I'm noticing a lack of threads about how terrible the PP is

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I'm noticing a lack of threads about how terrible the PP is

Post by Tom » Thu Feb 11, 2016 6:17 pm

Interesting. 
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by dragoncar » Thu Feb 11, 2016 6:23 pm

The PP is still lagging over my invested period by 6% annually.  Until it closes the gap back to the "expected" underperformance of 1-2%, I'm still not happy w/ it.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by MediumTex » Thu Feb 11, 2016 6:45 pm

The PP is having a good 2016 so far.  Historically, when the PP has had a few soft years it will have a couple of years with above average returns.

I don't know if 2016 will be that year, but the way the PP has behaved historically suggests that it is due for a good year.

Gold is also an asset that seems due for some speculative interest with money now fleeing the stock market, the bond market offering limited potential speculative gains, and the rest of the commodity sector suffering from soft worldwide demand.

The money has to go somewhere.  Contrary to what Maria Bartiromo likes to tell us, there is no such thing as "money on the sidelines."  There are only a series of fields adjacent to one another, and if money leaves one field, it necessarily enters another field.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by Dieter » Thu Feb 11, 2016 7:16 pm

My gold is still underwater.

Back to normal?

:)
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by lordmetroid » Fri Feb 12, 2016 3:16 am

I only got 3 quarters of a Permanent Portfolio at the moment, I am not entering stocks until the moving averages indicates a change in the trend. I am well aware that I am risking a sudden unexpected huge swing back. However, I am more psychologically comfortable not seeing part of my portfolio rapidly deteriorating.

Because the Permanent Portfolio model isn't as steadily "permanent" outside of USA.

Swedish Permanent Portfolio(OMXS30 stocks / Gold / 3 month bills / 2-10 years bonds):
[img width=500]http://i.imgur.com/g0C3ujk.png[/img]

Japanese Permanent Portfolio:
[img width=500]http://4.bp.blogspot.com/-jLZBJlSnvMI/U ... _Japan.png[/img]
Last edited by lordmetroid on Fri Feb 12, 2016 4:35 am, edited 1 time in total.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by Libertarian666 » Fri Feb 12, 2016 6:30 am

MediumTex wrote: The PP is having a good 2016 so far.  Historically, when the PP has had a few soft years it will have a couple of years with above average returns.

I don't know if 2016 will be that year, but the way the PP has behaved historically suggests that it is due for a good year.

Gold is also an asset that seems due for some speculative interest with money now fleeing the stock market, the bond market offering limited potential speculative gains, and the rest of the commodity sector suffering from soft worldwide demand.

The money has to go somewhere.  Contrary to what Maria Bartiromo likes to tell us, there is no such thing as "money on the sidelines."  There are only a series of fields adjacent to one another, and if money leaves one field, it necessarily enters another field.
Let's say you have a share of stock that is bid at 1000.

Now suppose there is bad news about the stock and it is now bid at 500.

Where did the "other 500 points" go? Does something else have to go up in price to compensate for the "lost 500 points"?
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by lordmetroid » Fri Feb 12, 2016 6:50 am

The points dissipated in the collective demand and supply for the asset.
Your speculation turned out to be a loss in this case. You have something that fewer people wants to buy compared to when you bought.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by buddtholomew » Fri Feb 12, 2016 7:44 am

lordmetroid wrote: I only got 3 quarters of a Permanent Portfolio at the moment, I am not entering stocks until the moving averages indicates a change in the trend. I am well aware that I am risking a sudden unexpected huge swing back. However, I am more psychologically comfortable not seeing part of my portfolio rapidly deteriorating.

Because the Permanent Portfolio model isn't as steadily "permanent" outside of USA.

Swedish Permanent Portfolio(OMXS30 stocks / Gold / 3 month bills / 2-10 years bonds):
[img width=500]http://i.imgur.com/g0C3ujk.png[/img]

Japanese Permanent Portfolio:
[img width=500]http://4.bp.blogspot.com/-jLZBJlSnvMI/U ... _Japan.png[/img]
Sorry lord, but you still haven't grasped the concept of the PP.
Buy and hold all 4 assets.
Market time in the VP.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by Libertarian666 » Fri Feb 12, 2016 10:03 am

lordmetroid wrote: The points dissipated in the collective demand and supply for the asset.
Your speculation turned out to be a loss in this case. You have something that fewer people wants to buy compared to when you bought.
So in other words, the points weren't transferred to someone else. They just disappeared.

Which of course was my point.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by dragoncar » Fri Feb 12, 2016 10:08 am

Libertarian666 wrote:
MediumTex wrote: The PP is having a good 2016 so far.  Historically, when the PP has had a few soft years it will have a couple of years with above average returns.

I don't know if 2016 will be that year, but the way the PP has behaved historically suggests that it is due for a good year.

Gold is also an asset that seems due for some speculative interest with money now fleeing the stock market, the bond market offering limited potential speculative gains, and the rest of the commodity sector suffering from soft worldwide demand.

The money has to go somewhere.  Contrary to what Maria Bartiromo likes to tell us, there is no such thing as "money on the sidelines."  There are only a series of fields adjacent to one another, and if money leaves one field, it necessarily enters another field.
Let's say you have a share of stock that is bid at 1000.

Now suppose there is bad news about the stock and it is now bid at 500.

Where did the "other 500 points" go? Does something else have to go up in price to compensate for the "lost 500 points"?
I think yes.  Imagine an island economy where you've got 50 bananas and your buddy has 50 coconuts.  You buy 10 of his coconuts for 10 bananas. 

Then your buddy gets really into bananas.  He loves them and gets tired of coconuts.  But you want to sell some of your coconuts because you have similar taste.  He will only give you 5 bananas for 10 coconuts.

Now you have 45 bananas and your friend has 5 bananas and 50 coconuts.  The price of bananas in coconuts went up, and the price of coconuts in bananas went down. 

Nominally you have fewer bananas, but they are also more valuable. 

maybe this analogy is too confusing for me to draw a conclusion at this time in the morning

Maybe a monkey comes and eats all your bananas.  Bad monkey
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by Libertarian666 » Fri Feb 12, 2016 10:12 am

dragoncar wrote:
Libertarian666 wrote:
MediumTex wrote: The PP is having a good 2016 so far.  Historically, when the PP has had a few soft years it will have a couple of years with above average returns.

I don't know if 2016 will be that year, but the way the PP has behaved historically suggests that it is due for a good year.

Gold is also an asset that seems due for some speculative interest with money now fleeing the stock market, the bond market offering limited potential speculative gains, and the rest of the commodity sector suffering from soft worldwide demand.

The money has to go somewhere.  Contrary to what Maria Bartiromo likes to tell us, there is no such thing as "money on the sidelines."  There are only a series of fields adjacent to one another, and if money leaves one field, it necessarily enters another field.
Let's say you have a share of stock that is bid at 1000.

Now suppose there is bad news about the stock and it is now bid at 500.

Where did the "other 500 points" go? Does something else have to go up in price to compensate for the "lost 500 points"?
I think yes.  Imagine an island economy where you've got 50 bananas and your buddy has 50 coconuts.  You buy 10 of his coconuts for 10 bananas. 

Then your buddy gets really into bananas.  He loves them and gets tired of coconuts.  But you want to sell some of your coconuts because you have similar taste.  He will only give you 5 bananas for 10 coconuts.

Now you have 45 bananas and your friend has 5 bananas and 50 coconuts.  The price of bananas in coconuts went up, and the price of coconuts in bananas went down. 

Nominally you have fewer bananas, but they are also more valuable. 

maybe this analogy is too confusing for me to draw a conclusion at this time in the morning

Maybe a monkey comes and eats all your bananas.  Bad monkey
The points still didn't go anywhere.

Let's try another analogy.

A football game score is 24-24. Then the referee announces that the last field goal by the second team was actually missed, so the score is really 24-21. Where did the other three points go?
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by MediumTex » Fri Feb 12, 2016 11:19 am

Libertarian666 wrote:
MediumTex wrote: The PP is having a good 2016 so far.  Historically, when the PP has had a few soft years it will have a couple of years with above average returns.

I don't know if 2016 will be that year, but the way the PP has behaved historically suggests that it is due for a good year.

Gold is also an asset that seems due for some speculative interest with money now fleeing the stock market, the bond market offering limited potential speculative gains, and the rest of the commodity sector suffering from soft worldwide demand.

The money has to go somewhere.  Contrary to what Maria Bartiromo likes to tell us, there is no such thing as "money on the sidelines."  There are only a series of fields adjacent to one another, and if money leaves one field, it necessarily enters another field.
Let's say you have a share of stock that is bid at 1000.

Now suppose there is bad news about the stock and it is now bid at 500.

Where did the "other 500 points" go? Does something else have to go up in price to compensate for the "lost 500 points"?
Indirectly, yes.

The 500 decline in value is now in money Heaven.  It's gone.

If you decide to sell for the new price of 500 that money has to go somewhere.

However, the only reason that the 1000 stock is now 500 is that a bunch of people have been selling it (more than usual or it wouldn't have lost half its value).  The money they are taking out of the stock market has to be going somewhere else.

I'm just talking about where money goes when assets are liquidated, not where the the difference between the old price and the new price goes when an asset declines in value, though the decline in value of individual assets is one of the effects of money leaving the overall market.

Sound right?
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by Libertarian666 » Fri Feb 12, 2016 12:15 pm

MediumTex wrote:
Libertarian666 wrote:
MediumTex wrote: The PP is having a good 2016 so far.  Historically, when the PP has had a few soft years it will have a couple of years with above average returns.

I don't know if 2016 will be that year, but the way the PP has behaved historically suggests that it is due for a good year.

Gold is also an asset that seems due for some speculative interest with money now fleeing the stock market, the bond market offering limited potential speculative gains, and the rest of the commodity sector suffering from soft worldwide demand.

The money has to go somewhere.  Contrary to what Maria Bartiromo likes to tell us, there is no such thing as "money on the sidelines."  There are only a series of fields adjacent to one another, and if money leaves one field, it necessarily enters another field.
Let's say you have a share of stock that is bid at 1000.

Now suppose there is bad news about the stock and it is now bid at 500.

Where did the "other 500 points" go? Does something else have to go up in price to compensate for the "lost 500 points"?
Indirectly, yes.

The 500 decline in value is now in money Heaven.  It's gone.

If you decide to sell for the new price of 500 that money has to go somewhere.

However, the only reason that the 1000 stock is now 500 is that a bunch of people have been selling it (more than usual or it wouldn't have lost half its value).  The money they are taking out of the stock market has to be going somewhere else.

I'm just talking about where money goes when assets are liquidated, not where the the difference between the old price and the new price goes when an asset declines in value, though the decline in value of individual assets is one of the effects of money leaving the overall market.

Sound right?
No. In my example, the price of the stock went from 1000 to 500 on no trading, due to bad news. There is absolutely no reason this cannot happen, and indeed sometimes it does.

So if you want to say that the money went to "money heaven", go ahead.

But given how skeptical you are on the "Figuring out Religion" thread, I would imagine you would prefer the more direct statement that it never existed in the first place. :P
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by moda0306 » Fri Feb 12, 2016 4:12 pm

I have to agree with tech here.  Prices can drop or rise without net movement of funds in or out of asset classes.  At least theoretically (I'd be interested to see if this happens in practice).
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by dragoncar » Wed Mar 02, 2016 3:20 pm

It took a year, but I'm back to my previous peaks.  I hated 2015, but didn't change my AA so that's a good thing I guess.  The recent rapid rise is scary, however.  Makes me expect an equally sharp drop in the near future (which will of course such since this is the time of the year I do all my contributions.... hasn't been good timing for me so far but that's just how my 401k, etc. works out).
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by Reub » Wed Mar 02, 2016 4:25 pm

So is the PP only as good as its gold component?
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by MediumTex » Wed Mar 02, 2016 5:39 pm

Libertarian666 wrote:
MediumTex wrote:
Libertarian666 wrote: Let's say you have a share of stock that is bid at 1000.

Now suppose there is bad news about the stock and it is now bid at 500.

Where did the "other 500 points" go? Does something else have to go up in price to compensate for the "lost 500 points"?
Indirectly, yes.

The 500 decline in value is now in money Heaven.  It's gone.

If you decide to sell for the new price of 500 that money has to go somewhere.

However, the only reason that the 1000 stock is now 500 is that a bunch of people have been selling it (more than usual or it wouldn't have lost half its value).  The money they are taking out of the stock market has to be going somewhere else.

I'm just talking about where money goes when assets are liquidated, not where the the difference between the old price and the new price goes when an asset declines in value, though the decline in value of individual assets is one of the effects of money leaving the overall market.

Sound right?
No. In my example, the price of the stock went from 1000 to 500 on no trading, due to bad news. There is absolutely no reason this cannot happen, and indeed sometimes it does.

So if you want to say that the money went to "money heaven", go ahead.

But given how skeptical you are on the "Figuring out Religion" thread, I would imagine you would prefer the more direct statement that it never existed in the first place. :P
If there is a bid on an asset, it means that trading of the asset is occurring.

Bad news only affects an asset price if people choose to sell in response to the bad news.  It's the selling that causes the decline, not the bad news.

If I own an asset that I could sell for $1,000 if I wanted to, but I choose not to and it later declines to $500, the $500 in lost value never existed for me, but only because I didn't choose to sell when the asset was at $1,000.  That's what I mean what I say that lost value went to money heaven.  It did exist when the bid was $1,000, but it stopped existing when the asset's price fell to $500.  For the guy who did sell at $1,000, that $1,000 is very real to him.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by dragoncar » Wed Mar 02, 2016 5:40 pm

Reub wrote: So is the PP only as good as its gold component?
These days, yes
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by stuper1 » Wed Mar 02, 2016 5:50 pm

dragoncar wrote:
Reub wrote: So is the PP only as good as its gold component?
These days, yes
This may come as a shock, but gold is really the only thing that differentiates the PP from a boglehead portfolio.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by l82start » Wed Mar 02, 2016 5:54 pm

stuper1 wrote:
dragoncar wrote:
Reub wrote: So is the PP only as good as its gold component?
These days, yes
This may come as a shock, but gold is really the only thing that differentiates the PP from a boglehead portfolio.
  gold.... and long term government bonds (PP) vs total bond market fund (BH)
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by barrett » Wed Mar 02, 2016 8:43 pm

l82start wrote:
stuper1 wrote:
dragoncar wrote: These days, yes
This may come as a shock, but gold is really the only thing that differentiates the PP from a boglehead portfolio.
  gold.... and long term government bonds (PP) vs total bond market fund (BH)
Does a boglehead portfolio have 25% cash?
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by l82start » Wed Mar 02, 2016 10:25 pm

barrett wrote:
l82start wrote:
stuper1 wrote: This may come as a shock, but gold is really the only thing that differentiates the PP from a boglehead portfolio.
  gold.... and long term government bonds (PP) vs total bond market fund (BH)
Does a boglehead portfolio have 25% cash?
they recommend a emergency fund (cash) i suppose the percentage will vary depending on number of months/years covered relative to total portfolio size.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by Reub » Wed Mar 02, 2016 11:03 pm

I wonder how a portfolio of 25% gold and 75% cash would compare to the PP.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by Libertarian666 » Thu Mar 03, 2016 10:02 am

MediumTex wrote: If there is a bid on an asset, it means that trading of the asset is occurring.
No, it doesn't. It means only that someone is offering to buy it, not that any trading is occurring.
MediumTex wrote: Bad news only affects an asset price if people choose to sell in response to the bad news.  It's the selling that causes the decline, not the bad news.
This is also incorrect, for the same reason: if the bid price drops, then that is by definition a decline in price even if there are no transactions along the way.
MediumTex wrote: If I own an asset that I could sell for $1,000 if I wanted to, but I choose not to and it later declines to $500, the $500 in lost value never existed for me, but only because I didn't choose to sell when the asset was at $1,000.  That's what I mean what I say that lost value went to money heaven.  It did exist when the bid was $1,000, but it stopped existing when the asset's price fell to $500.  For the guy who did sell at $1,000, that $1,000 is very real to him.
If the bid drops from $1000 to $500 with no transactions, then the money never existed.
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Re: I'm noticing a lack of threads about how terrible the PP is

Post by goodasgold » Thu Mar 03, 2016 12:35 pm

Desert wrote: While the HBPP also includes LTT and Cash, the combination of these two asset classes has performed very similarly to a single intermediate treasury fund or even total bond market fund.  So the HBPP is indeed very similar to a boglehead portfolio with a big slice of gold. 
I do not agree entirely. While the aggregate CAGR of the HBPP's holdings of long bonds and cash is similar to the Boglehead emphasis on intermediate bonds, the HBPP offers a lot more in terms of diversity and options.

For holders of the PP portfolio, when it is necessary to take out some cash for unforeseen expenses or even an occasional luxury, it is very convenient to have a choice between withdrawals from either the cash component or long bonds, or perhaps both. This flexibility and convenience  is often not suitable for Boglehead investors, depending on market trends.

And as I grow older, the advantage of overloading the cash component of the PP is becoming more attractive. And if reversion to the mean becomes a reality again (and I believe it will), cash will be even more attractive as interest rates rise to their long-term average.
Last edited by goodasgold on Thu Mar 03, 2016 12:40 pm, edited 1 time in total.
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