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Re: Depressed

Posted: Mon Dec 14, 2015 12:42 pm
by buddtholomew
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?

Re: Depressed

Posted: Mon Dec 14, 2015 12:56 pm
by AdamA
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. 

Re: Depressed

Posted: Mon Dec 14, 2015 1:24 pm
by lordmetroid
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.

Re: Depressed

Posted: Mon Dec 14, 2015 1:37 pm
by Austen Heller
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.

Re: Depressed

Posted: Mon Dec 14, 2015 2:05 pm
by Mark Leavy
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...

Re: Depressed

Posted: Mon Dec 14, 2015 2:32 pm
by Tom
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.

Re: Depressed

Posted: Mon Dec 14, 2015 3:39 pm
by Fred
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.

Image

Re: Depressed

Posted: Mon Dec 14, 2015 3:48 pm
by AdamA
Fred wrote:
Close but no cigar for 2014, according to PeakToTrough any way. But I'll take 9.76% next year.

Image
Round up.

;)

Re: Depressed

Posted: Mon Dec 14, 2015 9:53 pm
by technovelist
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.

Re: Depressed

Posted: Thu Dec 17, 2015 11:39 am
by buddtholomew
Gold neutralized, PP neutralized.

Re: Depressed

Posted: Thu Dec 17, 2015 11:46 am
by Reub
The sun will come out tomorrow.

Re: Depressed

Posted: Thu Dec 17, 2015 12:27 pm
by buddtholomew
Is anyone on this board approaching a tolerance band and do you intend to rebalance?