Stocks Crashing! Thank God For The PP!!

[MediumTex]

Welcome to the forum, Mr (Mrs?) blood! I love your user name. Great perspective.

Yep.

Good stuff from CacklingBloodSlurper.

Strong first post from the latest member of the PP coven.

mathjak started out strong too!

But he never claimed to drink blood, so that's a big difference right there.

I don't think we've ever had a blood drinker here who turned into a bad citizen.

[Tom]

PP is now beating S&P YTD.  S&P has lost almost 11% just in the month of January.  The PP is starting to show how in more volatile environments it does in fact work as expected and provide protection.  TLT is up to 127.10, about $10 from where it had previously settled and my gold ETF (PHYS) has picked up some decent slack as well.  The protection I'm getting right now makes me feel much better about the minor loss last year.

[Cortopassi]

PP must be blowing S&P 500 away by a longshot.

Small itty bitty concern that gold has yet to really push higher -- sure it is up $17 right now, but we were here just a week or so ago and went back down.  And still only barely over $1100, jeez.  But I'll take it.

In 2016 the gold and TLT up when stocks down followed by gold and TLT down while stocks up hasn't really been followed.  stocks just haven't come back up.

The pounding the market is taken is amazing.  The EM and SCV ETFs I bought earlier this year are down significantly.  Glad I didn't go all in at one time.  Now the question is do I still nibble and add to them or hold off?  Bottom could be a ways off.

Regardless, my PP is down 0.26% for 2016.  I am sure mathjak and many others in the market would kill for that right now.

[dualstow]

Small itty bitty concern that gold has yet to really push higher -- sure it is up $17 right now, but we were here just a week or so ago and went back down.  And still only barely over $1100, jeez.  But I'll take it.

I think we should give gold plenty of time. Like the Rio Grande carving the Grand Canyon time. But, one day, hopefully in our lifetimes or the lifetimes of our immediate heirs, the value will multiply. That is gold's superpower.

[Tom]

Sorry, yeah it's blowing away S&P YTD by a long shot.  I was looking at my chart since inception and that is now beating S&P by a slight margin

[Cortopassi]

Wow, this was quite a volatile day in the markets!  No way would I have guessed we'd go back positive after 500+ down, and then finish 200+ down!

And the PP just went, ehh, whatever and did its thing. 

[sophie]

+1 to the thread title!  It's so much fun looking at panicked headlines but not being in the least worried.  Sort of like snowfall predictions.

I'll also just remind everyone of something that was neatly laid out in the Permanent Portfolio book:  after a big loss, you need gains far in excess of the loss to get back to where you were. 

Let's say the PP is -2% last year, 0% this year, and 4% next year.  Meanwhile, VTI is +2% last year, -20% this year, and +20% next year.  After those three years, the PP will be up 1%, and VTI will be down 2%. 

Despite that, people will have spent comparatively far more time bemoaning the PP's performance compared to VTI, and only a relatively short time during the market crash being thankful for the PP.  Definitely a problem with the PP's design...it just doesn't have the entertainment value of watching the stock market.

[dualstow]

  Definitely a problem with the PP's design...it just doesn't have the entertainment value of watching the stock market.

But we can watch. Like the people in southern FL watch the weather channel in January.

[finster869]

  Definitely a problem with the PP's design...it just doesn't have the entertainment value of watching the stock market.

But we can watch. Like the people in southern FL watch the weather channel in January.

Too funny.  We Winter in Southern Florida and my wife asked me right before I read your post why I was so absorbed watching news about the big Winter Storm expected in the Northeast this weekend and the stock market melt down if neither was impacting us      Thank you PP.

[ochotona]

It really pays to be stock light at this time.

[barrett]

It really pays to be stock light at this time.

My guess is that most of us are "stock lighter" than we were three weeks ago. I think it's more correct to say that it's been good to be stock light YTD. Seriously, unless we know what is coming, how can we know what that it's a good time to be stock light? Not trying to pick a fight, ocho. You probably wrote that as a throw-away just to get the conversation started for the day. Though I'll admit it does feel like the equity pain could go on for a while.

Would you might sharing (sorry if you've posted this elsewhere) what your current AA is? I know that you don't love gold or LTTs at the current levels. Are you laden with cash just waiting for certain entry points?

[buddtholomew]

Not me, I'm stock heavy. Notice how miniscule our gains are with stocks declining. Equities will always be the main driver of returns.

[Cortopassi]

I am with Budd here.  At 27% equities right now, on the way to (gulp) 40% over the year.  1% chunks at a time.

If the market continues tanking, seems like a decent a time as any to begin increasing stock allocation.  My modified PP will be 40 stocks, 25 each gold/TLT and 10 cash, a slightly modified Golden Butterfly.

I hope not to be crying come Dec 31.

[barrett]

My modified PP will be 40 stocks, 25 each gold/TLT and 10 cash, a slightly modified Golden Butterfly.

It's not the Slightly Modified Golden Butterfly. It's The Cortopassi Prosperity Tilt Supreme!

That 10% cash allocation is probably OK if you are still young and your work prospects remain good even in a severe downturn. The 4X25 cash component can be a thing of beauty if an asset goes on sale big time, but that can sometimes take years to happen. I remember 2008 all too well when I was left on the sidelines with no cash to inject into stocks.

Cortopassi, I know you have written a bit about wanting to go more heavy on the equities. Do you see the above as a flat-out better portfolio or maybe just one that is more suited to your personality? Thanks.

[Cortopassi]

Honestly, what is best suited to my personality would be 100% in a 5% yielding money market, which we may not see again until long after I'm retired.

I have done enough with Tyler's charts to convince me I need to up my equity to try and capture some more CAGR in the 13-17 years I have until retirement.  I'm the first to say the future is unknowable and I should not be taking the historical chart returns as a sure thing.  However, I am at the point where if I don't do this, and stick to 25% allocations I am at point A (4.8 CAGR per Tyler's latest) and point B with the Cortopassi Prosperity Tilt (6.2% CAGR)

If I retire in 15 years, that's 2x my money with the PP and 2.5x with the modified.



Not as much difference as I'd like but at the levels I am talking about, extra $$ in retirement will help more than less $$ will hurt.  At least that's what I think, assuming there is still a social security safety net.

Lady in the office and her husband are 2 years from retirement.  Have 3 million in investments.  Obviously invested their money wisely.  Even with a 2.5x return and continuing the insane savings rate I do right now, it is nearly impossible for me to ever get to that level.  I will be lucky to retire with half that amount in investment accounts.  Not shabby, but I will beat myself up again here, it should have been a shitload more were it not for 25 years of stupidity on my part thinking I could beat the system.

[Reub]

Interesting chart:

http://allstarcharts.com/sp500-lost-13-3-weeks-now/

S&P going to 1576 possibly?

[buddtholomew]

Honestly, what is best suited to my personality would be 100% in a 5% yielding money market, which we may not see again until long after I'm retired.

I have done enough with Tyler's charts to convince me I need to up my equity to try and capture some more CAGR in the 13-17 years I have until retirement.  I'm the first to say the future is unknowable and I should not be taking the historical chart returns as a sure thing.  However, I am at the point where if I don't do this, and stick to 25% allocations I am at point A (4.8 CAGR per Tyler's latest) and point B with the Cortopassi Prosperity Tilt (6.2% CAGR)

If I retire in 15 years, that's 2x my money with the PP and 2.5x with the modified.



Not as much difference as I'd like but at the levels I am talking about, extra $$ in retirement will help more than less $$ will hurt.  At least that's what I think, assuming there is still a social security safety net.

Lady in the office and her husband are 2 years from retirement.  Have 3 million in investments.  Obviously invested their money wisely.  Even with a 2.5x return and continuing the insane savings rate I do right now, it is nearly impossible for me to ever get to that level.  I will be lucky to retire with half that amount in investment accounts.  Not shabby, but I will beat myself up again here, it should have been a shitload more were it not for 25 years of stupidity on my part thinking I could beat the system.

Cortopassi, $3 million in investments is a significant sum, but doesn't tell us much about their living expenses.
I too have 17-20 years until retirement and have reached a similar conclusion - equity risk is necessary to achieve retirement goals.
This works for me - 70/30 retirement assets (equity heavy) balanced with 4x25PP + Cash in taxable for a blended 52.5/40/7.5 allocation.
I can't touch the funds in retirement accounts for many years and therefore willing to increase risk for the likelihood of excess returns.
I know my risk tolerance so the PP + Cash in taxable let's me sleep well at night.
In other words, it doesn't have to be all or none. Blend Bogleheads with PP for a smoother ride.
For reference, 70/30 -9.3% YTD, PP+Cash -.5%, blended -4.5 and S&P500 -8.6%

[Cortopassi]

For reference, 70/30 -9.3% YTD, PP+Cash -.5%, blended -4.5 and S&P500 -8.6%

The shock at that -9.3% number, imagining it in my account right now, will certainly keep me to a blended/<40% stock allocation!

The living expenses of my colleague are minimal, which is one of the reasons they were able to save so much.

[buddtholomew]

For reference, 70/30 -9.3% YTD, PP+Cash -.5%, blended -4.5 and S&P500 -8.6%

The shock at that -9.3% number, imagining it in my account right now, will certainly keep me to a blended/<40% stock allocation!

The living expenses of my colleague are minimal, which is one of the reasons they were able to save so much.

Gotcha. In CA, couldn't retire comfortably on less than 4 million in my opinion. I'm sure others have retired with substantially less depending on expenses.

[Tyler]

If you want out of the rat race bad enough, you can get your expenses down pretty far.

+1. 

Expenses are something that too many people treat as non-negotiable for fairly arbitrary reasons.  After living in both California and Texas, I personally decided that measuring "standard of living" based purely on cost of living is a piss poor way to evaluate quality of life.  I happily retired on way less than $4mm.  Just not in California. 

But everyone's preferences are different, and mix in family and I understand it gets complicated.  Everything has a tradeoff.

[dragoncar]

For reference, 70/30 -9.3% YTD, PP+Cash -.5%, blended -4.5 and S&P500 -8.6%

The shock at that -9.3% number, imagining it in my account right now, will certainly keep me to a blended/<40% stock allocation!

The living expenses of my colleague are minimal, which is one of the reasons they were able to save so much.

Gotcha. In CA, couldn't retire comfortably on less than 4 million in my opinion. I'm sure others have retired with substantially less depending on expenses.

$4 million?  You gotta be kidding me... that's only $160k/year which wouldn't even cover my dog's therapist.

[Pointedstick]

But everyone's preferences are different, and mix in family and I understand it gets complicated.  Everything has a tradeoff.

The wife and I want to live like absolute Spartans and get out as early as humanly possible. Trailer, cheap land, thrift stores, food in bulk. First get out, then let luxuries come as the portfolio grows. If I'd known at 16 what I know now, I'd have been out for 10 years already.

I assume you have read http://www.amazon.com/Early-Retirement- ... 145360121X

…and follow Mr. Money Mustache?


Regardless, the PP (or a slightly modified version of it) makes a great ERE portfolio, both during accumulation and withdrawal.

[var]

depends on your wife spending habits...

but i think 4 million my number.... it really depends where you live... car you want to drive etc..

[goodasgold]

depends on your wife spending habits...

but i think 4 million my number.... it really depends where you live... car you want to drive etc..

Perspectives differ. I haven't driven a car (except short-term rentals when traveling outside of New York City) for 25 years.

"Some things are really necessaries of life in some circles, which in others are luxuries merely and in others still are entirely unknown." - Thoreau, Walden

[dualstow]

Perspectives differ. I haven't driven a car (except short-term rentals when traveling outside of New York City) for 25 years.

I think I stopped in 1989. Almost exactly the same time frame.