Trump's Effect on the PP

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jason
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Trump's Effect on the PP

Post by jason » Fri Nov 11, 2016 1:54 pm

Trump's victory is having a profound and unexpected (by me) negative effect on the PP. I was actually expecting the opposite. Is anyone else very worried about this? What are other PPers thinking about this?
Jack Jones
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Re: Trump's Effect on the PP

Post by Jack Jones » Fri Nov 11, 2016 2:01 pm

On Wednesday morning, when the futures markets were indicating that equities were going to tank, I remember feeling a little smug about my PP and how I'll be fine no matter what happens. I still feel fine about the future, but I no longer feel smug.
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Cortopassi
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Re: Trump's Effect on the PP

Post by Cortopassi » Fri Nov 11, 2016 2:04 pm

Past couple days have seen about 3% gain shaved off.

NOT liking it, but I am holding my nose and possibly averaging in a little more into gold.

Trump will likely increase the debt by trying to lower taxes and other stimulus measures while at the same time saying interest rates are too low. Not at all sure what will happen though, since it is Trump.

Funny, that he brings in volatility, which should be gold's friend, and it certainly is not except for election night!
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buddtholomew
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Re: Trump's Effect on the PP

Post by buddtholomew » Fri Nov 11, 2016 3:14 pm

US centric assets that are not exposed to currency risk have fared the best since the election.
My small-cap and small cap value stocks are up 10%+

Gold and bonds have gone the other way.
Maybe there is no longer a need for bunker assets.

Always the PP that takes the beating.
Retirement accounts humming along just fine...
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Re: Trump's Effect on the PP

Post by rickb » Fri Nov 11, 2016 11:12 pm

Cortopassi wrote:
Trump will likely increase the debt by trying to lower taxes and other stimulus measures while at the same time saying interest rates are too low. Not at all sure what will happen though, since it is Trump.
Trump will actually do whatever is best for Trump. First order of business is drastically reduce taxes on the wealthy. Second is to eliminate the estate tax so his kids will end up with everything he's scammed. Everything else is simply noise (he has no principles and no morals).

He's suggested "negotiating" (AKA defaulting) on US Treasuries. IMO, this is what's driving the treasuries beat down. If the "validity of the public debt of the United States ..." (see https://en.wikipedia.org/wiki/Fourteent ... nstitution) can be questioned, then one of the fundamental premises of the PP (the US will never default on treasuries) breaks. This is a very, very, very big deal. One way this happens is the Republican congress refuses to increase the debt limit. Trump is (at least notionally) a Republican. I suspect the market is simplified terrified about this (IMO, not terrified enough).
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ochotona
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Re: Trump's Effect on the PP

Post by ochotona » Sat Nov 12, 2016 4:40 am

rickb wrote:
Cortopassi wrote:
Trump will actually do whatever is best for Trump. First order of business is drastically reduce taxes on the wealthy. Second is to eliminate the estate tax so his kids will end up with everything he's scammed. Everything else is simply noise (he has no principles and no morals).

I love this.
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buddtholomew
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Re: Trump's Effect on the PP

Post by buddtholomew » Sat Nov 12, 2016 8:35 am

rickb wrote:
Cortopassi wrote:
Trump will likely increase the debt by trying to lower taxes and other stimulus measures while at the same time saying interest rates are too low. Not at all sure what will happen though, since it is Trump.
Trump will actually do whatever is best for Trump. First order of business is drastically reduce taxes on the wealthy. Second is to eliminate the estate tax so his kids will end up with everything he's scammed. Everything else is simply noise (he has no principles and no morals).

He's suggested "negotiating" (AKA defaulting) on US Treasuries. IMO, this is what's driving the treasuries beat down. If the "validity of the public debt of the United States ..." (see https://en.wikipedia.org/wiki/Fourteent ... nstitution) can be questioned, then one of the fundamental premises of the PP (the US will never default on treasuries) breaks. This is a very, very, very big deal. One way this happens is the Republican congress refuses to increase the debt limit. Trump is (at least notionally) a Republican. I suspect the market is simplified terrified about this (IMO, not terrified enough).
The theory is flawed.
If the US can default on debt, why would gold crater too?
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Re: Trump's Effect on the PP

Post by MachineGhost » Sat Nov 12, 2016 8:47 am

The Japan or USA can't default on their outstanding national debt because there's no liquidity limitation (unlike Europe).

However, if the market decides that holding said debt is toxic waste, be prepared for double digit interest rates. But where will all the capital go? There's no other market in the world large or deep enough to absorb it all. I suppose that the Fed can print up enough FRN's if everyone wants to hoard cash. Or there's an armada of cryptocurrencies to choose from.

Hyperinflation doesn't technically occur until the rate of inflation is around 13,000% a year or 50% a month. That only happens when productivity is completely destroyed. Trump is anything but a deflationist (except on trade but that's an issue of fairness).

So stop worryng.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: Trump's Effect on the PP

Post by dualstow » Sat Nov 12, 2016 9:13 am

jason wrote:Trump's victory is having a profound and unexpected (by me) negative effect on the PP. I was actually expecting the opposite. Is anyone else very worried about this? What are other PPers thinking about this?
Although I don't like it when the 3 non-cash assets fall together, I think this is a good time to put more money into the entire pp package. I believe Sophie's tests have shown that while buying the (single most) lagging asset is an ok strategy, it was far from being the best strategy. When the whole pp suffers, it's time to buy more pp.
https://www.reddit.com/r/TactiCat
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Re: Trump's Effect on the PP

Post by rickb » Sat Nov 12, 2016 10:40 am

MachineGhost wrote:The Japan or USA can't default on their outstanding national debt because there's no liquidity limitation (unlike Europe).
What you mean is that there's no rational reason whatsoever for Japan or the US (or any other independent currency issuer) to default. I agree with this.

Where we might disagree is whether Trump and (enough of) the Republicans in congress are rational.
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ochotona
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Re: Trump's Effect on the PP

Post by ochotona » Sat Nov 12, 2016 11:46 am

I think everything could reverse for the PP once reality sets in. I would not panic.
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Re: Trump's Effect on the PP

Post by Roy » Sun Nov 13, 2016 9:27 am

The last 3 days are dust in the wind—just as a few bad days in 2013 were, or those 3 great days (whenever), or the years that the PP lagged the broad market, or when it outperformed it when needed most.

All that is old news buried under a smooth flowing, longer-term trendline—but only if one does not fret over the dailies.

That the PP is a method that works—and works perhaps as well as anything can—is the sort of old news that allows one to do things other than watch it.

But the behavioral stuff is perneciously timeless. And for all the brilliance in its simple, effective design, it can not offer proof against one’s own gremlins.
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