PP humming along again

General Discussion on the Permanent Portfolio Strategy

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Kbg
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Re: PP humming along again

Post by Kbg » Fri Apr 15, 2016 11:51 pm

With a PP I'm not sure dollar cost averaging or spacing out purchases makes a whole lot of sense...it is a pretty good bet one of the three assets will be oinking and another flying...remember the assets are meaningless, it is the portfolio construction that matters.
Last edited by Kbg on Wed Apr 20, 2016 10:04 am, edited 1 time in total.
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Re: PP humming along again

Post by MachineGhost » Sat Apr 16, 2016 12:33 am

Kbg wrote: With a PP I'm not sure dollar cost averaging or spacing out purchases makes a whole lot of sense...it is a pretty good bet one of the three assets will oinking and another flying...remember the assets are meaningless, it is the portfolio construction that matters.
I don't think you would be saying that living through that 108 week drawdown.  DCA is the best way to deal with sequence of returns risk, epsecially the dismal 2013 and 2015.
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Kbg
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Re: PP humming along again

Post by Kbg » Wed Apr 20, 2016 10:18 am

MachineGhost wrote:
Kbg wrote: With a PP I'm not sure dollar cost averaging or spacing out purchases makes a whole lot of sense...it is a pretty good bet one of the three assets will oinking and another flying...remember the assets are meaningless, it is the portfolio construction that matters.
I don't think you would be saying that living through that 108 week drawdown.  DCA is the best way to deal with sequence of returns risk, epsecially the dismal 2013 and 2015.
Come on MG you KNOW that's a bad argument to make unless you think you can predict the future. I'll make you a pride of I told you so bet that if we make the bet starting Jan 16 and go through Dec 17 that DCA will be the exact wrong thing to have done.

The efficacy of DCA is entirely time series dependent and the ONLY reason it is superior is because it lowers average price. It is by no means a good risk mitigation strategy. I can see it for a single asset to avoid sequence risk (which will work ONLY if price goes down), but not for a PP.

Either you buy into HBs premise that the future can't be predicted or you don't. You saying DCA is a good thing is the same as you predicting the PP is going down and on an annual returns basis is a very poor bet to make.

Lest I go all theoretical on us, if I had a very large chunk of money I was going to roll into a PP I would spread it out over year, but using PP historical returns this most likely will prove to not be beneficial to the bottom line.
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Re: PP humming along again

Post by Tom » Wed Apr 20, 2016 10:46 am

I'm up 8.39% YTD and extremely happy about that.  S&P 500 up only 2.78%.  Happy I never wavered (not that I really considered it).
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Re: PP humming along again

Post by rickb » Wed Apr 20, 2016 10:48 am

Kbg wrote: Lest I go all theoretical on us, if I had a very large chunk of money I was going to roll into a PP I would spread it out over year, but using PP historical returns this most likely will prove to not be beneficial to the bottom line.
Actually, one of the data mining hobbyists with access to daily data (Tyler?) could quantify how likely this "most likely" is and what the range of the long term penalty might be.

Just guessing, I'd expect on a daily basis going all in ends up better something like 70-80% of the time and, even if you lose, the long term loss (measured against a 12 monthly DCA where you keep the uninvested portion in cash - which earns more than nothing) is never more than about 10%.
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Re: PP humming along again

Post by MachineGhost » Wed Apr 20, 2016 1:37 pm

Kbg wrote: Either you buy into HBs premise that the future can't be predicted or you don't. You saying DCA is a good thing is the same as you predicting the PP is going down and on an annual returns basis is a very poor bet to make.
You're worried about the returns.  I'm worried about the risk.  The risk is the PP has had 108-week in a row of of being underwater.  That is a fact.  DCA is a way to mitigate that risk if it reappears.  The returns will more than take care of themselves -- that's why we invest in the PP after all, right?

But if it's "market timing", then investing a lump-sum all at once in the PP at this juncture seems riskier than normal because you're relying on several things continuing to happen: extremely overvalued stocks continue to go up, extremely overvalued bonds continue to go up and gold is not going to fall victim to the deflationary forces that would finally consume us all if either/both of the first two finally mean-revert and because the central banks QEternity has finally lost their magical and illusionary power on the masses.  The context of that 108-week drawdown isn't so dissimilar to where the PP is at the moment.
Lest I go all theoretical on us, if I had a very large chunk of money I was going to roll into a PP I would spread it out over year, but using PP historical returns this most likely will prove to not be beneficial to the bottom line.
A year or 108 weeks, its all the same DCA. ::)

108-weeks might actually be too long if you're new and don't have sufficient gold exposure.  I do already so I'm less worried about it.
Last edited by MachineGhost on Wed Apr 20, 2016 1:39 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

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Re: PP humming along again

Post by MachineGhost » Wed Apr 20, 2016 1:43 pm

rickb wrote: Just guessing, I'd expect on a daily basis going all in ends up better something like 70-80% of the time and, even if you lose, the long term loss (measured against a 12 monthly DCA where you keep the uninvested portion in cash - which earns more than nothing) is never more than about 10%.
Let's get this debate settled!!!  Maths has a way of being objectively and factually truthful.
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Re: PP humming along again

Post by dualstow » Wed Apr 20, 2016 4:11 pm

Off-topic note: for the longest time, MG, I thought you were American. The avatar, for starters. But, you just have to have grown up with a British education. "Maths." "Colo(u)red people." Right?
ethnic: "pagan, heathen," Greek ethnikos ".. national," from ethnos "band of people living together, nation, people, tribe, caste,"..Earlier in English as a noun, "a heathen, pagan, one who is not a Christian or Jew" (c. 1400)
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Re: PP humming along again

Post by MachineGhost » Wed Apr 20, 2016 5:18 pm

dualstow wrote: Off-topic note: for the longest time, MG, I thought you were American. The avatar, for starters. But, you just have to have grown up with a British education. "Maths." "Colo(u)red people." Right?
:o
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Re: PP humming along again

Post by dualstow » Wed Apr 20, 2016 6:15 pm

No?
ethnic: "pagan, heathen," Greek ethnikos ".. national," from ethnos "band of people living together, nation, people, tribe, caste,"..Earlier in English as a noun, "a heathen, pagan, one who is not a Christian or Jew" (c. 1400)
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Re: PP humming along again

Post by MachineGhost » Wed Apr 20, 2016 7:58 pm

dualstow wrote: No?
Okay, I went to boarding school in England for a few years...  ::)
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

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Re: PP humming along again

Post by barrett » Wed Apr 20, 2016 8:38 pm

MachineGhost wrote:
dualstow wrote: No?
Okay, I went to boarding school in England for a few years...  ::)
Excellent call, Dualstow! I caught the "Maths" thing too but I thought MG was just putting on airs (or that maybe he was from India!).
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