Depressed

General Discussion on the Permanent Portfolio Strategy

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buddtholomew
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Re: Depressed

Post by buddtholomew » Mon Dec 14, 2015 12:42 pm

I have considered options to protect positions, but the other assets in the portfolio should in theory hedge each other. Isn't that the premise of 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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AdamA
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Re: Depressed

Post by AdamA » Mon Dec 14, 2015 12:56 pm

buddtholomew wrote: Isn't that the premise of the PP?
Yes. 

If you're having a rough time with this year's performance, just keep in mind that every prior down year has been followed by a double-digit (positive) year. 
"All men's miseries derive from not being able to sit in a quiet room alone."

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lordmetroid
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Re: Depressed

Post by lordmetroid » Mon Dec 14, 2015 1:24 pm

Interest rates hikes on the horizon, I can only see the price in bond market to plummet. Although treasuries will gain more dividend I doubt it will compensate for the forthcoming bond bear market. Stocks seems to also enter a bear market and gold has been sinking ever since 2011. Does this spell doom for the permanency of of the permanent portfolio. Will the PP bear market extend and maybe even accelerate in 2016?

I simply see no opportunity for passive investments at this point in time. I can't even buy bonds because the Swedish bonds are also in a bear market.
A month ago I abandoned the permanent portfolio for a dual momentum strategy but I yesterday I liquidated all my positions. Only problem now is that I have no idea when I shall reenter the market.
Last edited by lordmetroid on Mon Dec 14, 2015 1:28 pm, edited 1 time in total.
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Austen Heller
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Re: Depressed

Post by Austen Heller » Mon Dec 14, 2015 1:37 pm

Perhaps you need to tighten up your rebalance bands.  Stocks were down 10% a few months back, then popped up near the highs.  Did you harvest any of this volatility?  IMO the 15/35 bands are too wide to capture small swings like we saw in the fall.  Using 20/30 or 22.5/27.5 bands would allow you to get some gains, since the overall returns of the 4 asset classes are predicted to be low going forward.
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Mark Leavy
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Re: Depressed

Post by Mark Leavy » Mon Dec 14, 2015 2:05 pm

Cortopassi wrote:
I've always been interested in protecting my holdings by buying married puts at the same time.  If you don't know what that term is, please look it up.

-snip-

Has anyone ever effectively implemented this or have any thoughts?

-snip-
I've thought about this a lot.  It seem like a great strategy on the surface.  But if you look at the details of how the PP works, you see that there are really small moments in time when it rescues all of the losses.

Any sort of option clips the highs and the lows.  In general, if you sell or buy options to hedge the PP, they will generate a small return most of the time.  But what happens is that they clip off the large swings that happen when there is a large economic event.  And these gains are what make the PP sustainable in the long run.

So... long story short, I believe that surrounding the PP with options (and I have thought of every way imaginable...) will end up failing you when you need it the most.

The steady stream of cash in selling puts or calls can be nice - until it is not...
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Tom
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Re: Depressed

Post by Tom » Mon Dec 14, 2015 2:32 pm

AdamA wrote:
buddtholomew wrote: Isn't that the premise of the PP?
Yes. 

If you're having a rough time with this year's performance, just keep in mind that every prior down year has been followed by a double-digit (positive) year.
I second this.  It seems to me that next year could be a volatile one - and that could be good for the overall PP.  It will also remind many of us struggling why we chose this strategy.  It won't always be that we're lagging or slightly down while others are slightly up.  There will be times when people are freaking out and we're making money.  That is a good feeling - I know it from experience through the financial crisis.  I can deal with the currently lag/losses b/c I've seen the protection it can offer first hand.
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Re: Depressed

Post by Fred » Mon Dec 14, 2015 3:39 pm

AdamA wrote:
buddtholomew wrote: Isn't that the premise of the PP?
Yes. 

If you're having a rough time with this year's performance, just keep in mind that every prior down year has been followed by a double-digit (positive) year.
Close but no cigar for 2014, according to PeakToTrough any way. But I'll take 9.76% next year.

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AdamA
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Re: Depressed

Post by AdamA » Mon Dec 14, 2015 3:48 pm

Fred wrote:
Close but no cigar for 2014, according to PeakToTrough any way. But I'll take 9.76% next year.

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Round up.

;)
"All men's miseries derive from not being able to sit in a quiet room alone."

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technovelist
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Re: Depressed

Post by technovelist » Mon Dec 14, 2015 9:53 pm

Option buyers usually get hosed.

Option sellers are the ones who usually make out.

Of course they get massacred once in awhile, so it sort of evens out.
Another nod to the most beautiful equation: e + 1 = 0
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buddtholomew
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Re: Depressed

Post by buddtholomew » Thu Dec 17, 2015 11:39 am

Gold neutralized, PP neutralized.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: Depressed

Post by Reub » Thu Dec 17, 2015 11:46 am

The sun will come out tomorrow.
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buddtholomew
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Re: Depressed

Post by buddtholomew » Thu Dec 17, 2015 12:27 pm

Is anyone on this board approaching a tolerance band and do you intend to rebalance?
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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