Backtesting the PP in Other Countries (Economies)

[Kike Moreno]

OK, I understand that having 2 separate settings, one for the currency and another for the inflation could be too messy. But maybe you could just add a new "country" called "eurozone" with this configuration:
- data only from 1999. I know the timeframe is short, but it's better than nothing
- stocks: MSCI EMU
- bonds: German 30-year bund (the same currently used for German configuration)
- cash: German short term (the same currently used for German configuration)
- inflation: eurozone inflation (it is published monthly)

From what I see in your engine it looks like all these are configurable parameters except for the start year. Currently all the countries work on datasets starting on 1970, so maybe it is somehow hardcoded in the tool...

[Tyler]

That's an interesting idea. I'm not sure Germany alone would be an appropriate source for EMU bonds as a whole, but maybe I could properly weight them.

[Kike Moreno]

That's an interesting idea. I'm not sure Germany alone would be an appropriate source for EMU bonds as a whole, but maybe I could properly weight them.

Brownehead did an interesting analysis on the performance of the European countries bonds in the event of a deflation (which we had during the recent years). The conclusion is that German bunds where the best performers and only Netherlands and Finland had a similar performance. That's because, as we know, when things look difficult money goes to the safest place. So I don't think a capitalization based index will work for the euro PP. These indexes are full of, for example, French bonds that suffer during crises.

http://www.carterapermanente.es/bonos-europeos/

[Tyler]

World small caps are on my short list for things I'd like to add. The issue is that data is really hard to come by. As you already pointed out, even MSCI only has ACWI SC data back to 1994. I'm exploring different sources and models for backtesting options, but it will take time to get right.

For anyone interested, the site has finally been updated with World Small and World Value data. Check it out: https://portfoliocharts.com/2017/06/03/ ... big-world/

[blue_ruin17]

I saved this in notepad when I came across it somewhere in Bogleheads, but did not copy the URL.

PP In Iceland, 2008:

1. 25% LT Bonds: 0% 
2. 25% ST Bonds: 12% 
3. 25% Stocks: -88% 
4. 25% Gold: +259% 

Total PP: +46% 

[Bjorgen]

I saved this in notepad when I came across it somewhere in Bogleheads, but did not copy the URL.

PP In Iceland, 2008:

1. 25% LT Bonds: 0% 
2. 25% ST Bonds: 12% 
3. 25% Stocks: -88% 
4. 25% Gold: +259% 

Total PP: +46% 

Permanent Portfolio Rescues Iceland From Total Collapse:
http://www.thepermanentportfolio.com/pe ... -collapse/

[senecaaa]

Hi All,

For more empirical evidence of how the PP would respond to various economic conditions is there any (vetted) data on how it would have worked in other countries? Some example scenarios I'd like to see:
1. Long, deflationary conditions (Japan)
2. Transition from supplier of world's reserve currency (Britain)
3. Hyper-inflation (Argentina)
4. Economic collapse (Iceland)

These are (or were) all developed countries and so I feel like similar situations could occur in the U.S.. Thus, I'd like to see how the PP or GB holds up against real-world data as a validation of the theory.

And for FWIW, I'm considering transitioning to a GB-inspired portfolio:

1. 40% Stocks (in 2:1 split between U.S. and ex-U.S.)
2. 20% Gold
3. 20% LTT
4. 20% Cash (including I/EE-bonds)

Thanks!

Apparently the PP didn't do great in Japan: https://portfoliocharts.com/portfolio/portfolio-matrix/ (select Japan from the dropdown thingy).
Does that mean the PP is not at its best in deflationary conditions?