The Permanent Portfolio Jr.

[MachineGhost]

I'll keep this short.  For those that cannot tolerate the risk of the Permanent Portfolio, I've crunched the numbers over the past 100 years or so to come up with a substantially less risky version that still accomplishes the goal of wealth preservation and beating CPI inflation.  Ta da:

80% 5-Year Ladder (CD's, Treasuries)
10% Stocks
10% Gold

Yep, thats literally it.  You can then sleep like a baby at night.  No need to worry about gut quenching 25% maximum drawdowns (either real or nominal depending on who you believe).

[Xan]

What rebalancing bands do you use?

How do you go back 100 years across the line where gold was tied to the USD and come up with anything meaningful?

[MachineGhost]

What rebalancing bands do you use?

How do you go back 100 years across the line where gold was tied to the USD and come up with anything meaningful?

I used annual rebalancing.  I can't remember, but I think I used gold priced in GBP converted to USD to get earlier prices.  Or just silver.  Or real estate.  It doesn't really matter.  Birds of a feather flock together.

However, real estate is a consistent underperformer.

[dualstow]

Have you seen Tyler's new charts during your hiatus?
portfoliocharts.com
You can plug your jr in there.

[MachineGhost]

Have you seen Tyler's new charts during your hiatus?
portfoliocharts.com
You can plug your jr in there.

Oh wow, that's pretty darn cool!

80% into Short Term Treasury is close enough, but of course in the real world, CD rates were higher and duration exactly 2.93 years.

T-Bills top out at 12 months, so technically it would be a T-Bill + T-Note ladder.

It looks like starting this when stocks are overvalued is a bad idea, at least for 10 years out.

[dutchtraffic]

Tbills are riskier than gold.

[Reub]

Cd's aren't.

[dutchtraffic]

Cd's aren't.

They are.

The govt. might "guarantee" them, but what is that worth....?

[mathjak107]

I'll keep this short.  For those that cannot tolerate the risk of the Permanent Portfolio, I've crunched the numbers over the past 100 years or so to come up with a substantially less risky version that still accomplishes the goal of wealth preservation and beating CPI inflation.  Ta da:

80% 5-Year Ladder (CD's, Treasuries)
10% Stocks
10% Gold

Yep, thats literally it.  You can then sleep like a baby at night.  No need to worry about gut quenching 25% maximum drawdowns (either real or nominal depending on who you believe).

many years ago i read a book about the armadillo investing strategy . it was 80 % 5 year treasury's ,10% GOLD , 10% STOCK .

5 year cd's had a good run because of falling rates . you were always a head of the curve for most of history the last 40 years .  but with rates rising , be careful , you will be behind the curve .

[dualstow]

Was it by Richard C. Young? 1 of 2 reviews say the focus was on dividends. (?)

[mathjak107]

yes that was the author  . he was pushing his book around the same time i discovered harry brown .

[Reub]

Who knew that Machine Ghost was an armadillo?

[buddtholomew]

Who knew interest rates were rising?

[MachineGhost]

5 year cd's had a good run because of falling rates . you were always a head of the curve for most of history the last 40 years .  but with rates rising , be careful , you will be behind the curve .

I backtested it through the 40-year bond bear market.  Do not go past 3-year weighted maturity if you want to come out alive.

[MachineGhost]

Who knew that Machine Ghost was an armadillo?

I am but a humble armadillo...

[img width=800]http://i.imgur.com/rG85Arr.jpg[/img]

So much for my "original" idea, though!  But I made a modification at least!

[k9]

According to this source https://books.google.fr/books?id=OgUEAA ... gy&f=false

Young's Armadillo strategy is 20% treasuries, 10% gold, 70% stocks, so quite different from MG's allocation.