All PP assets trending down: When has this happened before? Kinda scary...

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Sam Brazil
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All PP assets trending down: When has this happened before? Kinda scary...

Post by Sam Brazil » Mon Sep 07, 2015 10:07 pm

I've only known about the PP for a few years and have been keeping an eye on the three PP assets the whole time. Until the past couple weeks, I've never seen all three down simultaneously (defined as below their 200 day moving averages). Usually it has been the case that if one was way down, another would be up. That's kind of the whole idea behind the PP.

I know all being down together is a theoretical possibility with the PP because the assets all have low correlation with each other, not negative correlation, so it's statistically expected that all 3 being down at the same time will happen eventually.

But zooming out, economically, what does this mean? I suppose the combination of PP assets all heading down together means the markets are expecting deflation? Combine this with China having a massive crash, the US about to raise interest rates and Europe just getting past the Greece crisis (which I don't believe is over). Is this the perfect deflation storm?

I'd love to find some historical precedence for what's happening. Does anyone have data that shows when this has happened before and what happened next? Does history give us any reason to believe this is *not* signaling high risk of a massive crash + deflation?
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mathjak107
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by mathjak107 » Tue Sep 08, 2015 3:08 am

while you may find some stagflation period or tight money period the fact is don't bother . these times never happened before ever .

at no time did we have zero interest rates , such high valuations in equity's and bond rates being so low and near the end of the interest rate range before .

these are very unconventional times for ALL  investing and is uncharted .

my opinion is all anyone is doing with charts of the past is driving and looking in the rear view mirror  and may be  developing a false sense of feeling good .

the pp uses opposite asset classes as insurance coverage and needs the ability to have strong trends in one asset class to pay the cost of that insurance .

but with all asset classes  being at best  part time employed or being unemployed like gold  there is no money to eat because the insurance protection is taking it all .

the fact is to date we  never had a claim  ever  so the key going forward may be  to consider the fact that having sooooo much insurance may be way to costly and reduce the coverage a bit .

just something to do your own homework on and keep in the back of your mind when we have those big up days and equity's try to run with the ball only to have the pp end in the red .

eventually there is a good chance once again  as always equity's will be the first one out of the gate  for the real recovery but the pp may be spending his paycheck on more insurance instead of food .
Last edited by mathjak107 on Tue Sep 08, 2015 3:29 am, edited 1 time in total.
gizmo_rat
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by gizmo_rat » Tue Sep 08, 2015 5:10 am

mathjak107 wrote: my opinion is all anyone is doing with charts of the past is driving and looking in the rear view mirror  and may be  developing a false sense of feeling good .
I'm pretty sure that the only claims I read about the PP are it's based on a macro model that has yet to be proven false. 
mathjak107 wrote: eventually there is a good chance once again  as always equity's will be the first one out of the gate  for the real recovery ...
Looking backwards that would probably be true :)
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by mathjak107 » Tue Sep 08, 2015 5:23 am

i agree on both counts . but more and more  "to me" it is appearing that the macro model  may be in a new time frame that like most strategy's , eventually  reach their waterloo when things change just enough to make what worked in the past no longer effective .

i think the situation  with the pp requires careful watching going forward and forget the past it may not apply anymore .

if you see the pp can't get traction to pull itself out you may have to rethink things and cancel some of that insurance in order to keep eating . .
Last edited by mathjak107 on Tue Sep 08, 2015 5:28 am, edited 1 time in total.
Sam Brazil
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by Sam Brazil » Tue Sep 08, 2015 12:15 pm

IMO, if there is a problem with the PP, I don't think it's because the PP's underlying strategy has become obsolete. The reason is that a strategy's lifespan is a function of its simplicity and years of successful history. You really can't beat PP on those fronts. There's also nothing that has logically changed about the world to where equities, gold, bonds and cash no longer cover all major economic conditions. Some say gold is obsolete, but central banks still hold hundreds of tons of it and people still buy tons of it for jewelry, so I don't buy that.

However, like someone else pointed out, times are unprecedented. Who knows how those asset classes will respond? But do QE and ZIRP really change anything fundamentally? Or do they just bias the future toward certain economic conditions? I have to assume the latter. I don't give central banks enough credit that I think they can fundamentally change economics.

If we're about to enter a bear market, all of a sudden the PP starts to look a lot better. All the disgruntlement with the PP has coincided with one of the longest equity bull market stretches in history, after all.

The irony is that this *may* be one of the best times in history to enter the PP since, if it's not permanently broken, and I don't believe it is, then this is would be an opportunity to capture the PP below its long term mean performance and enjoy the reversion.
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by Sam Brazil » Tue Sep 08, 2015 12:17 pm

mathjak107 wrote:my opinion is all anyone is doing with charts of the past is driving and looking in the rear view mirror  and may be  developing a false sense of feeling good .
You just have to not stretch the utility of looking into the past. Future and past correlation isn't 1, but it's not 0 either.
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mathjak107
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by mathjak107 » Tue Sep 08, 2015 12:41 pm

all i know is ii just looked and it is typical of every other time . i show the pp down and stocks up 300 . the pp once again gets stuck in the muck by gold and long term treasury's bogging it down in the mud turning equity's efforts to crap . .
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buddtholomew
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by buddtholomew » Tue Sep 08, 2015 1:19 pm

mathjak107 wrote: all i know is ii just looked and it is typical of every other time . i show the pp down and stocks up 300 . the pp once again gets stuck in the muck by gold and long term treasury's bogging it down in the mud turning equity's efforts to crap . .
Amen to that.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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AdamA
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by AdamA » Tue Sep 08, 2015 4:48 pm

mathjak107 wrote: all i know is ii just looked and it is typical of every other time . i show the pp down and stocks up 300 .
Isn't the S&P down close to 10% over the last 3 weeks or so?
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by mathjak107 » Tue Sep 08, 2015 5:12 pm

what the s&p  gave up were their gains  from a level the pp never got to so in comparison if you were invested since the 1st of the year you had a bigger cushion and merely gave back some of the gains  , ytd  it is now  just a point and a half  behind .  however many managed funds are up ytd .
Last edited by mathjak107 on Tue Sep 08, 2015 5:48 pm, edited 1 time in total.
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by buddtholomew » Tue Sep 08, 2015 5:58 pm

My personal YTD
BH 70/30: down 1.96%
PP: down 1.84%

Disclaimer - I bought equities during the recent correction in both portfolios. I feel like I have to be equity heavy to avoid losses in the PP.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: All PP assets trending down: When has this happened before? Kinda scary...

Post by mathjak107 » Tue Sep 08, 2015 6:13 pm

my 50/50 down 1.68% ytd  the pp i had owned and track down 2.42%
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