Yay PP!

General Discussion on the Permanent Portfolio Strategy

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Re: Yay PP!

Post by ppnewbie » Fri Jan 14, 2022 10:27 am

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mathjak107
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Re: Yay PP!

Post by mathjak107 » Fri Jan 14, 2022 10:50 am

I think we need to what this year brings before passing judgement on any portfolio.

I think rising rates are going to be a problem until they aren’t ….


Some portfolios may react so poorly to rate fears that it become harder to get back up again even if rates stabilize
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Re: Yay PP!

Post by buddtholomew » Fri Jan 14, 2022 11:05 am

I don’t claim to know which portfolio allocation will outperform moving forward. What I do know is that there is no confidence in the PP and I’m tired of fooling myself into believing there is anything magical about 4 economic climates and the PP holding assets to cover them all.

Prey tell which economic period we are in and which asset/s should perform well.
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Re: Yay PP!

Post by mathjak107 » Fri Jan 14, 2022 11:08 am

I agree ..I don’t think there are any magical properties..to me it is just another portfolio..although as you see rising rates and inflation can effect it more then other choices negatively .

But the reverse can be true and if we slow down my more inflation weighted assets won’t do well
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Re: Yay PP!

Post by dockinGA » Fri Jan 14, 2022 12:28 pm

mathjak107 wrote:
Fri Jan 14, 2022 11:08 am
I agree ..I don’t think there are any magical properties..to me it is just another portfolio..although as you see rising rates and inflation can effect it more then other choices negatively .

But the reverse can be true and if we slow down my more inflation weighted assets won’t do well
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Mathjak, is that you???????? Suddenly you are a voice of reason on this forum.
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Re: Yay PP!

Post by mathjak107 » Fri Jan 14, 2022 1:49 pm

I am never anti any portfolio…I am anti using something when odds don’t favor its weighting ….and yes the PP IS HEAVILY TILTED …

I am against any portfolio mitigating short term dips when investors are in their accumulation stage …. I’m not a fan of something weighted like the pp when the fed has to deal with the inflation genie that escaped out of the bottle and you are fighting the fed with considerable portfolio weight .

But that is no different then I wouldn’t be a fan of Commodities, floating rate loans , tips ,etc if inflation was falling and we were slowing down .

That 40 year bull market in bonds has put some portfolios up on a pedestal and that may be done for now …

Which is why whatever weighting you use should not leave one with a huge drop if they are wrong .

That is why I am a fan of a neutral core with little interest rate sensitivity then just season to taste based on the big picture…there are assets for rising rates and rising inflation and assets for recession and falling rates .

If you are right you pick up some alpha but of your are wrong you won’t really get burned by the assets that fly fighter cover over your equities
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Re: Yay PP!

Post by buddtholomew » Fri Jan 14, 2022 2:18 pm

I wouldn’t be so confident in your last statement with LTT’s down 1.6% and 5% YTD.

I’ll say it again...more money is lost trying to prepare or avoid equity crashes (a la PP) than just investing in stocks through thick and thin (don’t recall the original author of this comment). You might as well since you will experience equity like losses in Gold and LTT’s too.

The PP loses when stocks go up AND when the market goes down.
Last edited by buddtholomew on Fri Jan 14, 2022 2:24 pm, edited 1 time in total.
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Re: Yay PP!

Post by mathjak107 » Fri Jan 14, 2022 2:23 pm

100% equities in retirement works fine …it has almost the same success rate as 50/50.

But that volatility would be insane
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Re: Yay PP!

Post by mathjak107 » Sat Jan 15, 2022 4:47 am

So bud , not much difference there so far between a portfolio populated with the pp assets or not.

As of now a quick comparison between the standard insight core portfolio and pp which are both 25% equities shows the pp is close ..

Pp down 1.39% ytd while insight down 1.12 …big difference there is the insight model holds equity funds that took a bigger hit then a total market fund . But returns are close


On the other hand you have the once darling arkk down 11% ytd and down 40% the last year …qqq down 5% ytd .

The 100% equity growth model is down 2.65% vs 2.66 for total market fund .


Little is standing up or has magic powers right now…only my commodities fund is up ytd and my real return fund is back at zero ytd ..Bitcoin is down

So nothing seems any better than anything else.
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Re: Yay PP!

Post by buddtholomew » Sat Jan 15, 2022 9:59 am

Thanks MJ, I don’t see how the PP is only down 1% when SPY is -2.74 YTD and LTT’s -4% or so depending on site.
Can you share the actual returns for each asset?

My 43/12/0/45 is -1.12% YTD but I didn’t give up 25% in equity returns last year.
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Re: Yay PP!

Post by mathjak107 » Sat Jan 15, 2022 10:12 am

sure .

tlt minus 4.11
vti minus 2.66
gld minus .75
shy minus .43

morningstar
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Re: Yay PP!

Post by mathjak107 » Sat Jan 15, 2022 10:15 am

buddtholomew wrote:
Sat Jan 15, 2022 9:59 am
Thanks MJ, I don’t see how the PP is only down 1% when SPY is -2.74 YTD and LTT’s -4% or so depending on site.
Can you share the actual returns for each asset?

My 43/12/0/45 is -1.12% YTD but I didn’t give up 25% in equity returns last year.
you need to compare like portfolios ....

pp was up about 4.50% last year .

my core was up 5.20%

both 25% equities

now if you are aguing that 75% equities did better ? i would say well 100% equities did better than 75% ..and if you werent in ark last year you likely gave up money there too .

so everything has to be compared to at least the same equity levels.

seems the pp has been trailing my core portfolio by just a little yet the assets are very different
Last edited by mathjak107 on Sat Jan 15, 2022 10:16 am, edited 1 time in total.
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Re: Yay PP!

Post by buddtholomew » Sat Jan 15, 2022 10:16 am

mathjak107 wrote:
Sat Jan 15, 2022 10:12 am
sure .

tlt minus 4.11
vti minus 2.66
gld minus .75
shy minus .43

morningstar
GLD is +.75 so with those returns YTD PP is -1.62%...not too bad.
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Re: Yay PP!

Post by mathjak107 » Sat Jan 15, 2022 10:17 am

buddtholomew wrote:
Sat Jan 15, 2022 10:16 am
mathjak107 wrote:
Sat Jan 15, 2022 10:12 am
sure .

tlt minus 4.11
vti minus 2.66
gld minus .75
shy minus .43

morningstar
GLD is +.75 so with those returns YTD PP is -1.62%...not too bad.

morningstar shows gld at minus .75 see below

Total Return % (Price) -0.75
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Re: Yay PP!

Post by mathjak107 » Sat Jan 15, 2022 10:25 am

like i said , my core portfolio is nothing like the pp yet results so far are pretty close

i show the core i use as

26.40% equities
17.7% high yield bonds
16.70 total bond
39.2 very short term treasuries

so that is very different than the pp yet returns are pretty close . volatility is lower as well in mine in this messy environment as well since it is 40% short term treasuries .

but the lack of interest rate sensitive stuff with big moves allows it to actually meet or exceed the pp at this point in time with lower volatility most days without the drag of long term bonds and gold hence the 40% short term.

so for those who used to argue my portfolio was equity heavy or high volatility , surprise , it is actually less volatile then the pp is with those heavy movers now . it is not equity heavy in years
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Re: Yay PP!

Post by buddtholomew » Sat Jan 15, 2022 10:37 am

mathjak107 wrote:
Sat Jan 15, 2022 10:17 am
buddtholomew wrote:
Sat Jan 15, 2022 10:16 am
mathjak107 wrote:
Sat Jan 15, 2022 10:12 am
sure .

tlt minus 4.11
vti minus 2.66
gld minus .75
shy minus .43

morningstar
GLD is +.75 so with those returns YTD PP is -1.62%...not too bad.

morningstar shows gld at minus .75 see below

Total Return % (Price) -0.75
That makes the PP return YTD even worse.
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Re: Yay PP!

Post by buddtholomew » Sat Jan 15, 2022 10:39 am

mathjak107 wrote:
Sat Jan 15, 2022 10:25 am
like i said , my core portfolio is nothing like the pp yet results so far are pretty close

i show the core i use as

26.40% equities
17.7% high yield bonds
16.70 total bond
39.2 very short term treasuries

so that is very different than the pp yet returns are pretty close . volatility is lower as well in mine in this messy environment as well since it is 40% short term treasuries .

but the lack of interest rate sensitive stuff with big moves allows it to actually meet or exceed the pp at this point in time with lower volatility most days without the drag of long term bonds and gold hence the 40% short term.

so for those who used to argue my portfolio was equity heavy or high volatility , surprise , it is actually less volatile then the pp is with those heavy movers now . it is not equity heavy in years
So you pared back Gld and LTT’s, the 2 assets that differentiate the PP from other conservative allocations. No wonder you’re outperforming even on the downside. Proves my point really.
Last edited by buddtholomew on Sat Jan 15, 2022 11:00 am, edited 1 time in total.
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Re: Yay PP!

Post by mathjak107 » Sat Jan 15, 2022 11:00 am

Yes for now I am a head with lower volatility and rate risk but not enough to say the pp sucks in this environment

It is less then a half point difference

I am better weighted for inflation and rates rising The pp is better weighted for recession Or slow down

Maybe blend the two models

Which is kind of what I did by adding gold , commodities , bitcoin and a real return fund
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Re: Yay PP!

Post by buddtholomew » Sat Jan 15, 2022 11:06 am

It doesn’t suck, but on the other end of the spectrum it isn’t awesome either. I just think it’s touted to be something more magical than it truly is.

Many investors hold stock, gold and bonds so the PP is not novel in that regard. The 4x25 is what sets it apart from these other allocations and I think that’s a mistake. It’s taking an agnostic approach to investing and disregards risk parity altogether. I like 50/40/10 stocks, bonds and Gold but 4x25 is nonsensical and that’s how the PP was sold. Only years later others came out of the woodwork to say they had different allocations other than 4x25.
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Re: Yay PP!

Post by mathjak107 » Sat Jan 15, 2022 11:27 am

Well whether it’s a 40 year bull in bonds or not can make a big difference….

Years of high inflation would likely have shaped a different portfolio in today’s environment…

The reality is there is no one portfolio that is trueLy permanent if a trend ends up being long term and it bets against it.

The trend is your friend can mean an awful lot when you are poised against it .

As I say , in the accumulation, no way would I use anything but 100% equities… but there are loads of portfolios that are very good when used within the confines of what they are designed for …the problem with the pp is it was way over weighted towards low rates and high inflation and yet it was called neutral..

It really is underweight rising rates and rising inflation in the moderate range like now where gold may have little reaction
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Re: Yay PP!

Post by buddtholomew » Sat Jan 15, 2022 1:43 pm

Don’t get me started on Gold..the more talk about inflation the lower gold goes. I’m still waiting for the day where I can rebalance out of Gold for Stocks but it’s a pipe dream to think that will ever unfold. I have rebalanced out of LTT’s and am grateful for that opportunity.

This environment is prime for Gold to respond but alas it doesn’t. Why even bother except to quote a better risk adjusted return or smoother ride. Who cares about a smoother ride when you’re underperforming year after year.

It boils down to whether Gold and LTT’s can beat cash before the losses are too deep to overcome - I’m not willing to take that risk so have adjusted accordingly. I’ll keep my powder dry to purchase equities when they decline. Gold doesn’t drive the PP, LTT’s don’t drive the PP, stocks drive the PP.
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Re: Yay PP!

Post by mathjak107 » Sat Jan 15, 2022 2:50 pm

The environment is actually not prime for gold ..

As long as other assets produce why should gold be bid up ?. As long as other assets are not doing terrible , especially stocks , there is no reason for gold to run with the ball .

It takes not inflation but inflation levels the markets dont like for gold to take over .

Which is why I split the gold budget with commodities….they are perfect for moderate inflation..

Look at me ,defending the pp. , ha ha


But I think you don’t follow why assets like gold are not responding now …but by the time equities really tumble and don’t have the ball , gold will likely make its move up and that gold will buy more equities then hanging in cash would once stocks tumble …

Waiting in gold is likely going to produce better results then waiting in cash will…

This is why the last 20 years equities and gold beat equities and bonds over most time frames even though bonds were in a bull market …it blew my mind when I tried it

Try it in portfolio visualizer
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Re: Yay PP!

Post by buddtholomew » Sat Jan 15, 2022 3:32 pm

mathjak107 wrote:
Sat Jan 15, 2022 2:50 pm
The environment is actually not prime for gold ..

As long as other assets produce why should gold be bid up ?. As long as other assets are not doing terrible , especially stocks , there is no reason for gold to run with the ball .

It takes not inflation but inflation levels the markets dont like for gold to take over .

Which is why I split the gold budget with commodities….they are perfect for moderate inflation..

Look at me ,defending the pp. , ha ha


But I think you don’t follow why assets like gold are not responding now …but by the time equities really tumble and don’t have the ball , gold will likely make its move up and that gold will buy more equities then hanging in cash would once stocks tumble …

Waiting in gold is likely going to produce better results then waiting in cash will…

This is why the last 20 years equities and gold beat equities and bonds over most time frames even though bonds were in a bull market …it blew my mind when I tried it

Try it in portfolio visualizer
According to HB, it takes unexpected inflation at high levels for gold to respond. What other conditions besides current inflation levels (highest in 40+ years) and negative real yields would gold benefit? It’s a crapshoot, through and through.

What I have witnessed is that Gold will not go up when equites tank as investors will sell their gold positions to cover stock losses. Who knows how deep the decline will be before it rises again. We’ve seen this countless times in past pullbacks. Same for bonds.

I’m not sitting in cash, but rather using cash for living expenses over the next few years. I may be losing to inflation, but Gold and LTT’s may lose even more.
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Re: Yay PP!

Post by ppnewbie » Sat Jan 15, 2022 6:40 pm

I’m confused here. What is your exact allocation (percentages) , when did you get in to the PP, how many times have you rebalanced, how many times have you added more money into the PP. Also gold is up fifty percent in three years.

IMHO:
If your young and have a long runway of earnings you should consider at least moving to a GB.

Your trying to preserve the wealth you have. If you are still accumulating wealth, the PP is going to be a slow path.
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Re: Yay PP!

Post by buddtholomew » Sat Jan 15, 2022 10:38 pm

ppnewbie wrote:
Sat Jan 15, 2022 6:40 pm
I’m confused here. What is your exact allocation (percentages) , when did you get in to the PP, how many times have you rebalanced, how many times have you added more money into the PP. Also gold is up fifty percent in three years.

IMHO:
If your young and have a long runway of earnings you should consider at least moving to a GB.

Your trying to preserve the wealth you have. If you are still accumulating wealth, the PP is going to be a slow path.
AA has morphed over time since I recently retired.
Gold may be up last 3 years but I started in 2011.
I’ve added additional funds over the years but PP is in taxable so rarely rebalance (except during major stock declines).

Retirement accounts are invested 60/40 stocks/Stable Value and some Total Bond market as well.
60% is globally diversified with tilts to SV and REITs.
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