Nobody believes in the Permanent Portfolio

General Discussion on the Permanent Portfolio Strategy

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mathjak107
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Wed Apr 05, 2017 12:05 pm

i didn't refer to the pp as a doomsday portfolio . i was referring to mitigating short term temporary dips having no logic for a long term investor with a long term perspective . heavy betting against each other is for mitigating things in the short term as long term these dips have no meaning .

as peter lynch said more money has been lost preparing for or anticipating the next correction or crash than has ever been lost by any long term investor .

which goes back to what i said which you are mis-construing . thinking because the gb is 40% equity it is on not only on par with wellesley short term volatility wise but thinking it is less because of the risk "pairing " would likely be a mistake by that person .. that is my entire point . do not confuse it in the short term for what you may think a portfolio with only 40% stocks would leave you up or down in the short term . you can get qa much wilder ride than you signed on for. if short term mitigating is your goal the pp is better at
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Cortopassi
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Re: Nobody believes in the Permanent Portfolio

Post by Cortopassi » Wed Apr 05, 2017 12:35 pm

You're telling me I am not to infer you think the PP and its variants are doomsday portfolios by you stating it this way:

"other wise there is little point to permanently hurting your long term performance unless you believe doomsday is coming."

Nobody generally uses the term doomsday when regarding investing unless you are biased against holding gold. And if instead you are referring to a very conservative portfolio, i.e. bonds/CDs/cash as a doomsday portfolio, I would think those categories are potentially up for losses if a doomsday scenario includes problems with the government or banking sector in one form or another, debt, high interest rates, loss of confidence, inflation, hyperinflation, wars, etc.

I don't think anyone here is swayed by any short term PP volatility, other than bitching about it every now and then.

And I think/assume most here are more than happy giving up the potential increased returns of a 20-25% higher stock holding and instead having that portion in the safety (and likely lower return) of gold.
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Re: Nobody believes in the Permanent Portfolio

Post by Dieter » Wed Apr 05, 2017 2:33 pm

GB with 20% SCV is a volatile 40% stock allocation.
(Wellesley is 35% LCV)

20/20 LTT/STT is, what, >50% more duration exposure than Total Bond.
(While Wellesley tends to be longer duration, I think it's currently similar to Total Bond, mostly corporates)

Gold is....

But yes, not fun to watch move more than equity heavy portfolios.

I've always wanted my equity to be >= LTT + Gold to reduce (negative) tracking error in my GBish portfolio.

With the hope that when things go south, I go less south.
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Re: Nobody believes in the Permanent Portfolio

Post by buddtholomew » Wed Apr 05, 2017 4:05 pm

Dieter wrote:GB with 20% SCV is a volatile 40% stock allocation.
(Wellesley is 35% LCV)

20/20 LTT/STT is, what, >50% more duration exposure than Total Bond.
(While Wellesley tends to be longer duration, I think it's currently similar to Total Bond, mostly corporates)

Gold is....

But yes, not fun to watch move more than equity heavy portfolios.

I've always wanted my equity to be >= LTT + Gold to reduce (negative) tracking error in my GBish portfolio.

With the hope that when things go south, I go less south.
I reached that conclusion as well.
Equity >= LTT/ST+ Gold, currently 53,41 and 7 respectively.
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Re: Nobody believes in the Permanent Portfolio

Post by mukramesh » Fri Apr 07, 2017 12:24 pm

mathjak107 wrote:i didn't refer to the pp as a doomsday portfolio . i was referring to mitigating short term temporary dips having no logic for a long term investor with a long term perspective . heavy betting against each other is for mitigating things in the short term as long term these dips have no meaning .
According to Tyler's website, the longest drawdown was ~3 years. So people should not invest in the PP unless their time horizon is > 3 years. No point worrying too much about the daily movement of the different assets.
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Re: Nobody believes in the Permanent Portfolio

Post by sophie » Sat Apr 08, 2017 2:15 pm

This post isn't about the Permanent Portfolio so much as active vs. passive investing, which most of the posts in this thread (and many others) are really about.

My brother has long been a staunch believer in market timing with stocks as the best way to invest. He's also become increasingly busy, between family and his business. Today, to my amazement, I got an email from him asking for advice about index funds. Here's an excerpt from it that deserves to be immortalized:
I bought my house on XXX stock I bought at $00.14 and sold at $3.75. I fear that move may plague me throughout my lifetime into thinking I can win the stock market bet. Right now, I am $(a large number)K up on several stocks, but also $(large number + 5)K down on some others. All this investing and trading and watching the stock market in order to lose some money in the end. Just silly I'm realizing. Not worth the effort.

Anyway, I'm thinking of keeping the money I have in the market, and everything moving forward quickly put into index funds so that I am not tempted to trade it. That way I can plan responsibly for my future but still have something to satisfy my risk taking appetite.
I'm debating whether to go whole hog and introduce him to the Permanent Portfolio, but I think I'll start slow with the simplest possible stock/bond mix first. He's never bought a bond or fund in his life!
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Re: Nobody believes in the Permanent Portfolio

Post by dualstow » Sat Apr 08, 2017 3:21 pm

I think you're doing the right thing. As much as I love the pp, telling him about that first might be like that story about the people who are afraid of melons. You know, the normal guy goes to the Land of Melons, where people are terrified of them and think they're monsters. Normal guy takes out a machete and cuts one in half. "See? Nothing to fear," he says. They freak out and kill him.

Another normal guy, but wiser, comes along and finds that these people fear melons. He says, "Yes, shh, we better tread carefully, and gradually, over time, teaches them that there's nothing to fear.

Anyway, hooray for your brother. I can picture you starting him off with a boglehead-type lazy portfolio. Eventually he might ask, "Is this what you do?"

For what it's worth, I have a sister who works at a brokerage firm and she's never bought bonds either. (Sunday edit: sister-in-law)
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Re: Nobody believes in the Permanent Portfolio

Post by modeljc » Sat Apr 08, 2017 4:28 pm

sophie wrote:This post isn't about the Permanent Portfolio so much as active vs. passive investing, which most of the posts in this thread (and many others) are really about.

My brother has long been a staunch believer in market timing with stocks as the best way to invest. He's also become increasingly busy, between family and his business. Today, to my amazement, I got an email from him asking for advice about index funds. Here's an excerpt from it that deserves to be immortalized:
I bought my house on XXX stock I bought at $00.14 and sold at $3.75. I fear that move may plague me throughout my lifetime into thinking I can win the stock market bet. Right now, I am $(a large number)K up on several stocks, but also $(large number + 5)K down on some others. All this investing and trading and watching the stock market in order to lose some money in the end. Just silly I'm realizing. Not worth the effort.

Anyway, I'm thinking of keeping the money I have in the market, and everything moving forward quickly put into index funds so that I am not tempted to trade it. That way I can plan responsibly for my future but still have something to satisfy my risk taking appetite.
I'm debating whether to go whole hog and introduce him to the Permanent Portfolio, but I think I'll start slow with the simplest possible stock/bond mix first. He's never bought a bond or fund in his life!

I told my Friend Charles there are only three things that MIGHT sense in this funny world:
VWIAX
PP
Ladder of CD or Treasuries
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Re: Nobody believes in the Permanent Portfolio

Post by Jack Jones » Sun Apr 09, 2017 5:22 am

sophie wrote:
I bought my house on XXX stock I bought at $00.14 and sold at $3.75. I fear that move may plague me throughout my lifetime into thinking I can win the stock market bet. Right now, I am $(a large number)K up on several stocks, but also $(large number + 5)K down on some others. All this investing and trading and watching the stock market in order to lose some money in the end. Just silly I'm realizing. Not worth the effort.

Anyway, I'm thinking of keeping the money I have in the market, and everything moving forward quickly put into index funds so that I am not tempted to trade it. That way I can plan responsibly for my future but still have something to satisfy my risk taking appetite.
I'm debating whether to go whole hog and introduce him to the Permanent Portfolio, but I think I'll start slow with the simplest possible stock/bond mix first. He's never bought a bond or fund in his life!
At least introduce him to Harry's writing on investing. Given that he's already decided to split his investments into risk-taking and conservative buckets, the Permanent/Variable Portfolio concept will resonate with him.

Harry has some good writing on speculative investing in "Why the Best-Laid Investment Plans..." Page 276 "Spring Cleaning" seems relevant here:

"Try to begin the Variable Portfolio from scratch, with a sum of cash. Once you've actually dumped all the baggage you've acquired over the years -- the Edsel stock, the strategic metals, the Imperial Russian bonds, and the Vegematic -- you'll probably find that you're delighted to be rid of it all. With the cash in hand, you can buy for the Variable Portfolio whatever seems best now -- rather than living with what you did two or three or ten years ago."
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sophie
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Re: Nobody believes in the Permanent Portfolio

Post by sophie » Sun Apr 09, 2017 7:09 am

Thanks Jack!

I pointed him to the Bogleheads website to start with. The Best Laid Plans book is great, but it's too long. And Fail-safe investing would introduce him to the PP. Maybe I can just send him that and tell him to read just the "golden rules" part. The radio show would be great too. Harry does such a beautiful job of explaining the "golden rules" concepts on that show.

Like, "why would someone who has a sure-fire way to beat the market write a newsletter, instead of using their system to beat the market and then buying an island in Tahiti?" [I made up that last part :-)]
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Re: Nobody believes in the Permanent Portfolio

Post by eufo » Sun Apr 09, 2017 7:23 am

sophie wrote:This post isn't about the Permanent Portfolio so much as active vs. passive investing, which most of the posts in this thread (and many others) are really about.

My brother has long been a staunch believer in market timing with stocks as the best way to invest. He's also become increasingly busy, between family and his business. Today, to my amazement, I got an email from him asking for advice about index funds. Here's an excerpt from it that deserves to be immortalized:
I bought my house on XXX stock I bought at $00.14 and sold at $3.75. I fear that move may plague me throughout my lifetime into thinking I can win the stock market bet. Right now, I am $(a large number)K up on several stocks, but also $(large number + 5)K down on some others. All this investing and trading and watching the stock market in order to lose some money in the end. Just silly I'm realizing. Not worth the effort.

Anyway, I'm thinking of keeping the money I have in the market, and everything moving forward quickly put into index funds so that I am not tempted to trade it. That way I can plan responsibly for my future but still have something to satisfy my risk taking appetite.
I'm debating whether to go whole hog and introduce him to the Permanent Portfolio, but I think I'll start slow with the simplest possible stock/bond mix first. He's never bought a bond or fund in his life!
Early wins are very deceptive and can lead people into false beliefs. Many never figure it out, but at least your brother is smart enough to see it now. I work in the casino biz and we love it when a new player hits a big jackpot... because we know the hook has been set. They, more often than not, try to recapture that high. Buying a penny stock and having it skyrocket probably has the exact same feeling, with one exception... one might be inclined to think it's all skill... so it's a vindication of their brilliance as opposed to just "being lucky".

I helped my good friend a couple of years ago by telling him to fire his financial advisor (who was doing an immensely terrible job and charging him a fortune) and to google lazy portfolios. He picked a portfolio I don't particularly care for, but one he really likes. He continues to thank me to this day for that. I would start there with your brother. It's easy and fun to explore for someone new to passive investing. If he inquires further, take the next step with him.
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Re: Nobody believes in the Permanent Portfolio

Post by dualstow » Sun Apr 09, 2017 7:36 am

He picked a portfolio I don't particularly care for
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