PSA: I now have a 3-year period with no gains

[Reub]

I'm not complaining about performance, but come on! Since 2009 aren't equities up 150-200%? Is the PP up anywhere close to that? Please let's not pretend that it's kicked any ass recently.

[Pointedstick]

I'm not complaining about performance, but come on! Since 2009 aren't equities up 150-200%? Is the PP up anywhere close to that? Please let's not pretend that it's kicked any ass recently.

But you wouldn't expect it to, right? The PP is not a 100% equity portfolio so obviously it will lag one. I've said it before and I'll say it again: it's not the portfolio that's killing people but the wild expectations. A lot of people seem to want equity returns with cash volatility.

[craigr]

I'm not complaining about performance, but come on! Since 2009 aren't equities up 150-200%? Is the PP up anywhere close to that? Please let's not pretend that it's kicked any ass recently.

etfreplay.com shows 7.9% in 2009 vs. 26.5% for 100% S&P 500.

In 2010 it was 14.5% vs. 15.1% for S&P500.

In 2011 it was 11.5% vs. 1.9% for S&P500

Etc.

Nothing out of the ordinary is going on and volatility in the portfolio is about 50% of 100% stocks. It is all period dependent on the returns and what an investor happened to get.

A stock heavy portfolio is going to outperform a non-stock heavy portfolio after the worst market crash in 40 years followed by a sharp Fed induced recovery. There is no surprise here, but who was willing to bet the family farm in January 2009 on all of that happening?

So unless investors are going to jump into their time machine back to 2009, and put 100% of their money at the bottom of the market crash, the entire debate is meaningless.

[dragoncar]

But they did go well out of their way to start a massive thread on the BH site. They convinced many Bogleheads to change their investment strategy. They did write a book promoting this strategy. And then for the most part they went away.

I think that's because there's just not that much to say about it. 

You can read the FAQs on Craig's blog and understand most of what you need to know.  The rest of the discussion is mostly for fun. 

I would, of course, be interested to hear if either of them saw a change in the financial universe at some point that would make them leave the PP, but I've seen nothing over the past 5 years to indicate anything like that has happened.

That's kinda what spurred my post to begin with.  From when mediumtex said "A rolling three year period of negative returns would make me open up the hood and take a look."  We are nearing that point.

See: https://www.bogleheads.org/forum/viewto ... &start=100

But apparently clocks in thunderstorms have always had three years of negative returns

[mathjak107]

but the 2-1/2% loss would be assuming it is 100% equity's correct ?  both are not 100% equity's .

even so 7.62% in the worst 15 year time frame we  have had is not to bad .    the sap 500 i think was less than 4%

as of last night the losses are not 2.50%

the growth and income model is down 1.44% ytd  and  the growth model is down only 1%  ytd not 2-1/2 . one good market day and both portfolio's  could be positive again .  so while yes they got hit harder they had a bigger cushion of gains to fall back with  as well as were pushed back up by the larger market gains acting on them .  that is an important  thing to consider when looking at the drops .  they may be from much higher levels of gains .

[mathjak107]

I haven't complained about the poor performance of the portfolio. I'm a big boy. I just wonder why people could be so involved with and dedicated to the PP and then just go away for months at a time. It just seems a little odd.

Well, it happened.

I don't know what else there is to say about that.

Sometimes other interests in your life pull your attention in other directions.  I'm no different than any other member in that regard.  Lots of people here come and go.  That's a good thing.  I think that not thinking about the PP or any investment topic for a while is good for people.

we should all just be happy there is a forum and kind of a support group here for those who need it .  even  though i am not a follower i find the forum a great benefit for discussions  . i always believe in understanding the other side  of things so regardless of who is contributing from above  the forums are a benefit to all and i think rather than complaining the brass isn't posting we should be happy for those who have a place to post .


misery loves company and having others who reinforce your view and make you feel better about your choice  is a powerful tool as it helps you stay the course .

right or wrong even a broken watch is right twice a day so sticking to your plan is important no matter what your strategy .

[mathjak107]

I'm not complaining about performance, but come on! Since 2009 aren't equities up 150-200%? Is the PP up anywhere close to that? Please let's not pretend that it's kicked any ass recently.

etfreplay.com shows 7.9% in 2009 vs. 26.5% for 100% S&P 500.

In 2010 it was 14.5% vs. 15.1% for S&P500.

In 2011 it was 11.5% vs. 1.9% for S&P500

Etc.

Nothing out of the ordinary is going on and volatility in the portfolio is about 50% of 100% stocks. It is all period dependent on the returns and what an investor happened to get.

A stock heavy portfolio is going to outperform a non-stock heavy portfolio after the worst market crash in 40 years followed by a sharp Fed induced recovery. There is no surprise here, but who was willing to bet the family farm in January 2009 on all of that happening?

So unless investors are going to jump into their time machine back to 2009, and put 100% of their money at the bottom of the market crash, the entire debate is meaningless.

if the times going forward really are different ,  then comparing all these charts of the past is useless and nothing more than driving and looking in the rear view mirror .

each time frame is just different enough that one day every trading system or strategy eventually  reaches a point  where what worked well in the past does not anymore . some just take a longer time than others to reach that point .

for the pp it may have taken a point where zero interest rates , high stock valuations and bonds that have little oomph left  on their own and depend more on a calamity and flight to safety rather  than the normal direction of rates in a long term  fall.  the fact gold responds to little at this point  and falls more than it goes up has created the perfect storm . the 4-wheel drive system of the pp may be so bogged down it can't move itself .


we really will not know for a while whether the pp reached a point where by its own design it buried itself and can't get out  because its own asset's are killing off the weaker pulls of the  growth engine's that  attempt to tow it  but right now that appears to be the case to me .  but to early to really tell for sure .

i just wouldn't use that rear view mirror to much and concentrate more on the road a head of me while i stayed the course with the pp at this stage as i would with any portfolio today . .


for those uncomfortable with what they see  there are other conservative options out there to run with , no reason to second guess yourself or need reassurance from some others  and then pick on them for not being there .

[dualstow]

...
From when mediumtex said "A rolling three year period of negative returns would make me open up the hood and take a look."  We are nearing that point.

See: https://www.bogleheads.org/forum/viewto ... &start=100

But apparently clocks in thunderstorms have always had three years of negative returns

Ah, thank you for posting that. I have long since misremembered that as "would make me leave."
'Open the hood and look' is milder.

[Jack Jones]

See: https://www.bogleheads.org/forum/viewto ... &start=100

@MediumTex: Is that the epic BH thread that you sometimes refer to?

[MediumTex]

See: https://www.bogleheads.org/forum/viewto ... &start=100

@MediumTex: Is that the epic BH thread that you sometimes refer to?

I think that is a shorter thread that came after the epic thread.

[dualstow]

The big one. 72 pages. https://www.bogleheads.org/forum/viewtopic.php?t=15434
It continues with Med Tex in October 2010 http://www.bogleheads.org/forum/viewtopic.php?t=61964

[Jack Jones]

The big one. 72 pages. https://www.bogleheads.org/forum/viewtopic.php?t=15434
It continues with Med Tex in October 2010 http://www.bogleheads.org/forum/viewtopic.php?t=61964

Thanks!

[AdamA]

That's kinda what spurred my post to begin with.  From when mediumtex said "A rolling three year period of negative returns would make me open up the hood and take a look."  We are nearing that point.

2014 returned like 12% on the PP.  Where are you getting this 3-year period of negative returns?

[sophie]

9.8% officially in 2014 I think.  It's 4.8% total over the last 36 months.  Not negative and possibly not even real return negative if you believe the CPI (see thread I'm about to start), but still discouraging in the face of the tremendous stock market gains.

May I remind everyone though, that judging the stock market performance from the 2009 nadir is quite misleading unless you happened to buy in at exactly that point.  Most of the bull market was about recovering from the 2008-9 crash.  If you bought in at the peak in 2007, you would have been in the red until 2013 - that's NEGATIVE RETURNS FOR 6 YEARS.  If you're thinking that a standard Boglehead 60/40 or similar wouldn't be that bad, think again.  The pictoral performance chart on my Vanguard account says that nominal investment returns with a target date fund were negative between September of 2008 and October of 2011.  Less bad, but still 4 years in the red.

If you believe the PP's fundamentals are no longer sound, that would be a reason to pull out.  Not sure if a 3 year period with lackluster returns should be the criteria though.  By that logic you would most definitely have jumped out of the stock market sometime around 2010-2011, and then you'd have missed the big rally that's gone on since then.

[PP67]

It's been tough even for the biggest and brightest...

http://www.zerohedge.com/news/2015-09-0 ... quarter-le


Bridgewater's 'All-Weather' Fund Goes Negative For 2015 After Risk-Parity's Worst Quarter Since Lehman


The $80 billion Bridgewater All Weather Fund, a risk-parity model managed by hedge fund titan Ray Dalio, was down 4.2% in August, according to Reuters citing two people familiar with the fund's performance. This leaves the fund down 3.76% for 2015 as the frameworks for these funds are forced mechanically to reposition as correlations and volatilities across asset classes break down. Just as we saw in the summer of 2013's Taper Tantrum, the last 2 weeks have seen 4 to 5 sigma swings in daily returns and 'generic' risk-parity funds have suffered the biggest 3-month losses since the financial crisis.

[MediumTex]

It's been tough even for the biggest and brightest...

http://www.zerohedge.com/news/2015-09-0 ... quarter-le


Bridgewater's 'All-Weather' Fund Goes Negative For 2015 After Risk-Parity's Worst Quarter Since Lehman


The $80 billion Bridgewater All Weather Fund, a risk-parity model managed by hedge fund titan Ray Dalio, was down 4.2% in August, according to Reuters citing two people familiar with the fund's performance. This leaves the fund down 3.76% for 2015 as the frameworks for these funds are forced mechanically to reposition as correlations and volatilities across asset classes break down. Just as we saw in the summer of 2013's Taper Tantrum, the last 2 weeks have seen 4 to 5 sigma swings in daily returns and 'generic' risk-parity funds have suffered the biggest 3-month losses since the financial crisis.

That makes me so happy to be using the PP.  It looks like YTD it's doing better than just about everything else.

[mathjak107]

bridgewater's is a special situation  , not really representative of a regular fund ..

the problem is they use risk parity to bet against markets and they bet to heavy against the markets  early on  so  going in to in august they never developed the cushion  more conventional funds had .
they lost 4.2 percent in August , posting a negative 3.76  return  . that means they had to be barely up prior to august while conventional funds were doing well .

i know my fidelity blue chip growth and , contra were  all up more than 8% -10% prior  so  while they lost ground they are all positive .

fidelity blue chip growth is up 2.36%  contra  up 1.50 .

[craigr]

Risk parity. Meh:

http://gyroscopicinvesting.com/forum/pe ... /#msg61780

My bet is on the simple HBPP:

1) Lower costs.
2) Simpler to setup and manage.
3) Fewer moving parts inside the asset classes.
4) No leverage.
5) Doesn't try to complicate things with dubious backwards looking volatility measures.

[mathjak107]

interesting read about them  and their risk parity use .  yeeeech , i will take a good ole fashioned fund any day

http://www.streetinsider.com/Hedge+Fund ... 67437.html

[sixdollars]

ONE single year (2013) makes up the entirety of the 2.6% CAGR difference. All of this angst over one year's worth of underperformance in a historic bull market. You read these threads and you'd think the PP was in the midst of a massive drawdown or something. Seriously, sixdollars quote is on the money. It's crazy in here.

I agree, but I think it's a case of expectations not matching up with reality. Right now, everything is treading water, and I think some people assumed that this should be the ideal condition for the PP, and, specifically, that the PP would zig when other things zagged, and on a daily basis, to boot! It's the same old case of wishing for a portfolio that only ever went up, never down. Now that it's going down, there's panic because this wasn't supposed to happen! It's just not realistic.

Yeah, and it's unfortunate that people jumped into the PP without realizing this.  Gumby stated something about this in the bogleheads forum, quoting John Chandler.

He was. However, he never believed in limiting yourself to a 12 month timeline when comparing investments.

John Chandler, who was instrumental in helping Harry Browne research the Permanent Portfolio, said the following about 12-month returns:

    JOHN CHANDLER: The world doesn't really work according to the calendar...A lot, a lot of harm has been done because of the calendar. And one of the harms is trying to make everything fit neatly into a 12 month, or four week, or seven day pattern. The idea of the Permanent Portfolio is is that it invests in asset classes, which respond differently in different economic conditions. The economic conditions that makes one thing goes down, is the same condition that makes another asset go up. But, here is the key and that is that it does not happen overnight. It does take time for these economic forces to take hold. And I rememember back in the seventies, early eighties when we were doing research on the Permanent Portfolio, we found periods as long as 18 months where the portfolio could lose money. But, now that was about the longest we found. Now bear in mind that this is not a promise. It's not a guarantee without — saying that with only 18 months it can work. I can simply say, during the periods when it was being tested. The prices... doing tests on the Permanent Portfolio and what would happen in the different situations over long, long, long periods of time — about 18 months is the maximum we found where the portfolio could lose money before the economic forces took hold and balanced the portfolio out.

[Reub]

Good to see you guys posting a little bit more often! 

[mathjak107]

"There’s nothing wrong with Harry’s portfolio—nothing at all—but there’s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."

-William J. Bernstein



bernsteins opinions and theory's change way to fast himself ,  he changes them far to much to take anything he says  for more than the moment .

first he was big on retiree's investing through retirement  using equity's  and bonds for their income ,  then he switched sides in his book the age of the investor .  now it was short term bonds , tips and a longevity annuity , equity's were only if you had extra money to inveast after essential expenses were covered  .  then he re-canted that  strategy for now  after another researcher pointed out that rates are just to damn low to make that an option .

i don't take bernstein's opinion on anything for more than the thought in his head at the moment .

[barrett]

Ah, interesting to know that about Bernstein. I only know of him from his oft-cited quote about PP followers chasing returns.

mathjak, I am only posting so early because I have jetlag and keep waking up at 4:00AM. Don't get too used to having someone to discuss investing with in the middle of the night!

[mathjak107]

you will rarely hear from me after 8pm  as i am falling asleep .

60 may be the new 40 but 9pm is the new midnight .  i am up so early every day , even retired .  been that way for decades .  by 7 am we are at the gym  daily .

headed to the bronx zoo later with the kids and grand kids .

[dualstow]

60 may be the new 40 but 9pm is the new midnight .