, 2021 12:25 pm

"Assuming I would have not panicked in 2001 and 2008."

*Most* are not capable of sitting idling buy while their future evaporates, even if you have plenty of time to recover. In fact we all would have unimaginable wealth had we gone yolo into stocks at the bottom(s). But here we all are now, in an all-weather portfolio BB. The simple elegance of the PP system is that it provides a solid foundation for selling high and buying low, and if you let it, not worry as much about your money.


What percentage range do you assign for "most"?

I was not part of that "most" in 2000-2002, 2008-2009, last February / March. Each time I lost more money than I'd prior thought I'd ever have in my life. But each time I sold no equities.

I was not not one of the "most" because of any special character trait on my part. I just had no other long-term plan to change to from the one I'd adopted in January 2003.
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Re: Permanent Portfolio concept continues to live on

Post by whatchamacallit » Sun May 02, 2021 1:23 pm

100 years you might need a sliver of international equities in there. 100 years also makes you realize the value of gold.

Simple thing would be 50% in VTWAX Total world stock market, 25% in intermediate treasuries (a non hedged global government bond fund would be interesting here but I don't think it exists) and 25% in gold.

I would also like to have some smaller cap stuff in there but it complicates it more. Maybe 25% VTWAX and 25% small cap blend or extended market fund.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Sun May 02, 2021 2:30 pm

I was 100% equities from 1987 to 2007


In 2007 we bought a house in the poconos and thought we would retire earlier than we did .

Once we decided we didn’t want to retire in the poconos there was no reason to retire earlier since we both liked our jobs but I did get the portfolio toned down 65/45
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Re: Permanent Portfolio concept continues to live on

Post by doodle » Sun May 02, 2021 3:16 pm

jalanlong wrote:
Sun May 02, 2021 11:01 am
I Shrugged wrote:
Sun May 02, 2021 10:16 am
jalanlong wrote:
Sun May 02, 2021 9:59 am
Xan wrote:
Sat May 01, 2021 6:14 pm
jalanlong wrote:
Sat May 01, 2021 5:31 pm
I have been listening to people for 30 years tell me that hyperinflation and/or a massive stock collapse worse than 1929 are right around the corner. If I had listened to them I would be a lot poorer. If I had completely ignored them I’d be a lot richer. Instead I’m somewhere in-between!
Somewhere in-between is a great place to be. If you had a choice between:
a) flipping a coin between being filthy rich and being dirt poor
b) being reasonably well-off for certain

wouldn't you take b?
In a true 50/50 coin flip scenario of course I would take b. Unfortunately I have to live with the fact that everything in my gut for the last 30 years has told me to be all in on stocks. The only reason I had LTT or Gold at all is that I became convinced that I need to play it "safe" and be prepared for black sawn events. If I had just gone with my own feelings I would be filthy rich. But I get too caught up in doomsday scenarios which I am quite sure one day will happen but as I age it looks increasing like they may not happen in my lifetime.

LTT has had a great run. Gold hasn't done too bad either, depending when you got it.
They haven’t been disasters. Cash has been meh. But they have all held back my returns. If I would have just invested in stocks and held on which was original plan many years ago, I would be much better off. Assuming I would have not panicked in 2001 and 2008.
Yes, but that would have been a lucky choice. People fail to realize that this outperformance by stocks is specific to certain unique features including demographics, tech development, advantageous American positioning after two back to back world wars...and I'm sure there are many other factors.

The future to me looks like declining demographic growth, environmental and resource constraints on wild consumption, increasingly large levels of indebtedness...I'd be very surprised if stocks continue their bull run for another couple generations.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Sun May 02, 2021 4:39 pm

Buy high and sell higher has made far more money for investors .

The problem with buy low sell high is no one knows where low is .

In 2008 we all thought low was when we lost 2000 points ..who knew we had 6000 more to go ..

So many bailed and sold ….or they sold because stop losses were hit .

Odds are the next stop in a downturn is down ..odds are the next stop in a uptrend is up .

The trend is your friend.


You never see buy high and sell higher advertised …that is because those who know don’t tell and those who don’t know don’t know
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Re: Permanent Portfolio concept continues to live on

Post by jswinner » Sun May 02, 2021 5:08 pm

vnatale wrote:
Sun May 02, 2021 1:12 pm
jswinner wrote:
Sun May 02, 2021 12:25 pm
"Assuming I would have not panicked in 2001 and 2008."

*Most* are not capable of sitting idling buy while their future evaporates, even if you have plenty of time to recover. In fact we all would have unimaginable wealth had we gone yolo into stocks at the bottom(s). But here we all are now, in an all-weather portfolio BB. The simple elegance of the PP system is that it provides a solid foundation for selling high and buying low, and if you let it, not worry as much about your money.
What percentage range do you assign for "most"?

I was not part of that "most" in 2000-2002, 2008-2009, last February / March. Each time I lost more money than I'd prior thought I'd ever have in my life. But each time I sold no equities.

I was not not one of the "most" because of any special character trait on my part. I just had no other long-term plan to change to from the one I'd adopted in January 2003.
I would not put members of this board in the *most* category. But in 2008, billions did move stock to bonds, only miss out on the run-up: https://www.cbsnews.com/news/investors- ... ong-again/
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