The Reason to Quit PP

General Discussion on the Permanent Portfolio Strategy

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ochotona
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Re: The Reason to Quit PP

Post by ochotona » Thu Sep 24, 2015 6:18 pm

http://www.advisorperspectives.com/dsho ... erages.php

Yes, it's not PP. So, why did anyone here even ask about it? Y'all might as well be Wahabis asking how bacon tastes.
Last edited by ochotona on Thu Sep 24, 2015 6:23 pm, edited 1 time in total.
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Re: The Reason to Quit PP

Post by dualstow » Thu Sep 24, 2015 8:45 pm

ochotona wrote: Yes, it's not PP. So, why did anyone here even ask about it? Y'all might as well be Wahabis asking how bacon tastes.
I always wonder if Wahabis eat wasabi.
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Re: The Reason to Quit PP

Post by Cortopassi » Thu Sep 24, 2015 8:51 pm

Meb Faber, Ivy Portfolio, I certainly looked at that at the same time as the PP.  Quantitative Approach to Tactical Asset Allocation and its comparison and tweaks to the PP.

http://gestaltu.blogspot.com/2012/08/pe ... rt-ii.html

Here was a good discussion on this forum that came up related to this:

http://gyroscopicinvesting.com/forum/ot ... ation'/12/

And it reminded me that the reason I did not do it is I did not want to deal with potentially likely more trading and watching moving averages.
But what do I know?
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Re: The Reason to Quit PP

Post by Kbg » Thu Sep 24, 2015 9:40 pm

This is only an 11 year backtest so caveat emptor...but here is a way to get most if not all the benefits of PP, probably beat the overall performance, and it will likely continue to work into the future. Of course, past returns are no guarantee of future performance.

1. At the first of each month check the previous 3 months' returns
2. Buy the top 3 by return and allocate 33.3% each
- To buy, the asset's return must have been positive over the prior 3 mo period
- If not, substitute with SHY or your favorite STT vehicle
- Thus, you could have 100%, 66.67%, 33.33% or 0% allocated to SHY

Since 2005:

Traditional PP: 5.37% CAGR/-15.51% DD (annual rebalance)
Absolute MO, Top 3 PP: 8.75% CAGR/-11.83% DD

Since 2012 this version has under performed the traditional PP 1.68 vs 1.05% and 8.76 vs. 10.72%DD.

Interestingly if you happen to follow my VP PP posts, from 2012 a full up 3xETF version of the above returned 12.79/-19.87% DD.

Limiting the 3xETF allocation to 11.11% vice 33.33% the stats are 4.39/-6.86 DD.

Both are amazing to me but the leveraged scaled down to "normal" rotation version has 4x the returns with only 2/3rds the DD as the standard rotation version from 2012. It also trashed the standard PP with less volatility (portfolio NOT individual asset).

Hint: The leveraged results are truly non-intuitive.

Best part of all perhaps...you don't have to debate holding gold or LTTs or equities with yourself. If they are "on"/we are in that macro environment they are "in." If not, they aren't.
Last edited by Kbg on Thu Sep 24, 2015 9:56 pm, edited 1 time in total.
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Re: The Reason to Quit PP

Post by mathjak107 » Fri Sep 25, 2015 4:48 am

iwealth wrote:
mathjak107 wrote: that is because you are confusing volatility with losses and gains .
the pp is less volatile . but that does not mean at times it's losses won't be greater since other models develop bigger cushions from which they fall .
as i say , i don't give a hoot about peaks and valleys . if the  volatility matches my comfort level  that is all i care about in that regard . all the rest is about whether i am meeting my goals AND EXPECTATIONS FOR THAT ALLOCATION .
Quite a response to the simple and factual assertion that the PP has outperformed the S&P500 YTD. Another barrage of random statistics pertaining to a bunch of investment newsletter models that nobody here uses concluded by calling the original poster confused. Yes, there will always be some portfolio allocation performing better than another portfolio allocation. Got it, everyone's got it.

You are so dug in to your position that you can't even admit gold performed admirably during the financial crisis despite more than tripling from 2005 (start of the housing downturn) through 2011. Instead you choose to focus on bonds performing better for full-year 2008 and that gold is down 40% from the 2011 peak. True and true, but neither of those facts detracts from the incredible boost gold provided to portfolios during that 6-year timeframe which of course was captured by PP investors via rebalancing.
gold will always have short term moves based on the dollar  not crises unless inflationary ...

at the height of the financial crises gold actually fell  16% in 2008  but it ended up positive for the year . so , no golds response to the crises was pretty tepid but that is because the dollar was up 18%

in 2003-2007 the dollar was weak losing 25%  so gold made a nice move based on the dollar .


2009-2011 the dollar lost 18% so gold went up .  but the rise  , like nasdaq during the dot coms was way out of proportion and was just based on the bigger fool theory .


since the dollar has strengthened gold has fallen barely responding to any of todays events . .unless we have high inflation gold will not respond to  world news much . only changes in the dollar will move it .

you will see short term fluctuations for all sorts of reasons including speculation . yesterdays big 24 dollar up move shows 1/2 of it gone in over night trading this morning .  .


there needs to be a basis for sustained moves to hold . with the fed still under its own inflation mandate and the  dollar to strong  a basis for a move in gold seems pretty far off .
Last edited by mathjak107 on Fri Sep 25, 2015 5:23 am, edited 1 time in total.
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Re: The Reason to Quit PP

Post by iwealth » Fri Sep 25, 2015 11:39 am

mathjak107 wrote: gold will always have short term moves based on the dollar  not crises unless inflationary ...
Does this really matter? If gold responds to the dollar and the dollar responds to a crisis, what difference does it make? You still get the desired response.
at the height of the financial crises gold actually fell  16% in 2008  but it ended up positive for the year . so , no golds response to the crises was pretty tepid but that is because the dollar was up 18%
Even bonds didn't respond strongly until November of 2008 after SPY had already plummeted 50%. Nothing really escaped the wrath of September/October 2008.
in 2003-2007 the dollar was weak losing 25%  so gold made a nice move based on the dollar .
2009-2011 the dollar lost 18% so gold went up .  but the rise  , like nasdaq during the dot coms was way out of proportion and was just based on the bigger fool theory .
So from 2009-2011 the dollar was up 18% and gold doubled. It's a stretch to credit 100% of gold's rise to dollar weakness. Not saying it didn't help but there was more at play there. And the bigger fool theory provides opportunities to rebalance out of spikes in either direction. I don't think there are many buy-and-hold PP investors. Granted, if you started your PP at the gold peak, that was unfortunate. Perhaps it is the type of portfolio that truly needs to be dollar cost averaged into over the course of time.
since the dollar has strengthened gold has fallen barely responding to any of todays events . .unless we have high inflation gold will not respond to  world news much . only changes in the dollar will move it .
What recent events have actually posed a threat to our banking systems or currency? What's happened in the world that's truly scary as of late? Not much if you ask me. Things are pretty tepid out there. Gold seems to be doing exactly what one would expect it to do in this environment. And it's a lousy environment for gold, don't get me wrong.
you will see short term fluctuations for all sorts of reasons including speculation . yesterdays big 24 dollar up move shows 1/2 of it gone in over night trading this morning .  .
I can't form opinions based on gold being up $20 one day and then down $7 the next. It's just noise. Look at the S&P 500 lately if you want to see wild swings in each direction. And feel free to discuss the irrelevance of those moves to your decision to hold stocks.
there needs to be a basis for sustained moves to hold . with the fed still under its own inflation mandate and the  dollar to strong  a basis for a move in gold seems pretty far off .
Agreed 100%. If anything the sustained move should continue down. Anyway, I don't think we're really arguing about anything here. You don't like gold. I think there's a place for it in a risk-parity portfolio like the PP. That's about it.
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Re: The Reason to Quit PP

Post by mathjak107 » Fri Sep 25, 2015 1:13 pm

actually yes it does matter if gold only responds  to crisis when the dollar is weak or we have high inflation  because as bernstein pointed out , the flaw in the pp  is committing  equal  amounts of  money to anything but equal chances of outcomes playing out .

so this is why i think if harry was alive today we would see some fine tuning  and revisions possibly with gold limited to no more than a 10% stake  which to me makes sense .  betting 25% on equity's and 25% on gold to me just seems  to be a pretty big speculation on gold .
Last edited by mathjak107 on Fri Sep 25, 2015 1:17 pm, edited 1 time in total.
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Re: The Reason to Quit PP

Post by Pointedstick » Fri Sep 25, 2015 1:17 pm

mathjak107 wrote: actually yes it does matter if gold only responds  to crisis when the dollar is weak or we have high inflation  because as bernstein pointed out , the flaw in the pp  is committing  equal  amounts of  money to anything but equal chances of outcomes playing out .

so this is why i think if harry was alive today we would see some fine tuning  and revisions possibly with gold limited to no more than a 10% stake  which to me makes sense .
Are you sure that's actually what harry Browne would do? Or is that just what you would do?
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Re: The Reason to Quit PP

Post by mathjak107 » Fri Sep 25, 2015 1:19 pm

what does the words "i think "  mean to you
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Re: The Reason to Quit PP

Post by AdamA » Fri Sep 25, 2015 1:38 pm

mathjak107 wrote: actually yes it does matter if gold only responds  to crisis when the dollar is weak or we have high inflation  because as bernstein pointed out , the flaw in the pp  is committing  equal  amounts of  money to anything but equal chances of outcomes playing out .
But that "flaw" has never really caused a problem for the PP.
so this is why i think if harry was alive today we would see some fine tuning  and revisions possibly with gold limited to no more than a 10% stake  which to me makes sense .  betting 25% on equity's and 25% on gold to me just seems  to be a pretty big speculation on gold .
What has changed in the world over the past ten years to make you say that?
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Re: The Reason to Quit PP

Post by LC475 » Fri Sep 25, 2015 1:47 pm

There is no way Mr. Browne would recommend a reduction in the gold allocation.  I believe that to a large extent the Permanent Portfolio is a way of getting people to hold gold and be able to keep holding it during a potentially long period of low returns or losses, when otherwise they'd bail.

Harry Browne thought there was and is a very real risk of high inflation coming to the dollar.  Eventually.  He just didn't think it would happen immediately.

25% is a good amount.
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Re: The Reason to Quit PP

Post by mathjak107 » Fri Sep 25, 2015 1:48 pm

keep in mind harry was a gold bug .

in 40 years gold has returned less then a t-bill rolled over . i doubt that was herry's vision  sure it had some periods of time where it out performed but it's ability to  grow money over long periods of time has usually been far and away been bested by other assets .


basically  gold tracked inflation , which while a poor money maker  is okay,  but once you figure in storage costs and insurance or fund fees like gld  you actually  lagged inflation and always will because of the costs .


so betting as much on that fact as you would on equity's , which  more often than not over 20 years or longer  has  produced  a lot more  money over a lot more time frames , seems to me to be a big imbalance .
Last edited by mathjak107 on Sat Sep 26, 2015 6:00 am, edited 1 time in total.
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