Having built and tested that to my satisfaction, I decided to take it a step further. I recently posted in another thread that I decided to iterate using that same code and price data over the 176,000-ish ways one could allocate 0-100% of capital over the 4 assets. In effect, I wanted to answer the following questions:

1) What have been the optimum performing allocations among the 4 assets of the permanent portfolio since 1972?

2) In what ways has changing the allocation affected performance and volatility of the portfolio?

I'm aware that doesn't answer what

*will*be the future most efficient allocation, but I think the results can be instructive nonetheless.

A few folks expressed interest in seeing the results, so I'm posting them here, along with a CSV file with the full results of every iteration. I think the columns are self-explanatory, but if anyone has questions, by all means post them here and I'll try to answer. Here's the results:

http://www.peaktotrough.com/download/hb ... v.zip [ 3 MB ]

Here are the parameters for each run of this simulation:

- Start date: 01/01/1972

- End date: 12/06/2012

- Reinvest all dividends and interest payments into their respective assets

- Rebalance on 35/15 bands

- Cash in 1 year T-bills

- Treasury bonds are all 30 years when they were historically available, 20 years otherwise

- Stock allocation in the S&P 500

Interesting (albeit, somewhat random) observations:

- Sorting for highest CAGR gives us: 10.3% CAGR and 11.12% annualized standard deviation with an allocation of 0% Tbills, 6% Tbonds, 50% gold, 44% S&P500.

- Sorting for highest max drawdown yields a 100% allocation to gold. It takes the... ahem... gold medal with a 70.26% max dd over the period. Yikes.

- Sorting for highest Sharpe ratio gives us 0.6167 with an allocation of: 20% Tbills, 23% Tbonds, 34% Gold, 23% S&P500. CAGR of 10.21% and standard deviation of 7.3%.

- Second highest Sharpe ratio is 0.6166: 27% Tbills, 25% Tbonds, 21% Gold, 27% S&P500. CAGR of 9.7% and standard deviation of 6.5%. Two things noteworthy here... a significant difference in allocation, but similar results in sharpe ratios. Also, this is substantially similar to the standard 4x25 portfolio.

- Looking at gold specifically, in the top 100 results sorted by Sharpe ratio, the low gold allocation is 18%, CAGR is 9.6%. The high gold allocation is 35% with a CAGR of 10.3%.

- The standard 4x25 allocation is remarkably close to the optimal allocation with a CAGR of 9.6%, standard deviation of 6.8% and Sharpe ratio of 0.57. I personally find this fascinating.

Some of you guys are MUCH better at data crunching with Excel than I am, so have at it... let us know if you find anything interesting.

Also, it goes without saying that I do not claim these results to be error-free, and I highly recommend everyone verify the results and perform their own due diligence before using anything contained herein for investment purposes.

Thanks,

P2T