Why the PP is better in accumulation than you think

General Discussion on the Permanent Portfolio Strategy

Moderator: Global Moderator

User avatar
mathjak107
Executive Member
Executive Member
Posts: 3315
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Mon Oct 19, 2015 8:05 pm

another one with visions  ha ha ha ..

it isn't worth trying to simulate something because we just really do no know the answer .
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Mon Oct 19, 2015 8:06 pm

mathjak107 wrote: another one with visions  ha ha ha ..

it isn't worth trying to simulate something because we just really do no know the answer .
You're weird.  How is expecting the future to be exactly like the past any different than simulating?

In fact if you really believe that, then the PP is perfect for you because its all about not simulating or checking history.  Which I certainly don't agree with.
Last edited by MachineGhost on Mon Oct 19, 2015 8:08 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
Matthew19
Full Member
Full Member
Posts: 79
Joined: Fri May 29, 2015 9:50 pm

Re: Why the PP is better in accumulation than you think

Post by Matthew19 » Mon Oct 19, 2015 9:50 pm

I enjoyed this forum much more before you came along mathjak107.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 3315
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Oct 20, 2015 3:11 am

thank you .

i guess it is as they say , ignorance is bliss .    .  there have been many issues here that were just  not accurate before i came along .  sorry if i had to bring along some facts and figures that showed the error in a lot of thinking here and ruined the fact many of you  were blindly  believing the bull-sh%t you handed each other  like some kind of support group .

hey if you guys don't want me spoiling the party  i will just leave the forum .    you can just close your eyes to educating yourselves and keep on believing what you want .

there is nothing wrong with the pp as it is if that is the plan you think will work for you .

but what is wrong is the attempts to make the pp in to things it was never designed for by cherry picking certain time frames or comparing to other portfolios during time frames  that were not the best time frames for that mix of investments    , or even trying to show it was as good a growth vehicle as anything else and then selecting perfect time frames or bending them .  we have folks trying to create data that does not exist based on what  they think would have happened with other assets like silver , like this discussion here on safe withdrawal rates .

of course if you do this with conventional portfolio's you are data mining  or get the how do you know it will do that in the future .  but when select data is pulled out or created out of the air  for the pp suddenly it is ok .

perhaps those who drink the kool-aid don't see this being done but this forum is filled with these attempts .

just accept the pp for what it is without all this mental masturbation patting each other on the back  and trying to constantly make comparisons turning it in to a support group rather then something educational with an exchange of information from both sides . .


like i said , you guys don't want to hear the negatives or inaccuracy's , fine i will go . just close yourself off and keep congratulating each other .
Last edited by mathjak107 on Tue Oct 20, 2015 7:49 am, edited 1 time in total.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 3315
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Oct 20, 2015 3:14 am

MachineGhost wrote:
mathjak107 wrote: another one with visions  ha ha ha ..

it isn't worth trying to simulate something because we just really do no know the answer .
You're weird.  How is expecting the future to be exactly like the past any different than simulating?

In fact if you really believe that, then the PP is perfect for you because its all about not simulating or checking history.  Which I certainly don't agree with.
planning around remote fliers with the same weight as the most likely is just not a good idea  , that is my point .

thinking this time is different has been the most costliest thinking  in the financial world , john templton was so right about that .
Last edited by mathjak107 on Tue Oct 20, 2015 3:16 am, edited 1 time in total.
dragoncar
Executive Member
Executive Member
Posts: 1111
Joined: Wed Aug 10, 2011 7:23 pm

Re: Why the PP is better in accumulation than you think

Post by dragoncar » Tue Oct 20, 2015 4:23 am

Really cool tyler.

So does anyone here want some pizza rolls?

Leave a message on this webzone and I'll send you pizza roll.
Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Why the PP is better in accumulation than you think

Post by Libertarian666 » Tue Oct 20, 2015 9:42 am

Matthew19 wrote: I enjoyed this forum much more before you came along mathjak107.
In that case, I recommend setting your profile to ignore him. That's what I have done.
Reub
Executive Member
Executive Member
Posts: 3158
Joined: Fri Jan 21, 2011 5:44 pm

Re: Why the PP is better in accumulation than you think

Post by Reub » Tue Oct 20, 2015 10:12 am

Why is true diversity of opinion such an anathema in here? Although I don't always agree with Mr. mathjak he adds a lot to these threads and makes one question himself, which is a good thing.

I just feel that Mr. mathjak should understand that he isn't an expert as his one week entrance and exit from the PP proves.
User avatar
Xan
Administrator
Administrator
Posts: 3264
Joined: Tue Mar 13, 2012 1:51 pm

Re: Why the PP is better in accumulation than you think

Post by Xan » Tue Oct 20, 2015 10:40 am

Reub wrote: Why is true diversity of opinion such an anathema in here? Although I don't always agree with Mr. mathjak he adds a lot to these threads and makes one question himself, which is a good thing.

I just feel that Mr. mathjak should understand that he isn't an expert as his one week entrance and exit from the PP proves.
If by "adds a lot to these threads" you mean "adds the same thing over and over and over to every single thread", then agreed.
User avatar
dualstow
Executive Member
Executive Member
Posts: 11567
Joined: Wed Oct 27, 2010 10:18 am
Contact:

Re: Why the PP is better in accumulation than you think

Post by dualstow » Tue Oct 20, 2015 11:42 am

This is a great thread. Carry on, guys.
https://www.city-journal.org/journalism-advocacy-over-reporting
User avatar
Tyler
Executive Member
Executive Member
Posts: 1970
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Why the PP is better in accumulation than you think

Post by Tyler » Tue Oct 20, 2015 12:41 pm

mathjak107 wrote: i guess it is as they say , ignorance is bliss .    .  there have been many issues here that were just  not accurate before i came along .  sorry if i had to bring along some facts and figures that showed the error in a lot of thinking here and ruined the fact many of you  were blindly  believing the bull-sh%t you handed each other  like some kind of support group .

...perhaps those who drink the kool-aid don't see this being done but this forum is filled with these attempts .
Open discussion of diverse perspectives is great.  Repeating the same complaints even after others have thoughtfully replied, falsely accusing people of fabricating and cherry picking data, calling people ignorant, claiming intellectual superiority, HITTING THE CAPS LOCK, saying the entire discussion is a waste of time, and generally filibustering all topics you do not personally agree with is anything but an open discussion.  And all of that is in this thread alone.  It's not a matter of drinking the kool aid.  It's an issue of mutual respect. 

I admit I'm kinda disappointed that a topic I spent a lot of time on has been overrun by chest beating.  That's generally not how this board has historically operated, and hopefully it's only temporary.  If anyone offers a rebuttal, that's fine.  I've said my peace and refuse to contribute to further arguments.

In the meantime -- I'll take one of those pizza rolls, Dragoncar.  http://totinos.tumblr.com/
Last edited by Tyler on Tue Oct 20, 2015 12:50 pm, edited 1 time in total.
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Oct 20, 2015 3:22 pm

mathjak107 wrote: planning around remote fliers with the same weight as the most likely is just not a good idea  , that is my point .
I don't understand what you said here.
mathjak107 wrote: thinking this time is different has been the most costliest thinking  in the financial world , john templton was so right about that .
That's true, but it goes both ways.... both for extremes in the current moment as well as historical extremes that "can't possibly be exceeded" in the future.  All we have to base our portfolio design on is history, simulation, probabilities and deep thinking.  A portfolio design is not going to break just because you substitute the point-in-time actual reality that silver was practical legal gold if it is a truly robust one.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Oct 20, 2015 3:24 pm

Reub wrote: Why is true diversity of opinion such an anathema in here? Although I don't always agree with Mr. mathjak he adds a lot to these threads and makes one question himself, which is a good thing.
Ditto.  I've learned a lot from mathjak about retirement concepts that I never really paid attention too before as well as the proven power of discipline.  Talk is cheap, but mathjak has walked the talk.  So he deserves some respect at the very least.
Last edited by MachineGhost on Tue Oct 20, 2015 3:39 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Oct 20, 2015 3:27 pm

So here is the bottom line for 1965+ as far as inflation and 4% SWR adjusted returns are for several portfolios (with all the usual caveats about gold we don't need to rehash again):
Portfolio Real MaxDD
Browne PP -49.35%
Risk Parity PP -58.70%
50/50 10yr -59.46%
Wellesley + 15% Gold -58.38%
100% Stocks -54.34% (it hit -60.69% in 1932, -59.42% in 2008)
Without the gold, Wellesley hits a -74.26% real MaxDD.

I don't know what a safe cushion is in real terms, but -74.26% MaxDD requires nearly an 800% gain just to get back to breakeven.  I suggest -50% is more than enough for anybody with a pulse.

As I've suspected, the 35% to T-Bonds in the Risk Parity PP is a very bad idea in a high inflation period.  But mean variance optimization is not designed to handle portfolio risk in terms of maximum drawdown, only volatility.
Last edited by MachineGhost on Tue Oct 20, 2015 4:55 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
Dmilligan
Junior Member
Junior Member
Posts: 13
Joined: Wed Dec 19, 2012 7:49 am

Re: Why the PP is better in accumulation than you think

Post by Dmilligan » Tue Oct 20, 2015 3:46 pm

MachineGhost wrote: BTW, the Browne PP survives as well, generating .43% real CAGR until 2014, assuming you held junk silver coins from 1965 to 1967 then switched to gold in 1968.  0% is at a 4.45% SWR.
MG, did you happen to also calculate the maximum percentage withdrawal that would have sustained the initial principal when adjusted for inflation? If so, I'd be curious to learn that number as a comparable to the 40 year number on Tyler's site.
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Oct 20, 2015 4:00 pm

Dmilligan wrote:
MachineGhost wrote: BTW, the Browne PP survives as well, generating .43% real CAGR until 2014, assuming you held junk silver coins from 1965 to 1967 then switched to gold in 1968.  0% is at a 4.45% SWR.
MG, did you happen to also calculate the maximum percentage withdrawal that would have sustained the initial principal when adjusted for inflation? If so, I'd be curious to learn that number as a comparable to the 40 year number on Tyler's site.
Do you mean the inflation-adjusted value each year of the initial starting balance as the lower threshold for each year's total portfolio value?  If so, then there is no minimum SWR as the PP doesn't keep up in this 15 year time frame, except for 3 years but 2 of those were using silver and 1 was the very first year of gold floating (i.e. not reliable).  At the end of 1981, the real initial balance is $1653.87 whereas the PP is down to $911.69.
Last edited by MachineGhost on Tue Oct 20, 2015 4:06 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
Dmilligan
Junior Member
Junior Member
Posts: 13
Joined: Wed Dec 19, 2012 7:49 am

Re: Why the PP is better in accumulation than you think

Post by Dmilligan » Tue Oct 20, 2015 4:18 pm

MachineGhost wrote: Do you mean the inflation-adjusted value each year of the initial starting balance as the lower threshold for each year's total portfolio value?
If one retired in 1965 and began to withdraw the same percentage from the PP each year through to the current year, what is the maximum fixed percentage that could be withdrawn annually and still allow the initial portfolio to still be the same in inflation-adjusted dollars as it was on the day of retirement?

For example, Tyler's Withdrawal Rates calculator (https://portfoliocharts.files.wordpress ... -rates.jpg) shows that the PP has a sustainable withdrawal rate of ~4.2% since 1972.
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Oct 20, 2015 4:42 pm

Dmilligan wrote:
MachineGhost wrote: Do you mean the inflation-adjusted value each year of the initial starting balance as the lower threshold for each year's total portfolio value?
If one retired in 1965 and began to withdraw the same percentage from the PP each year through to the current year, what is the maximum fixed percentage that could be withdrawn annually and still allow the initial portfolio to still be the same in inflation-adjusted dollars as it was on the day of retirement?

For example, Tyler's Withdrawal Rates calculator (https://portfoliocharts.files.wordpress ... -rates.jpg) shows that the PP has a sustainable withdrawal rate of ~4.2% since 1972.
OIC, you mean the balance at the end of a period is still at least the initial inflation-adjusted starting balance, rather than inflation-adjusted year by year comparisons.

In that case, $1000 in 1965 would turn into $7526.03 at the end of 2014.  The PP could then support a 0.31% SWR and still be slightly ahead at the end with $7535.88.  The real MaxDD is -13.96%
Last edited by MachineGhost on Tue Oct 20, 2015 4:49 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
dragoncar
Executive Member
Executive Member
Posts: 1111
Joined: Wed Aug 10, 2011 7:23 pm

Re: Why the PP is better in accumulation than you think

Post by dragoncar » Tue Oct 20, 2015 5:00 pm

MachineGhost wrote:
Reub wrote: Why is true diversity of opinion such an anathema in here? Although I don't always agree with Mr. mathjak he adds a lot to these threads and makes one question himself, which is a good thing.
Ditto.  I've learned a lot from mathjak about retirement concepts that I never really paid attention too before as well as the proven power of discipline.  Talk is cheap, but mathjak has walked the talk.  So he deserves some respect at the very least.
Which concepts?  I don't read every thread but am interested in retirement concepts
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Oct 20, 2015 5:31 pm

dragoncar wrote: Which concepts?  I don't read every thread but am interested in retirement concepts
Mainly the need for maximum equity growth to reach goals, ignore volatility and MaxDD (i.e. factor it into your plans) and use portfolios that survive safe/sustainable withdrawal rates during the worst historical periods.

My own conclusions are that gold is essentially a poor man's replacement for inadequate equity exposure, some minimum level of gold is always needed to deal with high inflation periods to have a buffer zone, 100% equity isn't really that much riskier than other portfolios and using market timing on 100% equity will blow everything else out of the water.  And that there's a high price to be paid for diversifying out of equity.  I think if you're not in a withdrawal stage, the PP can be a very high price to pay for psychological comfort.  But as Browne said, focus on your career/job for the growth.  Mathjak did both, however.
Last edited by MachineGhost on Tue Oct 20, 2015 5:39 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
Tyler
Executive Member
Executive Member
Posts: 1970
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Why the PP is better in accumulation than you think

Post by Tyler » Tue Oct 20, 2015 6:45 pm

MachineGhost wrote: And that there's a high price to be paid for diversifying out of equity.  I think if you're not in a withdrawal stage, the PP can be a very high price to pay for psychological comfort.
It all comes down to personal goals.  This may sound crazy to some people, but accumulating the most money is not the primary investing goal for everyone. 

Circling back to the topic of the thread, a goal like financial independence is actually independent of absolute account balance.  A person with $1mm and only $25k in annual expenses is actually much better off than someone with $10mm and $600k in expenses, and that's even before you consider how different investing styles affect portfolio sustainability.  Also, one should realize that many people seeking FI are looking to retire after working 10 years and not 40 (I did in 14), so the typical advice you might give to someone accumulating money into their 60's may not apply.  Basically, someone saving for financial independence may have very different investing preferences than someone wanting to get rich.  I suspect a lack of understanding of that difference in outlook is a source of a lot of the resistance when the topic comes up. 
Last edited by Tyler on Tue Oct 20, 2015 7:05 pm, edited 1 time in total.
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Oct 20, 2015 9:55 pm

Tyler wrote: Basically, someone saving for financial independence may have very different investing preferences than someone wanting to get rich.  I suspect a lack of understanding of that difference in outlook is a source of a lot of the resistance when the topic comes up.
I think this is where the financial industry is way behind.  Even all the robo-advisors ask pathetically stupid questions to determine your "risk tolerance" rather than engage in any actual goal planning, sustainable withdrawals and to come up with portfolios to arrive at said goal while taking decreasing duration into account (i.e. target date).  Regular people don't even know what their investing preferences are and tend to overestimate their ability to deal with volatility.  Some good financial advisors do it this way but of course they have expensive conflicts of interest are and/or are clueless about mitigating downside risk.  Why don't you come up with a DIY Step-By-Step-Idiot-Proof webapp to arrive at possible portfolios to reach such goals?
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
Tyler
Executive Member
Executive Member
Posts: 1970
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Why the PP is better in accumulation than you think

Post by Tyler » Tue Oct 20, 2015 10:53 pm

MachineGhost wrote: Why don't you come up with a DIY Step-By-Step-Idiot-Proof webapp to arrive at possible portfolios to reach such goals?
Now that's a bold idea.  Probably a lot harder than it sounds, but something definitely worth pondering. 
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
dutchtraffic
Executive Member
Executive Member
Posts: 242
Joined: Sat Apr 11, 2015 7:28 am

Re: Why the PP is better in accumulation than you think

Post by dutchtraffic » Wed Oct 21, 2015 4:34 am

MachineGhost wrote:
OIC, you mean the balance at the end of a period is still at least the initial inflation-adjusted starting balance, rather than inflation-adjusted year by year comparisons.

In that case, $1000 in 1965 would turn into $7526.03 at the end of 2014.  The PP could then support a 0.31% SWR and still be slightly ahead at the end with $7535.88.  The real MaxDD is -13.96%
A 0.31% withdrawal rate from 1965 till today doesn't look incredibly exciting...are you sure these numbers are correct?
User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: Why the PP is better in accumulation than you think

Post by ochotona » Wed Oct 21, 2015 6:35 am

MachineGhost wrote: My own conclusions are that gold is essentially a poor man's replacement for inadequate equity exposure, some minimum level of gold is always needed to deal with high inflation periods to have a buffer zone, 100% equity isn't really that much riskier than other portfolios and using market timing on 100% equity will blow everything else out of the water.  And that there's a high price to be paid for diversifying out of equity.  I think if you're not in a withdrawal stage, the PP can be a very high price to pay for psychological comfort.  But as Browne said, focus on your career/job for the growth.  Mathjak did both, however.
When I say "market timing", it's called "speculation". When MachineGhost says it, people listen.

'The firm was best known for its commercials in the 1970s and 1980s based on the phrase, "When E. F. Hutton The Machine Ghost talks, people listen" (which usually involved a young professional remarking at a dinner party that his broker was E.F. Hutton, which caused the moderately loud party to stop all conversation to listen to him).'

Market time the HBPP, and it will be a fine accumulation portfolio, and still low volatility.

Which... TA-DA! ... magically re-mathjacks the thread back to it's intended purpose, HBPP for the accumulation phase.
Last edited by ochotona on Wed Oct 21, 2015 6:45 am, edited 1 time in total.
Post Reply