Question for Melveyr

General Discussion on the Permanent Portfolio Strategy

Moderator: Global Moderator

User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 4052
Joined: Sun Sep 16, 2012 5:28 pm

Re: Question for Melveyr

Post by Kriegsspiel » Sun Feb 21, 2016 12:16 am

Blackbox

If, in the past, a portfolio has returned 4% real returns, when a bunch of varied and crazy shit has happened, who cares what the individual components are? Don't the results speak for themselves?

/Blackbox
You there, Ephialtes. May you live forever.
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

Re: Question for Melveyr

Post by buddtholomew » Sun Feb 21, 2016 9:44 am

Kriegsspiel wrote: Blackbox

If, in the past, a portfolio has returned 4% real returns, when a bunch of varied and crazy shit has happened, who cares what the individual components are? Don't the results speak for themselves?

/Blackbox
+1, the PP is a package.
Interesting that we continue to look for alternatives with the portfolio performing so well YTD.
After 5+ years, my appreciation for its design has only strengthened.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Question for Melveyr

Post by vnatale » Mon Apr 13, 2020 7:11 pm

stuper1 wrote:
Sat Feb 20, 2016 6:21 pm
Austen Heller wrote: Bill Bernstein's book "Deep Risk", addresses your issue about gold.  We talked about it here:

http://gyroscopicinvesting.com/forum/pe ... /#msg83163

My conclusion from Deep Risk was that gold doesn't really respond very well to inflation.  It's not even that great of a diversifier; from 1976-2013, Bernstein finds that the normal 4x25 PP had an average return of 8.66% with a SD of 7.92%.  You can get the same return with an even lower SD using the portfolio 29% stocks : 35.5% bonds : 35.5% cash ("Deep Risk", pg.16).  However, gold still has useful roles, as a form of portfolio insurance, a safe-haven, and an alternative currency for holders of US dollars.
I agree that gold doesn't necessarily respond well to inflation.  However, as a diversifier, I think gold definitely serves an important purpose.  The retirement withdrawal calculator at portfoliocharts.com shows that your 29/35.5/35.5 portfolio could support a safe withdrawal rate of 2.8 to 3.7%.  The 4x25 can support a SWR of 3.9 to 4.8%.  This means that with gold in your portfolio, you can live about 33% richer in retirement, which seems quite significant.
I do remember reading what Bernstein wrote in his book "Deep Risk" regarding gold. And, at the time, it caused me to write off gold an investment. Good response, though, from stuper1 here.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
GT
Executive Member
Executive Member
Posts: 270
Joined: Sun Jan 20, 2013 7:54 pm

Re: Question for Melveyr

Post by GT » Fri Apr 17, 2020 4:09 pm

buddtholomew wrote:
Sun Feb 21, 2016 9:44 am
Kriegsspiel wrote: Blackbox

If, in the past, a portfolio has returned 4% real returns, when a bunch of varied and crazy shit has happened, who cares what the individual components are? Don't the results speak for themselves?

/Blackbox
+1, the PP is a package.
Interesting that we continue to look for alternatives with the portfolio performing so well YTD.
After 5+ years, my appreciation for its design has only strengthened.
Did Budd really say the above back in the day?
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 4052
Joined: Sun Sep 16, 2012 5:28 pm

Re: Question for Melveyr

Post by Kriegsspiel » Fri Apr 17, 2020 4:27 pm

He would say it periodically. budd was very high amplitude.
You there, Ephialtes. May you live forever.
pmward
Executive Member
Executive Member
Posts: 1731
Joined: Thu Jan 24, 2019 4:39 pm

Re: Question for Melveyr

Post by pmward » Fri Apr 17, 2020 5:01 pm

I wonder if Budd wound up selling those gold and long treasuries he loathed so much? If so he literally would have capitulated right at the bottom. LTT's and gold have basically out performed stocks pretty much since the very day he went on that tirade and was booted. Maybe we all owe Budd a debt of gratitude for causing gold and LTT's to go up??? ;D
stuper1
Executive Member
Executive Member
Posts: 1365
Joined: Sun Mar 03, 2013 7:18 pm

Re: Question for Melveyr

Post by stuper1 » Fri Apr 17, 2020 5:09 pm

The guy had $13M and still wasn't happy. I owe him a debt of gratitude for reminding me that money doesn't buy happiness.

I wonder if he was any happier when that $13M was substantially less about a month ago?
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Question for Melveyr

Post by mathjak107 » Fri Apr 17, 2020 6:01 pm

stuper1 wrote:
Fri Apr 17, 2020 5:09 pm
The guy had $13M and still wasn't happy. I owe him a debt of gratitude for reminding me that money doesn't buy happiness.

I wonder if he was any happier when that $13M was substantially less about a month ago?
Money rarely buys happiness ..but what it does buy in life is choices many times ....I learned very early on about the importance of having choices in life
stuper1
Executive Member
Executive Member
Posts: 1365
Joined: Sun Mar 03, 2013 7:18 pm

Re: Question for Melveyr

Post by stuper1 » Fri Apr 17, 2020 6:08 pm

Yes, and once a person's basic needs are met, which doesn't cost a whole lot at least in our society, then happiness becomes a choice. At least for a lot of people. There are exceptions perhaps for people who had truly bad parents or circumstances. I do believe that a lot of people who aren't very happy could change that simply by choosing to look at things in a different perspective.

But there's nothing wrong with having some money to have even more choices in life.
pmward
Executive Member
Executive Member
Posts: 1731
Joined: Thu Jan 24, 2019 4:39 pm

Re: Question for Melveyr

Post by pmward » Fri Apr 17, 2020 6:14 pm

mathjak107 wrote:
Fri Apr 17, 2020 6:01 pm
stuper1 wrote:
Fri Apr 17, 2020 5:09 pm
The guy had $13M and still wasn't happy. I owe him a debt of gratitude for reminding me that money doesn't buy happiness.

I wonder if he was any happier when that $13M was substantially less about a month ago?
Money rarely buys happiness ..but what it does buy in life is choices many times ....I learned very early on about the importance of having choices in life
I couldn't agree more.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Question for Melveyr

Post by mathjak107 » Sat Apr 18, 2020 5:52 am

pmward wrote:
Fri Apr 17, 2020 6:14 pm
mathjak107 wrote:
Fri Apr 17, 2020 6:01 pm
stuper1 wrote:
Fri Apr 17, 2020 5:09 pm
The guy had $13M and still wasn't happy. I owe him a debt of gratitude for reminding me that money doesn't buy happiness.

I wonder if he was any happier when that $13M was substantially less about a month ago?
Money rarely buys happiness ..but what it does buy in life is choices many times ....I learned very early on about the importance of having choices in life
I couldn't agree more.

two things stuck with me my entire life as my entire motivation .

first was i grew up pretty poor in a new york city housing project ... i promised myself never to ever go back or raise my family in one .

the 2nd thing was i learned how important having money for choices was ...

i didn't hang out with the best of crowds in those days .. so i hung with a bunch of guys that were always up to no good ...

well one night they decided to do something that myself and another guy wanted no part of so we didn't go ..

my friend though ended up being arrested days later .... he was being accused of doing something he never did ... i knew he was innocent because he was with me . but he couldn't afford a lawyer and his parents were just over the limit for legal aid ...

HE WAS GOING TO PLEAD GUILTY to a crime he never did ... he felt he had no choices since he could not get a lawyer .....

the thought that he had to plead guilty to something he didnt do blew me away .... i never ever wanted to be in a position of no choice .

at the last minute a relative came to his aid and he got a lawyer and was found innocent ...

this served as a life long lesson and motivated me every day to stay not only out of the projects but to always have enough to have choices within reason that i could afford
User avatar
dualstow
Executive Member
Executive Member
Posts: 14235
Joined: Wed Oct 27, 2010 10:18 am
Location: synagogue of Satan
Contact:

Re: Question for Melveyr

Post by dualstow » Sat Apr 18, 2020 8:09 am

pmward wrote:
Fri Apr 17, 2020 5:01 pm
I wonder if Budd wound up selling those gold and long treasuries he loathed so much? If so he literally would have capitulated right at the bottom. LTT's and gold have basically out performed stocks pretty much since the very day he went on that tirade and was booted. Maybe we all owe Budd a debt of gratitude for causing gold and LTT's to go up??? ;D
I think Budd sold his gold. I remember him feeling relieved by the sale. Not sure if he held onto his bonds.
RIP Daniel Kahneman | Happy Good Friday
User avatar
Smith1776
Executive Member
Executive Member
Posts: 3506
Joined: Fri Apr 21, 2017 6:01 pm

Re: Question for Melveyr

Post by Smith1776 » Sat Apr 18, 2020 10:37 am

dualstow wrote:
Sat Apr 18, 2020 8:09 am
I think Budd sold his gold. I remember him feeling relieved by the sale. Not sure if he held onto his bonds.
Budd was an interesting character. Most people who hate the PP or whatever portfolio just make an adjustment and move on.

He was an odd case where he seemed so displeased with the PP (especially gold), but couldn't help but hold assets he hated and continued posting on this forum. Why stay? Why not just move on if this whole community and its philosophy upsets you so much? Why bother going through all the drama of asking to be banned?

Strange.
🛞 The All-Terrain Portfolio 🛞
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

Re: Question for Melveyr

Post by buddtholomew » Sat Apr 18, 2020 11:00 am

Hello All, I’ve been visiting the board regularly and have now had a chance to invest during a full cycle with a newfound appreciation for the PP.

On Friday 03-20 I was 35/15/15/35 stocks/gold/bonds/cash and as of today am 45/15/0/40 after selling TLT at an AVG price of 160 (purchase price 92). I offset losses in SCV (IJS) and put the proceeds in SPY and IAU on 03-23.

TLT and shortly thereafter Gold buoyed the portfolio during the recent decline (very thankful) and provided me with the willpower to increase equity allocation to 45% today. Still have internal strife over whether LTT’s should have a role in my portfolio moving forward.

My 401K was 70/30 but recently moved to 80/20 after buying stocks all the way down. The unrealized losses were unbelievable, but now the portfolio is recovering to mid 2019 levels after the recent run up.

I was also laid off in April with the company ultimately closing in the next couple of months. At this point I am adjusting to early retirement.
Last edited by buddtholomew on Sat Apr 18, 2020 11:12 am, edited 1 time in total.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
User avatar
dualstow
Executive Member
Executive Member
Posts: 14235
Joined: Wed Oct 27, 2010 10:18 am
Location: synagogue of Satan
Contact:

Re: Question for Melveyr

Post by dualstow » Sat Apr 18, 2020 11:05 am

Sorry to hear about the layoff. You've got a better cushion than most, but that sucks.
Hope you're in good spirits.
RIP Daniel Kahneman | Happy Good Friday
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Question for Melveyr

Post by mathjak107 » Sat Apr 18, 2020 11:46 am

welcome back bud....
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

Re: Question for Melveyr

Post by buddtholomew » Sat Apr 18, 2020 11:49 am

Thanks DS and MJ!
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
User avatar
Mark Leavy
Executive Member
Executive Member
Posts: 1950
Joined: Thu Mar 01, 2012 10:20 pm
Location: US Citizen, Permanent Traveler

Re: Question for Melveyr

Post by Mark Leavy » Sat Apr 18, 2020 12:26 pm

mathjak107 wrote:
Sat Apr 18, 2020 11:46 am
welcome back bud....
Thumbs up.
pmward
Executive Member
Executive Member
Posts: 1731
Joined: Thu Jan 24, 2019 4:39 pm

Re: Question for Melveyr

Post by pmward » Sat Apr 18, 2020 2:07 pm

Budd_Returns wrote:
Sat Apr 18, 2020 11:00 am
TLT and shortly thereafter Gold buoyed the portfolio during the recent decline (very thankful) and provided me with the willpower to increase equity allocation to 45% today. Still have internal strife over whether LTT’s should have a role in my portfolio moving forward.
I think for those that are afraid of TLT, an option maybe worth considering is a either a barbell of cash and IEF (7-10 year treasuries), or a 3 way of cash, IEI (3-7 year treasuries) and TLT. That would reduce average duration without completely punting all deflation protection. It would probably be better than just sticking too straight cash which is currently a fixed expense.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Question for Melveyr

Post by mathjak107 » Sat Apr 18, 2020 3:18 pm

100% in ief vs 50% in Tlt and 50% cash has the Tlt barbell with about 20% more oomph when called upon to run with the ball ... that can be a big shift in power ... duration works out close but the fear greed and perception with long term treasuries can be much greater
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

Re: Question for Melveyr

Post by buddtholomew » Sat Apr 18, 2020 5:58 pm

Thanks Mark!

I managed duration with the barbell approach to 5.6 years and have experience adjusting LTT’s/Cash to achieve the desired balance. I also tracked this composition against Total Bond Market ETF for many years and the returns were roughly equivalent on a daily basis. I cannot speak to what happened in March 2020 as I stopped tracking duration after selling the bonds, but I suspect as MJ highlighted the barbell has outperformed during this recent crisis. Does someone have the numbers handy to compare the approaches and validate the 20% figure attributed to greed/fear?

I do feel naked without LTT coverage and deflation protection PM.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Question for Melveyr

Post by mathjak107 » Sat Apr 18, 2020 6:13 pm

The last 3 months has seen a 2% difference between ief and a split of tlt/ cash.... 10% vs 12% for the Tlt mix ...that is 20%
User avatar
dualstow
Executive Member
Executive Member
Posts: 14235
Joined: Wed Oct 27, 2010 10:18 am
Location: synagogue of Satan
Contact:

Re: Question for Melveyr

Post by dualstow » Sat Apr 18, 2020 6:44 pm

that is 20%
hmm? ???
RIP Daniel Kahneman | Happy Good Friday
User avatar
vnatale
Executive Member
Executive Member
Posts: 9423
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: Question for Melveyr

Post by vnatale » Sat Apr 18, 2020 6:50 pm

dualstow wrote:
Sat Apr 18, 2020 6:44 pm
that is 20%
hmm? ???
12% is 20% more than 10%.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2464
Joined: Fri May 21, 2010 4:16 pm

Re: Question for Melveyr

Post by buddtholomew » Sat Apr 18, 2020 7:00 pm

mathjak107 wrote:
Sat Apr 18, 2020 6:13 pm
The last 3 months has seen a 2% difference between ief and a split of tlt/ cash.... 10% vs 12% for the Tlt mix ...that is 20%
A 2% difference during a 35% SP500 decline is leaps and bounds over holding 100% cash (assuming bond capital appreciation). Seems like a reasonable alternative for those adverse to the LTT/STT combination and for someone like me who has recently sold their entire batch of TLT.
Last edited by buddtholomew on Sat Apr 18, 2020 9:22 pm, edited 1 time in total.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
Post Reply