Permanent Portfolio Forum
https://www.gyroscopicinvesting.com/forum/
https://www.gyroscopicinvesting.com/forum/viewtopic.php?t=7310
Budd is the guy next to you during turbulence saying "wow, this jet airliner, often touted for it's extreme stability in flight, is sure rocking a lot! airliner for the lunch you can't afford to lose, my ass!"MediumTex wrote:If the PP were a 10 hour international flight, budd would be the guy sitting next to you who turns to you every 30 minutes and says: "I'm pretty sure the plane is about to crash."Matthew19 wrote:I'm sorry for the losses but I really don't plan to run. I can appreciate that this is a strange market and while it adjusts the PP will have some short term stagnation. I don't plan to look at it daily or even weekly, I run a business and have a family, I'd rather enjoy life.buddtholomew wrote: Run as far away as fast as possible...I could not be more sincere. This portfolio is not what they make it out to be. This is the 7th day of straight losses...the money you can't affort to lose...my a$$
Deep and subtle with the deftest touch.dragoncar wrote: Budd is the guy next to you during turbulence saying "wow, this jet airliner, often touted for it's extreme stability in flight, is sure rocking a lot! airliner for the lunch you can't afford to lose, my ass!"
I'm imagining the following conversation.iwealth wrote: Since the start of the year, the portfolio is down what, 0.75% this year?
So, the equivalent of flying along at 30,000 feet and plummeting to 29,775.
[/align]I was thinking more of an internal pressure-induced event:MachineGhost wrote: I really fear this is what will happen to budd when the PP hits that infamous maximum drawdown that I-used-to-mention-but-no-longer-do-due-to-he-who-shall-remain-nameless:
Going from some basic PP newbie questions to an exploding head without straying too far off topic and doing it in under 4 pages is pretty impressive.Matthew19 wrote: I didn't expect this thread to end up with exploding heads haha
What long-term bull market in gold?Reub wrote: Maybe budd has a point. Is the PP positively biased because of the long term bull markets in gold and treasuries?
And I would point Reub back to some of the PP basics, like if one asset is falling, another asset MUST be rising, and if you can somehow find proxies for assets associated with all conceivable economic environments, then you will always have at least one winner in your portfolio, and that's enough to protect you.Pointedstick wrote:What long-term bull market in gold?Reub wrote: Maybe budd has a point. Is the PP positively biased because of the long term bull markets in gold and treasuries?
Mark,Mark Leavy wrote: The metric that I have finally settled on is a linear fit of the inflation adjusted returns. Here's the vanilla HBPP over the last 10 years:
[img width=800]http://i57.tinypic.com/2z8ng2w.png[/img]
The linear fit of the inflation adjusted growth rate is 8.45%.
The average (RMS) deviation from that best fit line is 4.88%
The largest deviation from the line (not MaxDD) is 13.5%
Our current deviation from that best fit linear line is 8.58%
What about when 2 assets are falling and the other is overvalued?MediumTex wrote:And I would point Reub back to some of the PP basics, like if one asset is falling, another asset MUST be rising, and if you can somehow find proxies for assets associated with all conceivable economic environments, then you will always have at least one winner in your portfolio, and that's enough to protect you.Pointedstick wrote:What long-term bull market in gold?Reub wrote: Maybe budd has a point. Is the PP positively biased because of the long term bull markets in gold and treasuries?
Thank you, Mark! Your posts are always polite and insightful. But do you have a 10 year chart available for the next 10 years?Mark Leavy wrote: Good question Reub (and Budd).
I think you should always question the fundamentals of any system. The problem is in not having a decent metric to evaluate whether the fundamentals are working or not. You can't look at the day to day swings. That is just noise and will drive you crazy. But without something else to look at, you can never be sure that it is all working.
The metric that I have finally settled on is a linear fit of the inflation adjusted returns. Here's the vanilla HBPP over the last 10 years:
[img width=800]http://i57.tinypic.com/2z8ng2w.png[/img]
The linear fit of the inflation adjusted growth rate is 8.45%.
The average (RMS) deviation from that best fit line is 4.88%
The largest deviation from the line (not MaxDD) is 13.5%
Our current deviation from that best fit linear line is 8.58%
So... yes we are down a little bit from average over the last 10 years.
We are still aways a bit from even our worst 10 year slump.
Nothing in this picture makes me think the model is broken.
Think of this post as just an example. You need some metric that can give you an accurate picture of the model performing to plan. Pick whatever you want - but a day/week up/down will not give you the information you are looking for.
Hope this helps.
All the best,
Mark
Could you run it again but this time with gold at 20%/cash 30% that I determined was risk parity?Mark Leavy wrote: Think of this post as just an example. You need some metric that can give you an accurate picture of the model performing to plan. Pick whatever you want - but a day/week up/down will not give you the information you are looking for.
Yes, we should have it track the global financial asset portfolio so we can stop worrying about tracking error anxiety.barrett wrote: Also, I really think we need a quick performance link on the home page of this forum so that we all know what we are talking about when we get into the debate about whether or not the PP's current performance is tracking its historical performance. I get frustrated when I read most 'tracking error' posts because the PP is not supposed to track some other index like the S&P 500 or a 60/40 Bogleheads setup. We should only be comparing it to itself. Only then can we have reasonable discussions about whether or not it is lagging, broken, outperforming, regressing to the mean, etc.
If you are the type of person that insists on making opinions on whether assets are over/undervalued, passive investing just isn't for you. It doesn't matter how you structure your portfolio (PP, 60/40, etc.), something will always be rising, falling, "overvalued" or "undervalued". The PP is particularly bad for such a person because the individual assets are in fact quite volatile and swing rapidly from highs to lows and vice versa.Reub wrote: What about when 2 assets are falling and the other is overvalued?
Where do we find evidence of these 2 fundamental principles of the portfolio - namely another asset MUST be rising when one or more is falling and you will ALWAYS have one winner that is sufficient to protect you. These are at the core of the PP philosophy. How can you be so sure?MediumTex wrote:And I would point Reub back to some of the PP basics, like if one asset is falling, another asset MUST be rising, and if you can somehow find proxies for assets associated with all conceivable economic environments, then you will always have at least one winner in your portfolio, and that's enough to protect you.Pointedstick wrote:What long-term bull market in gold?Reub wrote: Maybe budd has a point. Is the PP positively biased because of the long term bull markets in gold and treasuries?
May be helpful if everyone provides their definition of "protection" first because I'm sure MT's will be different than yours.buddtholomew wrote: Where do we find evidence of these 2 fundamental principles of the portfolio - namely another asset MUST be rising when one or more is falling and you will ALWAYS have one winner that is sufficient to protect you. These are at the core of the PP philosophy. How can you be so sure?
I have personally witnessed 1 negative Year and YTD we are negative as well. I don't recall the specifics, but negative years are 2-5 in 40 and now they are becoming more frequent.
+1barrett wrote: I get frustrated when I read most 'tracking error' posts because the PP is not supposed to track some other index like the S&P 500 or a 60/40 Bogleheads setup. We should only be comparing it to itself. Only then can we have reasonable discussions about whether or not it is lagging, broken, outperforming, regressing to the mean, etc.
He means that in real terms. Cash certainly won't go up in nominal terms when the other three are declining.buddtholomew wrote: Where do we find evidence of these 2 fundamental principles of the portfolio - namely another asset MUST be rising when one or more is falling and you will ALWAYS have one winner that is sufficient to protect you. These are at the core of the PP philosophy. How can you be so sure?
Budd, The actual number of negative years in real terms is eight so far. This is according to the data in Craig & MT's book. I am also including 2013 (their data only went through 2011). The reason the nominal returns are now more frequently negative is most likely because they are clustered around a lower number due to really low inflation.buddtholomew wrote: I have personally witnessed 1 negative Year and YTD we are negative as well. I don't recall the specifics, but negative years are 2-5 in 40 and now they are becoming more frequent.
