Worst 3 year PP performance ever?

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jason
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Worst 3 year PP performance ever?

Post by jason » Mon Jun 08, 2015 12:38 pm

According to http://www.peaktotrough.com/hbpp.cgi if you go back 3 years, 6/8/2012 through today, 6/8/2015, the performance is as follows:
Years 3.00
CAGR 2.98%
Starting Capital 10,000
Ending Capital 10,922
Total Return 9.22%
Max Drawdown 7.81% (2012-10-02 - 2013-06-27)
DD > 10% Count 0
Annualized Std. Dev 4.82%
Sharpe Ratio 0.58

Has the PP ever performed worse than 2.98% CAGR over any 3 year period (not calendar years, but any 3 year period)?
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Re: Worst 3 year PP performance ever?

Post by barrett » Mon Jun 08, 2015 12:47 pm

jason wrote: Has the PP ever performed worse than 2.98% CAGR over any 3 year period (not calendar years, but any 3 year period)?
Sure. Remember that the three-year period you gave is still positive in real terms. Assuming that we are only interested in real terms, it was worse 1999-2001 and 2000-2002. Also 1981-1983. Some other three year-periods are also well within range of what you are talking about - and probably worse - depending on what inflation data you use, obviously. I know you said that you weren't talking about calendar years but that's a quick answer with the data I am looking at.
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Re: Worst 3 year PP performance ever?

Post by PP67 » Mon Jun 08, 2015 1:04 pm

As I have mentioned before, if I had the programming prowess of Peak2Trough or many others on this forum, I would develop a program (like Peak2Trough) that you could put your start date and let it show you how your returns for that time period rank with similar time periods over the last 42 years...  That could be very enlightening...

There have been a few rolling average plots posted here in the past but I don't specifically remember a 3yr rolling average but that would give you a much better idea of how your PP investment compares with past history...
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Re: Worst 3 year PP performance ever?

Post by Tyler » Mon Jun 08, 2015 1:53 pm

Having a few rolling years of real returns under 3% a year is nothing unusual.  Just count over three squares from the original diagonal below.  By my calculations, the worst 3-year (calendar) period was between 1999 and 2001, where the portfolio had a real CAGR of -0.37%.

[img width=600]http://i57.tinypic.com/fciird.jpg[/img]

And of course, it's always good to keep perspective.

[img width=600]http://i57.tinypic.com/11bn0jd.jpg[/img]

More info here:  http://gyroscopicinvesting.com/forum/pe ... ic-graphic
Last edited by Tyler on Mon Jun 08, 2015 2:21 pm, edited 1 time in total.
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Re: Worst 3 year PP performance ever?

Post by Tyler » Mon Jun 08, 2015 2:49 pm

Here's another way to visualize the same data above.

[img width=600]http://i61.tinypic.com/156wzgo.jpg[/img]

Multi-year negative returns are rare but do happen.  Note how consistent the compound results get after the first 5 years.  Current short-term returns are nothing out of the ordinary. 

The requisite perspective:

[img width=600]http://i58.tinypic.com/21l8i2h.jpg[/img]
Last edited by Tyler on Mon Jun 08, 2015 3:00 pm, edited 1 time in total.
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Re: Worst 3 year PP performance ever?

Post by Pointedstick » Mon Jun 08, 2015 3:51 pm

Beautiful data as usual, Tyler. It might be instructive to make some for a few typical "conservative" Boglehead-type portfolios as well, since very few people hold 100% stocks.
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Re: Worst 3 year PP performance ever?

Post by Tyler » Mon Jun 08, 2015 4:07 pm

Thanks!  The original charts were quite labor intensive to generate, but I've been working on automating the system to make portfolio experimentation practical.  I'll let you know when I get that up and running.

In the meantime, the board link above (look for rickb's posts) offers some general insight into how bonds affect the stock chart.  The short story is that they tend to mute the highs and lows but do not necessarily alter the overall pattern. 
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Re: Worst 3 year PP performance ever?

Post by Pet Hog » Mon Jun 08, 2015 4:09 pm

Beautiful new charts, Tyler.  Would it be too much work to add a new column for the PP performance in 2014?  Craig wrote about that here:  +9.1 or +8.9% return depending on how cash was invested.

Now you've got me wondering, does "invested in 1972, withdrawn in 2013" mean invested on 12/31/1972 and withdrawn on 12/31/2013; or invested 1/1/1972, withdrawn 1/1/2013; or invested 12/31/1971, withdrawn 12/31/2012?  Or something else?

Pointedstick, do you mean something like this?
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Re: Worst 3 year PP performance ever?

Post by barrett » Mon Jun 08, 2015 4:12 pm

Tyler wrote: Here's another way to visualize the same data above.

[img width=600]http://i61.tinypic.com/156wzgo.jpg[/img]

Multi-year negative returns are rare but do happen.  Note how consistent the compound results get after the first 5 years.  Current short-term returns are nothing out of the ordinary. 
Tyler,

Just to be extra clear, ALL that gray/beige space to the right represents real returns between 3% and 7%, correct?

Also, thanks for reformatting the data. I always think I am pretty good at figuring out what I am looking at but having everything set up this way sure makes it easier to compare the different time periods.

Thank you so much!
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Re: Worst 3 year PP performance ever?

Post by Tyler » Mon Jun 08, 2015 4:22 pm

@PetHog: Think of each data point as a snapshot on Jan 1st of each year.  So invested Jan 1st 1972 and withdrawn Jan 1st 1973.  This way, the first column reflects the real return for the initial investment year.  I understand it's a little confusing on the surface, but the "years held" in the later charts should be clear.  I plan to update the data once I get my automation projects done -- it will make it a lot easier.

@Barrett: Yes, all of the gray/beige space is for real CAGR returns between 3 and 7%.  Stocks eventually get to that same sweet spot over a long enough timeframe.  The PP just settles in faster.
Last edited by Tyler on Mon Jun 08, 2015 4:26 pm, edited 1 time in total.
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Re: Worst 3 year PP performance ever?

Post by Pet Hog » Mon Jun 08, 2015 4:51 pm

Tyler wrote: @PetHog: Think of each data point as a snapshot on Jan 1st of each year.  So invested Jan 1st 1972 and withdrawn Jan 1st 1973.  This way, the first column reflects the real return for the initial investment year.  I understand it's a little confusing on the surface, but the "years held" in the later charts should be clear.  I plan to update the data once I get my automation projects done -- it will make it a lot easier.
Tyler, I get that you are talking about "the return in 1972," but that means investing after the market closed on Dec 31, 1971 (or, if you like, before it opened on Jan 1, 1972), and then selling similarly on Dec 31st, 1972.  So your numbers for "buy 1972, sell 1973" are the year-end data for 1971/1972.  Note from the chart in this post that started it all:  the investment was made on the last day of the year.  So the formatting in your chart is off by a year from that one?

One more related question: The final row in your latest chart is for investing in 2003 and holding for 10 years.  I guess you would say it means, "buy on Jan 1, 2003, and sell on Jan 1, 2013."  If so, could you add two new rows of data?

Once again, thanks for posting these charts.  They are extremely informative.
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Re: Worst 3 year PP performance ever?

Post by Tyler » Mon Jun 08, 2015 5:15 pm

The Dec 31st vs Jan 1st distinction shouldn't really affect results, but I see what you mean about potential shifted years when directly comparing the two charts.  I'll have to study that.

Good catch!  I'll make sure any future work is clear, consistent, and complete.
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