I'm noticing a lack of threads about how terrible the PP is
Posted: Thu Feb 11, 2016 6:17 pm
Interesting.
Permanent Portfolio Forum
https://www.gyroscopicinvesting.com/forum/
https://www.gyroscopicinvesting.com/forum/viewtopic.php?t=8176
Let's say you have a share of stock that is bid at 1000.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.
Sorry lord, but you still haven't grasped the concept of the PP.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]
So in other words, the points weren't transferred to someone else. They just disappeared.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.
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.Libertarian666 wrote:Let's say you have a share of stock that is bid at 1000.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.
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"?
The points still didn't go anywhere.dragoncar wrote: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.Libertarian666 wrote:Let's say you have a share of stock that is bid at 1000.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.
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"?
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
Indirectly, yes.Libertarian666 wrote:Let's say you have a share of stock that is bid at 1000.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.
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"?
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.MediumTex wrote:Indirectly, yes.Libertarian666 wrote:Let's say you have a share of stock that is bid at 1000.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.
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"?
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?
If there is a bid on an asset, it means that trading of the asset is occurring.Libertarian666 wrote: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.MediumTex wrote:Indirectly, yes.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"?
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?
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.
These days, yesReub wrote: So is the PP only as good as its gold component?
This may come as a shock, but gold is really the only thing that differentiates the PP from a boglehead portfolio.dragoncar wrote:These days, yesReub wrote: So is the PP only as good as its gold component?
gold.... and long term government bonds (PP) vs total bond market fund (BH)stuper1 wrote:This may come as a shock, but gold is really the only thing that differentiates the PP from a boglehead portfolio.dragoncar wrote:These days, yesReub wrote: So is the PP only as good as its gold component?
Does a boglehead portfolio have 25% cash?l82start wrote:gold.... and long term government bonds (PP) vs total bond market fund (BH)stuper1 wrote:This may come as a shock, but gold is really the only thing that differentiates the PP from a boglehead portfolio.dragoncar wrote: These days, yes
they recommend a emergency fund (cash) i suppose the percentage will vary depending on number of months/years covered relative to total portfolio size.barrett wrote:Does a boglehead portfolio have 25% cash?l82start wrote:gold.... and long term government bonds (PP) vs total bond market fund (BH)stuper1 wrote: This may come as a shock, but gold is really the only thing that differentiates the PP from a boglehead portfolio.
No, it doesn't. It means only that someone is offering to buy it, not that any trading is occurring.MediumTex wrote: If there is a bid on an asset, it means that trading of the asset is occurring.
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: 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 the bid drops from $1000 to $500 with no transactions, then the money never existed.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.
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.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.