Any Changes for the New Year?

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Cortopassi
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Any Changes for the New Year?

Post by Cortopassi » Tue Dec 29, 2015 3:33 pm

You may recall my intention was to revisit the 25/25/25/25 allocation in January, thinking about switching to a Golden Butterfly or similar variant -- at a minimum adding some level of small cap and/or international.

The more I look at the current markets, the more I am convinced that 2016 will be a disaster for stocks and that gold has to start clawing back, hence given my track record of being nearly always wrong, I am planning on starting a slow allocation change to increase stock exposure!  Whether it is the right or wrong thing to do at this time or ever, I don't know.

I am leaning toward a middle ground allocation that increases stocks and does as little as possible in forcing me to trade out of existing positions, at least in taxable accounts.  I do have two others where the total stock exposure is 45% and 50% but I figure that's pushing it.

The main source of new buying for the stock exposure comes from cash, so little selling.

My allocation targets:

20% Total Stock Market
10% Small Cap Value
10% Emerging Market
25% LTTs
10% Cash/STTs
25% Gold

I'd be interested in all comments, I am sure which will be mainly negative!  Too much gold!  Too much EM!  Too much LTTs!  Maybe even a Not Enough Gold from certain people!

Anyway,
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Re: Any Changes for the New Year?

Post by buddtholomew » Tue Dec 29, 2015 3:45 pm

Increasing equities and fixed income duration accordingly makes sense to me. I too hold SCV/EM in retirement accounts and re-balance with 5% bands.
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Re: Any Changes for the New Year?

Post by dualstow » Tue Dec 29, 2015 4:37 pm

Cortopassi wrote: The more I look at the current markets, the more I am convinced that 2016 will be a disaster for stocks and that gold has to start clawing back, hence given my track record of being nearly always wrong, I am planning on starting a slow allocation change to increase stock exposure!  Whether it is the right or wrong thing to do at this time or ever, I don't know.
...
I'd be interested in all comments, I am sure which will be mainly negative!  Too much gold!  Too much EM!  Too much LTTs!  Maybe even a Not Enough Gold from certain people!

Anyway,
I am the only one who knows this, but gold is going to start clawing back in the year 2032 and not before. I feel a little guilty about my monopoly of this knowledge, so I'm going to invest as if I never had this foresight.

If anything, I'm going to try to exercise more discipline in getting more new cash into the pp's four assets instead of the vp. Out of sheer laziness, I have put money into the vp because it was more convenient and not because of some strategy. I then rationalized because it's so hard to buy ten gold coins at a time. In 2016 I'm really going to stay on target. Make the pp a bigger part of my total.
RIP Toots
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Re: Any Changes for the New Year?

Post by Reub » Tue Dec 29, 2015 4:54 pm

dualstow wrote:
Cortopassi wrote: The more I look at the current markets, the more I am convinced that 2016 will be a disaster for stocks and that gold has to start clawing back, hence given my track record of being nearly always wrong, I am planning on starting a slow allocation change to increase stock exposure!  Whether it is the right or wrong thing to do at this time or ever, I don't know.
...
I'd be interested in all comments, I am sure which will be mainly negative!  Too much gold!  Too much EM!  Too much LTTs!  Maybe even a Not Enough Gold from certain people!

Anyway,
I am the only one who knows this, but gold is going to start clawing back in the year 2032 and not before. I feel a little guilty about my monopoly of this knowledge, so I'm going to invest as if I never had this foresight.

If anything, I'm going to try to exercise more discipline in getting more new cash into the pp's four assets instead of the vp. Out of sheer laziness, I have put money into the vp because it was more convenient and not because of some strategy. I then rationalized because it's so hard to buy ten gold coins at a time. In 2016 I'm really going to stay on target. Make the pp a bigger part of my total.
Yes. 2032 is definitely the year. It all has to do with calculating and utilizing the value of pi properly. ;)
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Re: Any Changes for the New Year?

Post by dualstow » Tue Dec 29, 2015 4:54 pm

Aha! So it's not just me! Thank you, Reub. I feel unburdened of my Cassandra complex.
RIP Toots
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Re: Any Changes for the New Year?

Post by Dieter » Tue Dec 29, 2015 4:57 pm

While small is a small percentage of total stock market, if in a tax advantages account, look at going with a large balanced fund (S&P 500, Wiltshire(?) 1000, ....) instead of total stock market to have more distinct large vs small.
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Re: Any Changes for the New Year?

Post by pugchief » Tue Dec 29, 2015 10:22 pm

Cortopassi wrote: ... given my track record of being nearly always wrong, I am planning on starting a slow allocation change... 

...Whether it is the right or wrong thing to do at this time or ever, I don't know.
Mike, your very early posts talked about how many investing mistakes you had made, constantly changing things up, and how you were at peace, at long last, with the PP. What new information has caused a seismic shift in that philosophy? Yes, gold has dragged, but in the PP one of the 4 assets will always be dragging.
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Re: Any Changes for the New Year?

Post by Cortopassi » Tue Dec 29, 2015 11:00 pm

Pug,

That's a very good question.  In the end I think the major item for me is the lack of potential return going forward, possibly for decades, of short term treasuries/cash.  So more than anything it is to separate out a rainy day cash portion and take the 25% that I currently have dedicated to cash and allocate some of that more aggressively.

If cash/STT was making me 5% like 10 years ago, I wouldn't be considering this.  If the Fed moves Fed funds rate to 2-3% in the next year or two, I will probably move more back into short term.

Please, I am happy to hear out anyone on why this is a bad idea!
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Dieter
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Re: Any Changes for the New Year?

Post by Dieter » Tue Dec 29, 2015 11:28 pm

Cortopassi wrote: Pug,

That's a very good question.  In the end I think the major item for me is the lack of potential return going forward, possibly for decades, of short term treasuries/cash.  So more than anything it is to separate out a rainy day cash portion and take the 25% that I currently have dedicated to cash and allocate some of that more aggressively.

If cash/STT was making me 5% like 10 years ago, I wouldn't be considering this.  If the Fed moves Fed funds rate to 2-3% in the next year or two, I will probably move more back into short term.

Please, I am happy to hear out anyone on why this is a bad idea!
Emerging Market and Small Cap Value can be quite volatile.
Possibility that Short Term Treasuries will be the best performer in the near term (better than Gold & LTT this year.)
Stocks have been on a tear for a while

FWIW, my PP-ish account is in retirement and also tilted for growth (~ 45/25/10/20), so quite similar to what you have, including SCV. I don't have an explicit emerging allocation - have thought about it, but looks like a wild ride. I have International Small instead, which also isn't a bastion of stability, but works for me.

But bottom line -- won't know the best answer for a few years....
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Re: Any Changes for the New Year?

Post by AdamA » Tue Dec 29, 2015 11:42 pm

Cortopassi wrote: You may recall my intention was to revisit the 25/25/25/25 allocation in January, thinking about switching to a Golden Butterfly or similar variant -- at a minimum adding some level of small cap and/or international.

The more I look at the current markets, the more I am convinced that 2016 will be a disaster for stocks and that gold has to start clawing back, hence given my track record of being nearly always wrong, I am planning on starting a slow allocation change to increase stock exposure!  Whether it is the right or wrong thing to do at this time or ever, I don't know.

I am leaning toward a middle ground allocation that increases stocks and does as little as possible in forcing me to trade out of existing positions, at least in taxable accounts.  I do have two others where the total stock exposure is 45% and 50% but I figure that's pushing it.

The main source of new buying for the stock exposure comes from cash, so little selling.

My allocation targets:

20% Total Stock Market
10% Small Cap Value
10% Emerging Market
25% LTTs
10% Cash/STTs
25% Gold

I'd be interested in all comments, I am sure which will be mainly negative!  Too much gold!  Too much EM!  Too much LTTs!  Maybe even a Not Enough Gold from certain people!

Anyway,
How much better do you think this will perform vs the PP?
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Re: Any Changes for the New Year?

Post by Hal » Wed Dec 30, 2015 3:46 am

My pennies worth....

Assuming you are into the PP for stability, not maximum return,  then I would play it by the numbers and not try to predict.

This actuarial blog has a good article you can reference against from a non-PP perspective.

http://actuary-info.blogspot.com.au/201 ... escue.html

Hal
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Cortopassi
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Re: Any Changes for the New Year?

Post by Cortopassi » Wed Dec 30, 2015 8:03 am

Hal wrote: My pennies worth....

Assuming you are into the PP for stability, not maximum return,  then I would play it by the numbers and not try to predict.

This actuarial blog has a good article you can reference against from a non-PP perspective.

http://actuary-info.blogspot.com.au/201 ... escue.html

Hal
and
AdamA wrote:
How much better do you think this will perform vs the PP?
Certainly stability is one major aspect, but I do need to consider the growth side as well.

As to how much better, that is a 50/50 crapshoot going forward.  Historically it returns more, but as I've stated many times, the future can be completely different no matter how long the time frame.  The question is are the odds better that it will perform better than the standard PP?  Again, it is a crapshoot and needing to feel comfortable in one's allocation.  Mentally, I am comfortable with gold and bonds where they are at, and I feel stocks are a bit light after doing this 2 years and STTs are a bit heavy in the current environment.

I understand this will invite more volatility, which I would not look forward to.  But I have calmed enough over the past few years to realize worrying about it, and the performance concerns and watching of my portfolio becomes less and less part of my life.  Which to me means I am ready to mentally handle a more volatile portfolio that could bring more return, while still sleeping at night.
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