Nobody believes in the Permanent Portfolio

General Discussion on the Permanent Portfolio Strategy

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Cortopassi
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Re: Nobody believes in the Permanent Portfolio

Post by Cortopassi » Tue Apr 04, 2017 9:59 am

dualstow wrote:When it comes to investments, I don't worry at all.
I'll leave that to the wise folks.
Yes. I read these comments by MJ and others thinking that any of us have the skill to know what bucket to place our money into given the current state of the world and think they are fooling themselves. For sure, I know people who've done it successfully. Not me, and that's why I am here.

Can rates ever get back to 6%+? I personally think long before that we will be in another recession/collapse and the Fed will need to drop rates again.
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Tue Apr 04, 2017 10:03 am

i don't think we will see 6% for a while but all we need is just to keep seeing these tiny hikes and that may keep assets moving together .

it isn't a question of guessing what is next . it is merely the fact that the volatility is there no matter what you do it seems , like it or not . in the short term it is what it is and longer term protecting against short term dips becomes irrelevant since it is the short term we would like to mitigate . .

my point is that we can't control the potential scenario's and there will be times like now that these risk pairing portfolio's are actually more volatile than conventional portfolio's .
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Re: Nobody believes in the Permanent Portfolio

Post by dualstow » Tue Apr 04, 2017 10:38 am

mathjak107 wrote:these risk pairing portfolio's
I like it! I mean, I think it's supposed to be risk-paring, cutting down risk as with a paring knife.
But in a way, we're pairing risks against each other. You accidentally invented a cool new term.
We won't get into the apostrophe. :(
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Re: Nobody believes in the Permanent Portfolio

Post by Jack Jones » Tue Apr 04, 2017 12:37 pm

dualstow wrote:
mathjak107 wrote:these risk pairing portfolio's
We won't get into the apostrophe. :(
O0
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Re: Nobody believes in the Permanent Portfolio

Post by Cortopassi » Tue Apr 04, 2017 1:31 pm

A major part of the PP is to specifically invest in volatile assets, and rebalance out of one into others based off bands or time.

I started buying gold in 2008. If instead of the investing I did, I went right into the PP in 2008, peak to trough shows that I would have rebalanced because of:

Bonds in 11/2008, due to increase
Gold in 4/2011, due to increase
Stocks in 7/2015, due to increase

This is telling me that the rebalancing bands are working to everyone's favor in the PP and volatility should be welcomed.

The bond rebalance came at a transitory top in late 2008. The gold rebalance ticked nearly the exact top of gold around $1900. The most recent stock rebalance captured a lot of the gain along the way.

Sure, Jan 2008 is arbitrary, and I chose it because that's when I made my first gold purchase.
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Re: Nobody believes in the Permanent Portfolio

Post by dualstow » Tue Apr 04, 2017 1:40 pm

Cortopassi wrote: I started buying gold in 2008. If instead of the investing I did, I went right into the PP in 2008, peak to trough shows that I would have rebalanced ...
I think I get it but could you clarify? Does this mean you eased into the PP because you were easing into gold?
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Cortopassi
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Re: Nobody believes in the Permanent Portfolio

Post by Cortopassi » Tue Apr 04, 2017 1:58 pm

I got sick of my investing style from 1989 to 2008 (one word: haphazard) and a buddy turned me onto gold, so I started buying it, since I had none, and miners (stupid). Went great for quite some time, until 2011, when I was riding high, and then gold started dropping like a rock and has yet to recover.

I spent 2011-2014 pretty much in cash, watching the market rise. Getting burned in 2008 and dumping most everything at the exact wrong time and buying into the "sure thing" of gold at the time made a lot of sense, until getting burned from gold and miners.

In late 2013 I happened upon Craig's book, changed all holdings into the PP in early 2014 and have been in the PP ever since.

It doesn't matter that I am giving up potentially larger gains by not being in stocks, or that I should have less bonds because of interest rates having nowhere to go but up, or why am I holding a barbarous relic.

Everyone I have ever listened to, and adjusted my strategy because of, has been lopsided wrong, either in the stock, bond or gold direction. You can still find hundreds of shills out there telling the latest sucker the end of the world is coming, you need to get into gold and silver. Or conversely, get out of bonds. Or the market can't go any higher (or won't stop going up ever).

Figured it was time in 2014 to drop the emotions and get a little piece of the action in all those assets, and I can attest under oath that I have never been calmer or less stressed when it comes to money.

I applaud those who have been able to make the right calls, or have the balls to stick it out through a rough patch like 2008. That is not me, and the PP has saved my ass.

When I'm driving home and the business report comes on to try to explain what drive the latest rise or fall in the markets, I just laugh.
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Tue Apr 04, 2017 2:11 pm

well it does not mean today you are any better insulated . like i said with all asset classes moving together in these big up swings or down swings the volatility and losses may be worse .

as i said the growth and income model i follow as well as the butterfly is doing better and so far has smaller swings .

in the end discipline will determine how you do . to date over the long term no one would have lost a penny in the markets over a typical accumulation stage except for poor investor actions
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Re: Nobody believes in the Permanent Portfolio

Post by dualstow » Tue Apr 04, 2017 2:14 pm

mathjak107 wrote:well it does not mean today you are any better insulated . like i said with all asset classes moving together in these big up swings or down swings the volatility and losses may be worse .
OP's friend Charles thinks we are "doomers."
If Keith Jarrett is a musician's musician, do posts like these make mathjak our resident doomer's doomer? O0
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Re: Nobody believes in the Permanent Portfolio

Post by Cortopassi » Tue Apr 04, 2017 2:22 pm

MJ, I would take issue with your assessment that all asset classes are moving together. Here's a 1 year chart of the major ones we are talking about, which have a delta from about -8% to 21% returns. Seems reasonably uncorrelated. I put silver in there because it is 5% for me.

I would say esp. since Trump, we've become quite uncorrelated.

Image
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Tue Apr 04, 2017 2:36 pm

who cares what was happening last year . tell us what is happening now almost daily . that is all that matters .

all that matters is i swapped part of my investments for a model with "supposedly lower volatility " i got lower gains and higher volatility so far for my efforts . that is all that matters , at least to me .

lets see what more time brings us but so far it is not doing the job the way it should behave because of the rising rate fears . . the idea was to be less volatile , not more . after all that is the idea of having opposing assets .
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Re: Nobody believes in the Permanent Portfolio

Post by buddtholomew » Tue Apr 04, 2017 2:41 pm

mathjak107 wrote:who cares what was happening last year . tell us what is happening now almost daily . that is all that matters .

all that matters is i swapped part of my investments for a model with "supposedly lower volatility " i got lower gains and higher volatility so far for my efforts . that is all that matters , at least to me .

lets see what more time brings us but so far it is not doing the job the way it should .
Yeah, because you switched to the GB after SCV had increased 40+%.
See a pattern here?
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Tue Apr 04, 2017 2:43 pm

i owned a small cap value fund prior to slyv last year . fcpex was up 22% last year . i also bought slyv after it came down prior to the election when i decided to do some proactive protection in the gb and it was actually one of my best gainers . it had a great run up after the election until it gave a bunch back
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Re: Nobody believes in the Permanent Portfolio

Post by buddtholomew » Tue Apr 04, 2017 2:46 pm

mathjak107 wrote:i owned a small cap value fund prior to slyv last year . fcpex was up 22% last year
yes, but you didn't own it in the money allocated to the GB, correct?
your story changes to match your perspective on that particular post...
mj, just give it a rest already.
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Tue Apr 04, 2017 2:48 pm

like i said time will tell . the results we get individually are all that matter , not charts .
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Re: Nobody believes in the Permanent Portfolio

Post by Cortopassi » Tue Apr 04, 2017 3:31 pm

Thanks, Budd.

MJ, I may be misremembering here, but I recall that the PP purposely holds volatile assets. Are they always going to be uncorrelated and volatile in opposite directions? As we have seen, no. But it seems that you like to come in and challenge whether it is a good strategy, because the assets should be uncorrelated every single day and they aren't

There have been many days that I have been happy, because all have gone up in tandem. Many other days where they have all gone down in tandem. But it is pretty clear that at least since Nov, 5 months now, there has been little correlation. And most of the time there is little correlation. **If someone has access to data, it would be interesting to see the correlation between the main assets over time**

My version of the PP is currently up 5.26% YTD, better than three of the four main components (VTI, TLT, cash). Gold, silver and international are pulling the weight right now.

I am not complaining.
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Re: Nobody believes in the Permanent Portfolio

Post by buddtholomew » Tue Apr 04, 2017 4:17 pm

Sure Corto. :)

Everything I own is positive YTD, except a sliver of IJS and REITs.
Also, the PP is performing above expectations so this is a time to rejoice and not complain about poor performance.

Many have said before its less about what you own and more about whether you can invest in the strategy for better or worse.
Its also not about having the biggest pot of Gold in retirement as more $$ does not equate to more happiness.

I enjoy the journey the PP provides more than I enjoy the roller-coaster ups and downs a 70/30 allocation can have OVER longer periods than a day or week or month or year.
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Tue Apr 04, 2017 4:21 pm

i did not complain about poor performance at all . i said the volatility in the gb is as high as a 100% equity portfolio at times lately but the gains are not . my typical mix is under 50% and closer to 45% or so equity if i don't use the gb . i do not use 70/30 at all .

i would not classify the gb as a low volatility portfolio at this point in time and i do not recommend it for anyone who does not want a pretty wild ride at times .

that is really my point .
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Re: Nobody believes in the Permanent Portfolio

Post by buddtholomew » Tue Apr 04, 2017 4:24 pm

mathjak107 wrote:i did not complain about poor performance at all . i said the volatility in the gb is as high as a 100% equity portfolio at times lately but the gains are not .
sure, but is that the case when stocks decline.
I recall many days where stocks have declined and gold and treasuries have risen.
Gold has outperformed stocks (S&P500, Small-Cap) so the increased volatility has resulted in higher gains, no?
If you didn't hold the GB you wouldn't be invested in Gold.
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Tue Apr 04, 2017 4:55 pm

the volatility is different in the gb now . a 40%- 45% conventional model does not move like a 100% equity portfolio at any point in time .

that is not true in the gb as on those days many parts follow each other with the result that it behaves more like the 100% growth model i still track .

so it isn't the fact it is just volatile , it can be on par with a 70-100% equity model at times so a user needs to understand that because history on it shows it to be one of the lowest volatility wise today that may not be the case and the experience you have with it .

that may have been true over the long term or in the past but today if someone is looking at it as bit more aggressive equal to the pp as far as comfortable swings it can be far from it .

if you use it today you will experience the same swings a 70-100% equity model see's at times and potential users should be aware of that . it does not behave like a 40% equity model would be expected to.

you may think it would be even less docile than wellesley because it has opposing asset classes but it is not and i think this is important for potential users to realize .
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Re: Nobody believes in the Permanent Portfolio

Post by Cortopassi » Wed Apr 05, 2017 9:18 am

I'm still not clear on what you mean by volatility. Take this morning for example. My PP is down 0.13%, due to gold and TLT being down and the stock portion being up. So the volatile swing in gold is attenuated by a rising stock market, and overall the PP is right now less than 1/4 as volatile as a 100% stock and higher than a 60/40 (which is currently about a 0.1% move up)

You are saying that on days when assets are correlated, that each asset class might be up or down in tandem, say 1% and that makes the GB more volatile?

If I've got 5 GB assets each at 20% all moving 1%, the entire portfolio moves 1% And if I was in a 100% VTI setup instead, that move would be 1%. Same for a 60/40 TLT/VTI.

And the same results for a negative move.

So on days when all assets track, it doesn't matter what your allocations are, everyone gets the same move.

I suspect it all comes back to you not liking holding gold because that is a wildcard that doesn't fit into any "normal" portfolio. ;D
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Re: Nobody believes in the Permanent Portfolio

Post by dualstow » Wed Apr 05, 2017 9:32 am

I don't know why we're even talking about the Golden Butterfly in this thread, but you can see its standard deviation at portfoliocharts. Way lower than all_equities of course, but a bit higher than that of the pp.
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Wed Apr 05, 2017 9:35 am

yes , i am saying on the days that stocks , bonds and gold are all up or down the move can be huge , especially in dollars if you have a lot in it .

on those days the 40% equity gb surpasses my 100% equity model in moves .

so what i am saying is if the reason someone is running with a 40% equity model is to temper the swings they get on volatile days as opposed to running 100% equity , they may even get more of a swing at times in the gb .

if someone is looking to temper the short term volatility the gb may really not be the answer at times like now. there are other 40% equity models that will produce much less in swings ala wellesley as an example .

don't forget we are not talking action in a plunge , we are talking just daily activity and how the gb responds when all 4 move the same way just a bit .
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Re: Nobody believes in the Permanent Portfolio

Post by Libertarian666 » Wed Apr 05, 2017 9:38 am

mathjak107 wrote:yes , i am saying on the days that stocks , bonds and gold are all up or down the move can be huge , especially in dollars if you have a lot in it .

on those days the 40% equity gb surpasses my 100% equity model in moves .

so what i am saying is if the reason they are running with a 40% equity model is to temper the swings they get on volatile days as opposed to running 100% equity , they may even get more of a swing at times
So you are saying that when all your assets move in the same direction, you have more volatility than if they moved in different directions?

What are you going to tell us next? That 50% of the population has no more than the median amount of assets?

I can hardly wait. :P
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Re: Nobody believes in the Permanent Portfolio

Post by mathjak107 » Wed Apr 05, 2017 9:42 am

if you can't grasp what i am saying i can't help you understand it any better .

for someone looking for a portfolio that responds the way only 40% equity's is expected to act compared to 100% , the gb is likely not going to be the answer if short term drops are the reason you are using such a conservative model.

this concept really is not hard to understand ! volatility in it today can be far greater than the charts show the past was surpasing 100% equity portfolio's at times .

if you think it is a 40% equity alternative to wellesly you would be making the wrong choice for now .odds are you will be scared out out and that never is a good thing .
Last edited by mathjak107 on Wed Apr 05, 2017 9:46 am, edited 1 time in total.
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