Can we trust low correlations?

[koekebakker]

One of my concerns with the 4x25 portfolio is that 75% of its assets are highly volatile. The usual response is that you shouldn't look at assets in isolation, and so far in the history of the PP that has played out very well. The correlations between the three volatile asset classes have drifted over time but a clear zig-zag pattern has been visible.
What I'm wondering is how reliable do you believe the low correlations to be? Harry Browne believed, or at least make it seem so, that the economy must always be in one of four economic cycles, and that at least one of the assets will react to that. The idea of four distinct cycles is without doubt a pretty big simplification and I don't have too much faith in this. The possibility of all three asset classes to lose value at the same time could amount to very large losses, especially for what is considered a conservative portfolio.

I guess a lot of this depends on what you're looking for in a conservative portfolio.
A very simple portfolio of 30% stocks, 10% gold and 60% short/int treasuries (Desert-like) performed almost exactly the same as the PP, but with lower volatility, and it relies less on the low correlations between stocks/gold/bonds.

Is this just a trade-off between deep and shallow risk? Or does a large allocation of three volatile assets together create deep risks of it's own?

Moreover, is this kind of volatility even needed to be protected? Gold is notoriously volatile and a even little bit of gold will offer a lot of protection against an inflation spike.
Long term treasuries do really well when rates are falling, but so do intermediate, or even short-term treasuries. Cash protects against deflation as well, and even gold seems to respond to lower interest rates.
The PP might be so protected that ironically it leads to a higher standard deviation and a small (but how small?) risk of a large downturn when stocks, bonds and gold tank together.

For non-US investors this might be a bigger issue because gold doesn't have to respond at all to conditions in the investors country, which increases the likelyhood of unwanted high correlations.

[grapesofwrath]

I don't know about correlations - anyones guess, but...
There was an interesting website stableinvesting.com (which unfortunately expired recently), that discussed reducing/risk volatility by reducing gold, stock allocations with the residual in treasuries being of correspondingly shorter duration in order to reduce volatility (and consequently return). In had comparitive plots of the different flavours over time.
In google search for "stable investing bond duration as leverage" and then click the little arrow for 'cached copy'.
For instance for stock 15%(20%), gold 15% (20%) one balances with residual in treasuries of 5(7) years duration.
I've always thought doing this might be prudent at the present with long treasuries being so slow. i.e. one is reducing risk from sudden increase in rates. When (if..) rates rise one may reallocate to longer duration bonds and correspondingly increase the stock, gold proportion.

[MachineGhost]

I guess a lot of this depends on what you're looking for in a conservative portfolio.
A very simple portfolio of 30% stocks, 10% gold and 60% short/int treasuries (Desert-like) performed almost exactly the same as the PP, but with lower volatility, and it relies less on the low correlations between stocks/gold/bonds.

True, but that portfolio also got destroyed in real terms during the stagflationary 70's. You had to have at least a moderate exposure to real assets or commodities to have survived intact. Judging by the Golden Butterfly, it's safe to say you probably can't go lower than 20%, or maybe 15% if you gave up stocks for shorter duration fixed income.

BTW, the 70's weren't all that bad. It presided over the fantastic innovation know as futures and options which dramatically enhanced the ability to risk manage real and financial assets and revolutioned everything. So its not like everyone acts like a frog in boiling water during inflationary periods. Innovation is still alive and well, but you must keep up and not just assume everything is hunky dory with the status quo.

Is this just a trade-off between deep and shallow risk? Or does a large allocation of three volatile assets together create deep risks of it's own?

AFAIK, no financial portfolio survives "Tight Money" risk but none definitely survive "Inflation Risk" unless they're properly constructed like the PP.

Moreover, is this kind of volatility even needed to be protected? Gold is notoriously volatile and a even little bit of gold will offer a lot of protection against an inflation spike.
Long term treasuries do really well when rates are falling, but so do intermediate, or even short-term treasuries. Cash protects against deflation as well, and even gold seems to respond to lower interest rates.
The PP might be so protected that ironically it leads to a higher standard deviation and a small (but how small?) risk of a large downturn when stocks, bonds and gold tank together.

The correlations and the volatilities in the long-term are more or less evenly matched at the 25%x4 weights. It's not optimal but there isn't much additional risk-adjusted gain to be had to bother with that.

[MachineGhost]

I've always thought doing this might be prudent at the present with long treasuries being so slow. i.e. one is reducing risk from sudden increase in rates. When (if..) rates rise one may reallocate to longer duration bonds and correspondingly increase the stock, gold proportion.

The problem is what duration do you target and its corresponding volatility to craft the other assets around? Right now, duration models would have you at the lowest single digit durations which doesn't leave much room for exposure to the other assets. While there is no correlation between earnings yields and bond yields, the yield seeking phenomenom has driven future expected returns for all assets down to effectively 0% or negative real, so perhaps this is as it should be. The bigger question is: how does this new reality affect your investment goals?

Most of us are decades away from official retirement that the duration of all assets are effectively high enough that there is no issue with the standard PP. It's those within 10-16 years of retirement that are facing the cliff edge. The best thing would be to clear this crazy condition of yield seeking behavior and get back to normal markets... ASAP. Not holding my breath.

[I Shrugged]

It's a good question.

I guess I would say that if stocks, bonds, and gold all crash, there would not be any other liquid investments which would have helped. Other than the appropriate options, futures trades, short sales, etc.

There has been a lot of discussion over the years about the 4 cycles. The idea is not entirely satisfying, but nobody can refute it, either. I've posted that HB probably didn't forsee ZIRP and NIRP. And that is certainly the biggest thing affecting the PP and all investments today.

[Kbg]

KBakker,

For whatever reasons humans enjoy making investing a highly complex affair. Perhaps in some cases this is a good thing, but in others it isn't. With regard to HB's view of the economy, yes one could make an economic model significantly more complex and I know there are thousands of economists doing that at this very moment. But just because it is simple doesn't mean it isn't useful. Let me break it down even more simply for you.

The real economy: Is it growing or not?

Monetary base: Is it growing or not?

Combine the two together and you get four quadrants. Utterly simplistic, utterly accurate for the two factors that matter most for every investment on the planet. The descriptive model is bullet proof. Now where we can have a great debate with reasonable people differing is with regard to assets (which ones) and how to employ them within the context of the model.

HB came to the conclusion that no one can predict so he equal weighted everything his research said responded well to one of the four quadrants and added a volatility requirement to have at least one asset capable of hauling the other two dead weights. Another way to use the model is to look at history and say quadrant whatever happens most of the time and tilt the portfolio accordingly. (When people backtest and end up with a higher weighting to stocks it is an implicit assumption that the growth/inflation quadrant is predominant, and US economic history supports that). A final method is to measure the two base elements and tilt according to whatever quadrant your measurement indicates we are in. A variation to this last theme that involves no forecasting is simply put LTTs and gold together in a bucket (monetary) and cash and stocks in a different bucket (economic) and trend follow or use momentum.

If you are philosophically on board with HB's no one can predict then equal weights it is. If you are more inclined to the latter two then other methods should be used. Personally I recommend #1 or #3. Stocks look great in the rear view mirror over long periods of time. However, who is to say that is the future?

Note: I backtest like crazy...but I like to think I'm smart enough to realize that all I'm really doing is looking at history and there is no guarantee history will repeat.

[I Shrugged]

Due to ZIRP/NIRP, cash is now a full time dead weight.

Just flogging the dead horse. But it's worth repeating that our objectives and hopes should be pretty meager these days. Preservation of capital and so forth.

[Kbg]

Due to ZIRP/NIRP, cash is now a full time dead weight.

Just flogging the dead horse. But it's worth repeating that our objectives and hopes should be pretty meager these days. Preservation of capital and so forth.

And thus, why folks should pay attention to real vs. nominal. There is no great surprise cash is not a growth asset. Never has been. The vast majority of time it is a wealth losing asset and should never be thought of as a preservation of capital asset. That's what ST to MT treasuries are for.

[InsuranceGuy]

[deleted]

[koekebakker]

Thanks for the replies so far,

I agree with the idea that an allocation like the PP could very well be good enough, and that it doesn't make sense to overcomplicate it.
Part of me believes however that the PP itself might already be overcomplicating things. Or maybe not exactly overcomplicating, as 4 equal weighted assets is not exactly complicated, but making it more non-conventional and risky than necessary. The PP is definitely very opinionated. For some people not a problem, but for others it might make it harder to stay the course.

@machineghost:

I don't really see yet how a 30% stocks/ 10% gold / 60% short term treasuries got destroyed in the 70's in real terms. I've checked portfoliovisualizer and it seemed not too bad.
Even a less diversified portfolio of 1/3 stocks, 2/3 short term treasuries wasn't all that bad. Same for the 'lost decade' of the 00's. If the goal of the portfolio is preservation of wealth, both portfolios would pass the 'good enough' test for me.

Tight money scenarios will always be ugly, but short term treasuries are one of the better assets to hold in that situation.
It seems to me that the above mentioned Desert-style portfolio will likely do ok in almost any economic environment, just like the PP. It's a little more flexible as well as the lower duration gives you some more options for the fixed income part.

Regarding the lower rates:
Even in the EU I don't believe the rates are that bad. The real return for LT bonds is low, around 1%, and for short term bonds it's even lower of course, but the cash yield is still ok: 0.5 -1% real. A little more if you are willing to buy some CD's.

So a fixed income combination of 20% LT bonds and 80% cash/CD's will give you a duration of about 4-4.5 years with a real return of about 1%. Not great, but for a conservative, wealth preserving portfolio not that bad either.

Full disclosure:
I have a EU-PP, with the stock part divided between MSCI EMU and MSCI World. No immediate plans to make a change.

[MachineGhost]

Due to ZIRP/NIRP, cash is now a full time dead weight.

Just flogging the dead horse. But it's worth repeating that our objectives and hopes should be pretty meager these days. Preservation of capital and so forth.

If you looked at cash in PPP terms, it's not a dead horse when it goes up against all other currencies. So under a cirumstance like that, given the meager cash-like rewards available for the risk taken in other assets, cash is the best investment right now, especially at a 1% nominal yield per year.

[MachineGhost]

I agree with the idea that an allocation like the PP could very well be good enough, and that it doesn't make sense to overcomplicate it.
Part of me believes however that the PP itself might already be overcomplicating things. Or maybe not exactly overcomplicating, as 4 equal weighted assets is not exactly complicated, but making it more non-conventional and risky than necessary. The PP is definitely very opinionated. For some people not a problem, but for others it might make it harder to stay the course.

It's "opinionated" in the way that its not an ideal alllocation for the actual occurences of the four regimes historically. The problem here is if you weight the assets to historical occurence you are killing the portfolip's robustness in its ability to perform well on unseen data in the future. Countless of studies have used every asset allocation weighting strategy known to man and they all underperform a simple equal weighting strategy going forward. So the problem isn't the PP, its false expectations and cognitive biases.

I don't really see yet how a 30% stocks/ 10% gold / 60% short term treasuries got destroyed in the 70's in real terms. I've checked portfoliovisualizer and it seemed not too bad.
Even a less diversified portfolio of 1/3 stocks, 2/3 short term treasuries wasn't all that bad. Same for the 'lost decade' of the 00's. If the goal of the portfolio is preservation of wealth, both portfolios would pass the 'good enough' test for me.

Okay, lets just think about this for a moment. For about 15 years in a row, you consistently lost wealth in real terms until the Volcker solution of 1982. That's not "too bad"? It's incredibly demoralizing, scary and fight-or-flight syndrome inducing. Just out of self-preservation alone, you would no longer have been at 10% gold. Iabsolutelyguaranteeit. No one would have escaped the relentless doom porn about the demise of the USA, the USD, the supremacy of the USSR, etc. and the modern lamestream media would be doing lap dances with it all 24/7. Browne actually lived through (and profited from) this doom porn period, so bow to his wisdom!



So what's wrong here, really? Its your "seems to me" is flawed because you're relying on very selective data, i.e. limited. If you want "flexibility", then ladder your 25% cash out to 10-years using CD's and I-Bonds. Buttress up the PP, don't replace it wholesale.

And BTW, go look for the stats I posted in my Resort thread about the 4-asset balanced portfolio back to the 1920's. I think that will cure you of your short termism in a jiff.

[koekebakker]

The Desert portfolio on portfoliocharts doesn't use short term treasuries. With STT's the picture changes. When you lower your gold allocation, you have to lower your duration as well. I believe Desert himself uses tilted stocks and intermediate treasuries.

I haven't lived through the seventies so I have no idea how I would have handled that. It must have been incredibly difficult to stay any kind of course. The 00's were tough for me, and convinced me to slowly move to a more conservative portfolio.

I think I've read most of your research but is there any period post 1926 or so where a conservative stock/STT portfolio with some gold (if possible) got crushed?

[MachineGhost]

The Desert portfolio on portfoliocharts doesn't use short term treasuries. With STT's the picture changes. When you lower your gold allocation, you have to lower your duration as well. I believe Desert himself uses tilted stocks and intermediate treasuries.

I haven't lived through the seventies so I have no idea how I would have handled that. It must have been incredibly difficult to stay any kind of course. The 00's were tough for me, and convinced me to slowly move to a more conservative portfolio.

I think I've read most of your research but is there any period post 1926 or so where a conservative stock/STT portfolio with some gold (if possible) got crushed?

Tyler, since you dropped 10-year Treasuries in favor of 5-year Treasuries, the description for ITT is now, in fact, incorrect? Has the Desert heat map that I posted been updated to reflect the use of 5-year Treasuries?

Lower duration could make a significant difference. Typically 5-year VFITX is "optimal" for duration exposure in simplistic spreadsheet backtests. You just need some gold for protection against inflation and you're good -- that may have been the PP Jr. portfolio that I posted last year that was based on earning at least a positive real return in each and every year. But of course, the real return is atrociously low so you'll basically just be spinning in place and don't have an ever growing capital buffer that at least the PP offers.

The Desert portfolio is actually 30% stocks, 30% 30-yr T-Bonds and 30% 1-yr T-Bills, so 10% gold is woefully insufficient just based on risk parity. The fixed income duration is 5.5 years (yes that means the PP actually has a lower duration!). The "Tight Money" years of 1969 and 1981 resulted in -9.73% and -26.44% MaxDD respectively for the PP. For the Desert portfolio, those years are a -7.85% and -17.78% MaxDD respectively. I don't have commodity index data back to the 1920's so portfolio risk is untestable further back than 1968. Look at the eBalanced risk chart by decade to get an idea of the risk.

So I guess we can conclude duration is not the problem, its the gold. Sooner or later you wind up virtually right back at nearly 25% that its not worth screwing around with alternative weights unless you intend to rebalance every year based on risk parity instead of using rebalancing bands.

[Tyler]

Tyler, since you dropped 10-year Treasuries in favor of 5-year Treasuries, the description for ITT is now, in fact, incorrect? Has the Desert heat map that I posted been updated to reflect the use of 5-year Treasuries?

The "5-year Treasuries" was actually sortof a misnomer to begin with. They've always followed intermediate treasury funds closer to 6-7 years average maturity and are now more accurately named. Yes, the latest Desert charts have been updated to use Intermediate treasuries instead of the fixed 10-year variety. The performance didn't change all that much.

[MachineGhost]

I think it's very possible that all four asset classes could decline in unison, in the future. In a rising rates, rising inflation environment, there is no guarantee whatsoever that gold will rise (while LTT, stocks, and cash lose real value). The performance of gold in the 70's was driven at least in part (if not in totality) by the "reset" of gold prices after being pegged to the dollar for decades. The unpeg in '72 led to a spectacular rise in the price of gold, but that unpegging event will not occur again in our lifetimes. Backtesting has convinced some that gold responds well to inflation, but in fact there is little correlation between inflation and price of gold. Gold's price behavior seems almost entirely random, which is what we should expect from a purely speculative asset. One needs only look at the recent run up in gold price during the 2000's, in the absence of high inflation, to see that gold does not simply respond to inflation. The next time rates rise, we could see a gold selloff as investors flock to the higher yields (or not). In summary, gold isn't correlated strongly with inflation, and so can't be relied upon to save any portfolio from the ravages of inflation.

There's no disputing that gold is a poor inflation hedge compared to the alternatives, but what gold (or real assets) does is hedge sovereign risk and [hyper][high]inflation is a symptom of sovereign risk. That is exactly what we had in the 1970's. Gold also collapsed 50% after the depegging, so it wasn't a one way ticket straight up into to stratastrophere. In the lamestream consciousness, gold and inflation are synonymous, but we know better now.

Still, I think diversifying beyond gold is prudent. You never know if the winds will change to favor another real asset during a sovereign crisis. It's very unlikely, but never say never. The government could decide to confiscate, outlaw or tax to death gold sales and you'll be shit up the creek without a paddle.

So what would you rather do? Reduce gold to 10% or keep it at 25% and diversify?

P.S. Technically, zero duration cash doesn't decline in a rising rate environment. It is going up in real terms and gaining purchasing power vs all other currencies. So while 1-yr T-Bills could decline a wee bit, the loss is quickly offset by reinvesting at the higher rates. This assumes, of course, the higher rates are due to productivity and not sovereign risk.

[koekebakker]

P.S. Technically, zero duration cash doesn't decline in a rising rate environment. It is going up in real terms and gaining purchasing power vs all other currencies. So while 1-yr T-Bills could decline a wee bit, the loss is quickly offset by reinvesting at the higher rates. This assumes, of course, the higher rates are due to productivity and not sovereign risk.

This is the point I’m trying to make. A Desert-like portfolio with short term fixed income will be very hard to ‘destroy’. It is reasonably protected against inflation/deflation and the expected return is comparable to the PP (if you care about expected returns at all, which I do).

The risk of an outsized loss is likely to be smaller compared to the PP as only 40% of the assets are considered risky. The safety of your portfolio doesn’t depend on future low/negative correlations, but it is a bit more dependant on stock returns.
If I believed in tilting this Desert/Larry type portfolio would be even better as the backtested risk-adjusted results are very good.

[MachineGhost]

I agree that gold is the ultimate currency default insurance. In the absence of default, I like a slice of gold for diversification. The reason I keep it small is because I expect the real return of gold to be close to zero over long periods of time. I'd like to at least attempt to obtain a positive real return from most of the portfolio.

But you're talking about a measly .1% increase in yearly real returns per year and giving up a tremendous amount of downside protection against sovereign risk. I just don't see how the Desert portfolio is justified based on the data.

My favorite portfolio model is the Taleb/Swedroe concept of exposing a small slice of the portfolio to high risk, while preserving (and slowly growing) the remainder of the portfolio. I look at the bonds & gold as the preservation portion, with tilted equity as the high risk/return portion. And for the bonds, the exact duration has mattered little in the past. The HBPP barbell, 10-year treasuries, or intermediate treasuries all performed similarly. Even a slice of corporate bonds didn't change things a lot, but they did dip painfully in 2008, so I'd avoid corporate bonds. And I agree with your point on short duration bonds in a rising rate environment.

But, the Golden Butterfly is more in line with these fat tail expectations than the Desert portfolio. Golden Butterfly earns 6.0% real returns per year. That is a significant improvement over the PP even though it breaks the risk parity concept. Are you sure you're not being overly-paranoid about the gold here??? I have much more issues with T-Bonds due to insufficient data than I ever do the gold. Sure, I despise the ideal of a 25% MaxDD on my entire net worth, but it is what it is. There's just no way to wholesale fix it.

MG, what asset are you thinking about when you say "diversifying beyond gold?"

I'm thinking of other financialized real assets so they're readily fungible (I don't mean paper products, but standardization and grading). This is a gradually improving area and I expect it will really snowball during the next sovereign crisis. Historically, rare stamps and rare diamonds have saved many refugees. And if you're forced to stay put, then having a doom porner prepper SHTF cache is a good idea.

[MachineGhost]

This is the point I’m trying to make. A Desert-like portfolio with short term fixed income will be very hard to ‘destroy’. It is reasonably protected against inflation/deflation and the expected return is comparable to the PP (if you care about expected returns at all, which I do).

But you're market timing. Do you have a quantified system that has 90%+ correlation to future expected returns based on actions you take in the present? Just sayin'.

The risk of an outsized loss is likely to be smaller compared to the PP as only 40% of the assets are considered risky. The safety of your portfolio doesn’t depend on future low/negative correlations, but it is a bit more dependant on stock returns.
If I believed in tilting this Desert/Larry type portfolio would be even better as the backtested risk-adjusted results are very good.

70% of the assets in the Desert portfolio are risky compared to 75% in the PP. You have to compare apples to apples here.

Look, the PP already has a 4.5-yr duration. If you want it even lower, scale the three assets downwards to preserve the risk parity and park the difference into cash. You're basically making the same argument as Desert is, that you think the gold is the albatross around the PP's neck for not incurring outsized losses.

[koekebakker]

The thing is I'm not talking about the Desert portfolio, I'm talking about short term fixed income, 2.5-3y duration for the 60% fixed income part. The higher duration of the Desert portfolio makes it vulnarable in a 70's scenario.
When you lower the gold allocation compared to the PP, you have to lower the fixed income duration as well.

I don't really see how this is market timing. When constructing a portfolio I'm more interested in expected returns than in past data.
Data can be useful though. For example, the data shows very clearly that gold and stocks are more risky than cash. It also shows very clearly that the return of stocks, gold and bonds have been very good since '72.
It doesn't show why though. In the case of stocks a strong case has been made that of why stocks tend to go up over time. In the case of long bonds the reason is also clear: falling rates. Will that continue? Maybe. In the case of gold there is no immediate explanation of why it did so well. I wouldn't count on it going forward.

I believe that estimating an assets expected return is a better way of thinking about future returns than thinking that the Golden Butterlfy is returning 6% real. It did return 6% real.

[MachineGhost]

"Estimating" and "Expecting" is considered market timing if it causes you to make tactical allocation changes.

I think duration is probably the wrong thing to be looking at here. A 2-yr or so increase in duration to match the Desert portfolio is only an additional 2% loss per 1% increase in yield. That's not enough to explain the portfolio risk differentials between the PP, Desert and Desert Jr portfolios. Ultimately, it sounds like want you really want is less duration risk, less equity risk and less real asset risk. So just scale the PP down to whatever overall portfolio risk that you like -- what's the problem with that?

Low expected returns can only be dealt with by scaling down if you don't care about returns or diversifying the sources if you do.

[MachineGhost]

Shorter duration bonds made very, very little difference in the 70's. And over the period of 72 to 2015, an equal mix of 5YT and STT performed almost the same as a single slug of 10YT. That said, with the current low yields, I can get double the yield in a CD that I can get in the same maturity treasury, so I'm putting about 45% in CD's and ITT, and 15% in LTT.

I think the Golden Butterfly is a fine portfolio, much better than the PP. But with only U.S. equity, it lacks diversification and holds the most expensive equities in the world.

There's no reason you can't Taleb/Swedroe up the Golden Butterfly. The problem is the portfolio will no longer look so hot because recent returns for other sectors than the USA have been relatively poor since 2009. Diversification has sucked, so where do you draw the line? This is also a case where expected future returns would actually provide some guidance, but you're gonna really go off the reservation because value is all in emerging and frontier markets at this point. I'm not brave enough to put significant chunks into those markets... too wild and woolly for me.

I like the strategy of matching or slightly exceeding inflation with the 70%, and putting the remainder in high risk/high expected return assets (global).

The Desert portfolio is hardly that with Total Market. Are you saying it is outdated and has been revised?

I considered a "Match Inflation" portfolio also. I really don't relish the Double Trouble of losing on my trades and losing on my portfolio at the same time -- thats unnecessary additional psychological stress. But on the other hand, its puts all the stress on the active trades (i.e. me) not to have a passive source of return as backup. A job unrelated to the financial markets or economy would be the single best non-correlated asset you could possibly have. Sophie is bloody lucky!

[MachineGhost]

I'm willing to increase the risk (and hopefully return) a bit, so I've split the equity portion equally between TSM, SCV and EM.

Paging Dr. Tyler! Paging Dr. Tyler!

[Tyler]

Gold-heavy portfolios look pretty bad *relative* to traditional portfolios, when the gold reset period of the early to mid 70's is excluded. The fact that gold heavy portfolios have become popular is at least partially due to Simbas spreadsheet data starting in 1972. If that data had started in 1980, this forum probably wouldn't exist.

Nah. Gold also did terrific in the 2000's while stocks sucked for a decade. It's a lot more interesting than a one-time post-gold-standard burst.

I do like the way the Desert portfolio blends the PP with the Swedroe mentality of loading up on safety while investing in more volatile assets in smaller proportions. Using TSM/SCV/EM makes a lot of sense in that setup.

[Kevin K.]

The confusion here is that the OP and Desert are talking about the REVISED Desert Portfolio (which I nicknamed the "Desert Oasis" without dispensation from Desert) while Machine Ghost is talking about the original Desert portfolio - and the latter is what's on Tyler's site.

The updated version is, as Desert pointed out, a PP-informed spin on Larry Swedroe's most recent iteration of the Larry Portfolio. It's 60% Intermediate Treasuries, 10% each Total Stock, Small Cap Value, Emerging Markets and gold. The performance over pretty much any time frame I've run back tests on (I always start in 1975 to exclude the one time effects of going off the gold standard) is more impressive than even the PP, and for a retiree the lower drawdowns vs. pretty much anything else are extremelty attractive.

10% gold is enough to make a difference, but not enough to be dead weight. The stock components are exceptionally well selected too. Swedroe's excellent book(let) "Reducing the Risk of Black Swans" makes a compelling case for the basic approach of a ~70% ITT allocation with a modest allocation to only really volatile equities. Desert's equity choices and the 10% gold innovation make this new version even better than anything Larry has come up with. Here's one backtest:

https://www.portfoliovisualizer.com/bac ... 0&Gold1=10

I hope Desert will weigh in here with his own preferred name for this - and that Tyler will consider including it in Portfolio Charts, as it seems to be a very viable replacement for both the earlier Desert and the Larry portfolios currently on the site.