Permanent Portfolio in Europe (follow-up)

[Arturo]

One major issue with a Euro zone PP is that government bonds are not backed by the printing press. This adds a level of risk that doesn't exist in the US Japan or the UK. I am not sure how to compensate for that.

you pointed out the core of Europe problem, and the biggest fear for an european PP investor. country bonds are not backed up by BCE.

So from this perspective, you really do not know if you should buy only long german bonds, because is the strongest economy in Europe, or you should buy a basket of weighted countries to invest in a diversified product.

Its not about how EU-PP performed until now, but how it could performed in the uncertain future under conditions that are different than the ones Harry Browne used to design Permanent Portfolio.

I don't think there is an ideal solution here. But if I were in Europe trying to do a PP I might consider going with long term Swiss Gov't bonds. The Fanc is currently pegged to the Euro and they own their own currency. Also Switzerland is in MUCH better shape than the rest of Europe debt wise.

But there are risks there too. What is pegged today can be unpegged tomorrow. Still I would say they are probably the safest bonds in Europe at the moment.

Hi Ad Orientem,

its a little bit confusing. Some says german bonds. others a basket of weighted countries. You, Switzerland. The issue here is that nobody knows the future and whats going to happen with those countries, so trying to figure out how those bonds will perform is just a matter of speculation, and not investing.

How happened that i am living in the worst country for PP? :-)

[melveyr]

How hard would it be to do a US PP and then hedge out the FOREX risk? Is it hard to buy Treasuries as a retail investor in Europe?

[Arturo]

How hard would it be to do a US PP and then hedge out the FOREX risk? Is it hard to buy Treasuries as a retail investor in Europe?

Hi Melveyr,

Could you explain a little bit better hedging out the forex risk?

In regard of purchasing T-Bonds, its as easy as buying TLT ETF. The only big issue is the exchange risk.

Thanks and regards

[frugal]

Hi EU-PP's,

I am so happy to discover this thread!

Let me know how are HB-EU-PP's running?


Thank you.

[frugal]

How hard would it be to do a US PP and then hedge out the FOREX risk? Is it hard to buy Treasuries as a retail investor in Europe?

It would cost 1-2% per year

[frugal]

A good year for EUPP!

After a bad 2013, a good 2014.

Thank you all.

[juandelarocha]

It would be nice to check how all the EU PP commented here performed during these years -hoping that users still read this forum. For those -like me, who have recently started a European PP it's important to get some insights about PP dealing with the uncertainty of these past years.

Regards.

[blue_ruin17]

Use the calculators here: https://portfoliocharts.com/calculators/

Select the black box that says UNITED STATES and then click on Germany.

[frugal]

Hi,

any new friends on EU-PP?

Say hello :-)

Regards

[Thomas Hoog]

I have results starting in 2002.
based on 25 % distribution every year with the following EFT:
iShares Barclays Euro Government Bond 1-3 (IBGS)
iShares € Government Bond 15-30
ETFS Physical Gold (PHAU)
iShares MSCI World UCITS ETF DIST


PP index PP index
2002 -2,4% -2,4%
2003 5,6% 3,2%
2004 6,4% 9,6%
2005 19,4% 29,0%
2006 7,6% 36,6%
2007 5,5% 42,1%
2008 -3,3% 38,8%
2009 13,4% 52,2%
2010 13,4% 65,6%
2011 5,1% 70,7%
2012 8,0% 78,7%
2013 -3,4% 75,3%
2014 9,6% 84,9%
2015 1,7% 86,6%
2016 8,7% 95,3%
2017 -0,5% 94,8%
Average 5,9%

Pretty good !

[WhiteElephant]

Pretty good indeed, thanks for sharing!

When I setup my PP I compared eurozone PP's with different stock indices over the same timeframe as you did.
Turned out it mattered very little whether you used the world index, the emu index or 50/50 world/emu. I'll try to find it and share it here.

[frugal]

I have results starting in 2002.
based on 25 % distribution every year with the following EFT:
iShares Barclays Euro Government Bond 1-3 (IBGS)
iShares € Government Bond 15-30
ETFS Physical Gold (PHAU)
iShares MSCI World UCITS ETF DIST


PP index PP index
2002 -2,4% -2,4%
2003 5,6% 3,2%
2004 6,4% 9,6%
2005 19,4% 29,0%
2006 7,6% 36,6%
2007 5,5% 42,1%
2008 -3,3% 38,8%
2009 13,4% 52,2%
2010 13,4% 65,6%
2011 5,1% 70,7%
2012 8,0% 78,7%
2013 -3,4% 75,3%
2014 9,6% 84,9%
2015 1,7% 86,6%
2016 8,7% 95,3%
2017 -0,5% 94,8%
Average 5,9%

Pretty good !

COOL!

thank you for sharing

I am happy for you

Do you keep only this EU-PP or you also have other portfolios?

Regards!

[barrett]

I have results starting in 2002.

......

PP index PP index
2002 -2,4% -2,4%
2003 5,6% 3,2%
2004 6,4% 9,6%
2005 19,4% 29,0%
2006 7,6% 36,6%
2007 5,5% 42,1%
2008 -3,3% 38,8%
2009 13,4% 52,2%
2010 13,4% 65,6%
2011 5,1% 70,7%
2012 8,0% 78,7%
2013 -3,4% 75,3%
2014 9,6% 84,9%
2015 1,7% 86,6%
2016 8,7% 95,3%
2017 -0,5% 94,8%
Average 5,9%

Gerard, Can you share the CAGR or do you just have the average? Also, do you have reliable Dutch inflation numbers for that time? At least I think you are Dutch. I'd be really curious to know the real return of a European/Dutch PP with all the discussion on here about how the PP works outside of the US. Thanks.

[Thomas Hoog]

Yep Dutch, Sorry. no CAGR. I used this just as an benchmark against my own portfolio (10% cash, 20 % gold, 30 % LT Bonds, 40 % Equities // average yield 6,4 % so slightly better).

I dont have inflation figures but I think you can google them. My guess is around 2% for this period. So real return will be around 4 %.

It will no make you rich but that's is the HB philosophy, you make money with almost no effort and with sleepwell nights.

[WhiteElephant]

I've got data going back to 2001. Most of my data are yearly index returns from MSCI and Barclays indices. I've used some data from the old Marc de Mesel website.
The indices I've used are the MSCI Emu, Barclays Euro Government 15-30 and Barclays Euro Government 1-3.

[frugal]

Hi

what is the difference between EU-PP and VANILLA PP ?


Regards!

[WhiteElephant]

It's a basic eurozone PP, with 4x25 eurozone stocks, eurozone bonds, eurozone cash and gold

[Thomas Hoog]

Thx, the figures slightly differs but the conclusion is the same; it wont make you rich but it is the best sleep well approach.

[frugal]

Hi,

some years ago we could find in some countries in Eurozone, 3-4-5% for cash deposit in some banks.

This ended forever?

The high rate for cash will never come again?

Regards.

[Thomas Hoog]

Of course it will, the government has pumped billions into the economy. That money will also go out again, so inflation and thus the cash yield rates will increase. It may be next year or over 10 years but it will happen.
And when inflation is rising it is very hard to control it so it may be quite destructive the next decade. (Just keep your Gold portion safe:) ).

"In the simplest terms, inflation occurs when there's too much money in the system. On the flip side, deflation occurs when there are too few dollars in circulation. Robert Kiyosaki".

[europeanwizard]

Yep Dutch

Another Dutchie here. Thanks for your valuable posts!

[tarentola]

These are results from my real 4x25 portfolio of Euro shares with Euro and EM share ETFs, bond ETFs, gold ETFs and cash. Not very different from the US Vanilla PP figures of -2.24, +10.10, -2.99 and +5.9% for the same four years.

2013 -3.04%
2014 +12.39%
2015 +1.42%
2016 +7.08
Average 4.30%
2017 +2.1% so far, improving since the summer.

PS (off topic): I also have a separate portfolio of US and UK blue chip dividend shares, which in spite of the present US market highs is down 3.5% in Euros since 1 Jan 2017.

[frugal]

These are results from my real 4x25 portfolio of Euro shares with Euro and EM share ETFs, bond ETFs, gold ETFs and cash. Not very different from the US Vanilla PP figures of -2.24, +10.10, -2.99 and +5.9% for the same four years.

2013 -3.04%
2014 +12.39%
2015 +1.42%
2016 +7.08
Average 4.30%
2017 +2.1% so far, improving since the summer.

PS (off topic): I also have a separate portfolio of US and UK blue chip dividend shares, which in spite of the present US market highs is down 3.5% in Euros since 1 Jan 2017.

hi!!!

4,3% and what about inflation?

Do you think to change to a more aggressive lazy portfolio?


Regards

[tarentola]

4,3% and what about inflation?

It does not beat official inflation by much, and perhaps does not beat real inflation at all. But multiple-year periods of underperformance are not unusual.

Do you think to change to a more aggressive lazy portfolio?

Such as...? If you have a concrete suggestion and some evidence that it works or has worked, I would be delighted to know about it. I have backtested or consulted portfoliocharts.com for quite a few variants but cannot find anything that beats the PP for reasonable returns and limited drawdowns.

The poor 2017 Euro performance of the US and UK dividend share portfolio is largely due (I hope) to the dollar's having lost 12% of its value relative to the Euro since 1 Jan, while the pound lost 4%.

[frugal]

4,3% and what about inflation?

It does not beat official inflation by much, and perhaps does not beat real inflation at all. But multiple-year periods of underperformance are not unusual.

Do you think to change to a more aggressive lazy portfolio?

Such as...? If you have a concrete suggestion and some evidence that it works or has worked, I would be delighted to know about it. I have backtested or consulted portfoliocharts.com for quite a few variants but cannot find anything that beats the PP for reasonable returns and limited drawdowns.

The poor 2017 Euro performance of the US and UK dividend share portfolio is largely due (I hope) to the dollar's having lost 12% of its value relative to the Euro since 1 Jan, while the pound lost 4%.

Hi

are you going to ER?

MMM has 100% on stocks :-)