Is the PP going to hold up?

General Discussion on the Permanent Portfolio Strategy

Moderator: Global Moderator

Libertarian666
Executive Member
Executive Member
Posts: 5994
Joined: Wed Dec 31, 1969 6:00 pm

Re: Is the PP going to hold up?

Post by Libertarian666 » Fri Feb 09, 2018 1:46 pm

buddtholomew wrote:So what’s the threshold where the other assets move? Is it
20, 30, 40%. If that’s the case why bother with Gold and LTT’s. With those declines you should be buying stocks.

Stocks come back, Gold and LTT’s down.
Stocks go down, Gold and LTT’s flat or down.
Hmm...
So that means that gold is always worse than stocks.

Which is odd because as someone else has already pointed out, there have been 2 decades in the last 5 when gold was the best performing investment.

Have you read Bill Bernstein's article about the HBPP? Here's the URL again in case you missed it: http://www.efficientfrontier.com/ef/0adhoc/harry.htm.

But to cut to the chase (no pun intended), people who get into the HBPP because it has been outperforming for the past several years are not going to stick with it, so they won't get the benefits of its lower volatility with overall good performance.

If that sounds familiar, it should.
glennds
Executive Member
Executive Member
Posts: 574
Joined: Mon Jan 28, 2013 11:24 am

Re: Is the PP going to hold up?

Post by glennds » Fri Feb 09, 2018 2:19 pm

buddtholomew wrote:Thanks Glennd’s for the reminder.
Stocks are rebounding with Gold/LTT’s selling off.
By the way, I should say I completely get and share your pain. That's what drove me to the Peak2Trough tool to look back at the history myself.

I occasionally have to remind myself of the quote in the article that Libertarian666 linked - "Investment success accrues not so much to the brilliant as the disciplined".
Last edited by glennds on Fri Feb 09, 2018 3:15 pm, edited 1 time in total.
User avatar
bitcoininthevp
Executive Member
Executive Member
Posts: 222
Joined: Fri Sep 25, 2015 8:30 pm

Re: Is the PP going to hold up?

Post by bitcoininthevp » Fri Feb 09, 2018 2:40 pm

buddtholomew wrote:
Cortopassi wrote:The only temporary issue I have with this downturn is the rapidity of the paper loss. I was at 2.66% up on 1/25, here we are 15 days later and I am -2.81% down. The PP is mitigating the downturn, but it is still a painful 5.5% turn negative.
Finally, someone coming to my point of view.
PP has provided absolutely zero benefit during this downturn.
Only reason PP is losing slightly less is the lower allocation to equities. This lower allocation comes with MUCH lower gains when stocks rise.
Dont forget. Gold went from ~$1240/oz to ~$1320/oz in the last 60 days. Thats about 6.5% up.

So not only shouldn't one be looking at gold "responding to" stocks within a couple days, but Id advocate looking weeks/months *before* as well.
User avatar
bitcoininthevp
Executive Member
Executive Member
Posts: 222
Joined: Fri Sep 25, 2015 8:30 pm

Re: Is the PP going to hold up?

Post by bitcoininthevp » Fri Feb 09, 2018 2:47 pm

buddtholomew wrote:
Kriegsspiel wrote:
“Why keep something in gold? It’s stable. But why keep it in gold when it stays in a $100 range, when I could buy Bitcoin when it is increasing everyday?” Salamida said.

http://fortune.com/2018/02/08/bitcoin-p ... price-buy/
bud?
Let me be clear, I am not advocating buying BTC but merely pointing out on a day where the DOW fell 1000+ points BTC rose 10% while Gold only 0.24% That doesn't seem unusual to anyone on this forum? Think about that for a moment.

Techno, not sure what you are talking about but you missed the point once again.
Appreciate bitcoin being talked about in the discussion here. :) But bitcoin is all over the place for a variety of reasons, the least of which might be external-to-crypto markets.

Reminds me of this tweet the other day:
https://twitter.com/arbedout/status/960675720296108033
User avatar
bitcoininthevp
Executive Member
Executive Member
Posts: 222
Joined: Fri Sep 25, 2015 8:30 pm

Re: Is the PP going to hold up?

Post by bitcoininthevp » Fri Feb 09, 2018 2:57 pm

eufo wrote: RE: Bitcoin... If anyone is selling equities to run to Bitcoin as a safe haven, I think they are making a gross error that will prove disastrous.
I agree with this.

On a related topic, I would like to put in an application for a new portfolio.

I see GB, Coffeehouse, Swensen all have their own. And I'm jealous.

I propose a portfolio which is a traditional permanent portfolio mix with a bitcoin variable portfolio sidecar.

Hows:
  • 24% gold
    24% cash
    24% stocks
    24% long term bonds
    4% bitcoin
Turns out the back testing is amazing.

Ill need your help with the name.
User avatar
dualstow
Executive Member
Executive Member
Posts: 11530
Joined: Wed Oct 27, 2010 10:18 am
Contact:

Re: Is the PP going to hold up?

Post by dualstow » Fri Feb 09, 2018 3:06 pm

Budd, if I recall correctly, you are quite well off. (Publicly stated). You should be relaxing, and not sweating this at all.
Failing that, I just want to know if you simply feel like venting and don't actually need a response, or if you are looking for answers that you haven't gotten yet. I'm asking sincerely, not sarcastically.
https://www.city-journal.org/journalism-advocacy-over-reporting
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2159
Joined: Fri May 21, 2010 4:16 pm

Re: Is the PP going to hold up?

Post by buddtholomew » Fri Feb 09, 2018 3:09 pm

bitcoininthevp wrote:
buddtholomew wrote:
Cortopassi wrote:The only temporary issue I have with this downturn is the rapidity of the paper loss. I was at 2.66% up on 1/25, here we are 15 days later and I am -2.81% down. The PP is mitigating the downturn, but it is still a painful 5.5% turn negative.
Finally, someone coming to my point of view.
PP has provided absolutely zero benefit during this downturn.
Only reason PP is losing slightly less is the lower allocation to equities. This lower allocation comes with MUCH lower gains when stocks rise.
Dont forget. Gold went from ~$1240/oz to ~$1320/oz in the last 60 days. Thats about 6.5% up.

So not only shouldn't one be looking at gold "responding to" stocks within a couple days, but Id advocate looking weeks/months *before* as well.
Sure, but let's not forget LTT's are down almost 8% YTD.
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2159
Joined: Fri May 21, 2010 4:16 pm

Re: Is the PP going to hold up?

Post by buddtholomew » Fri Feb 09, 2018 3:14 pm

dualstow wrote:Budd, if I recall correctly, you are quite well off. (Publicly stated). You should be relaxing, and not sweating this at all.
Failing that, I just want to know if you simply feel like venting and don't actually need a response, or if you are looking for answers that you haven't gotten yet. I'm asking sincerely, not sarcastically.
DS, I'm not sweating the losses at all since they are minor in comparison to the gains we have seen in the PP.
If the threshold is > 20% decline before Gold and LTT's respond then I need to rethink whether the PP is for me.
With a 20% decline I am exchanging into stocks and may never benefit from Gold or LTT's if Stocks continue to fall (I will be re-balancing into stocks).
Maybe its just Stocks and Cash.
User avatar
dualstow
Executive Member
Executive Member
Posts: 11530
Joined: Wed Oct 27, 2010 10:18 am
Contact:

Re: Is the PP going to hold up?

Post by dualstow » Fri Feb 09, 2018 3:16 pm

Makes sense.
https://www.city-journal.org/journalism-advocacy-over-reporting
User avatar
eufo
Executive Member
Executive Member
Posts: 243
Joined: Mon Dec 05, 2016 7:17 pm

Re: Is the PP going to hold up?

Post by eufo » Fri Feb 09, 2018 3:27 pm

bitcoininthevp wrote:
eufo wrote: RE: Bitcoin... If anyone is selling equities to run to Bitcoin as a safe haven, I think they are making a gross error that will prove disastrous.
I agree with this.

On a related topic, I would like to put in an application for a new portfolio.

I see GB, Coffeehouse, Swensen all have their own. And I'm jealous.

I propose a portfolio which is a traditional permanent portfolio mix with a bitcoin variable portfolio sidecar.

Hows:
  • 24% gold
    24% cash
    24% stocks
    24% long term bonds
    4% bitcoin
Turns out the back testing is amazing.

Ill need your help with the name.
"Bittersweet"?

I like the concept, btw.
Don't agree with me too strongly or I'm going to change my mind
User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: Is the PP going to hold up?

Post by ochotona » Fri Feb 09, 2018 4:04 pm

The Little Bit portfolio
Mr Vacuum
Executive Member
Executive Member
Posts: 164
Joined: Tue Jan 19, 2016 11:51 am

Re: Is the PP going to hold up?

Post by Mr Vacuum » Fri Feb 09, 2018 8:02 pm

dualstow wrote:
I'll be nibbling at stocks on a regular (weekly) schedule, but I think the dumbest thing I can do is make that equity-heavy fantasy a reality, even if stocks continue to drop. My thought for the day is stay the course.
dualstow, I forget your plan. Is that nibble a long term increase plan or micro rebalancing or what?

I so badly want to buy some whenever it drops a few percent, but that has never once worked out for me—even in late 2008, already way farther down than a few percent, it just kept going down. So that is my stay the course self admonition.
User avatar
dualstow
Executive Member
Executive Member
Posts: 11530
Joined: Wed Oct 27, 2010 10:18 am
Contact:

Re: Is the PP going to hold up?

Post by dualstow » Sat Feb 10, 2018 7:33 am

Mr Vacuum wrote:
dualstow wrote:
I'll be nibbling at stocks on a regular (weekly) schedule,
dualstow, I forget your plan. Is that nibble a long term increase plan or micro rebalancing or what?


Choice #1. It’s not so much rebalancing as a long term plan to continue to accumulate stocks, pp or not, while I’m still relatively young. It’s probably best to just lump sum early, but my lump sum is already invested.

Most importantly, this is the only way I can overcome paralysis. I can buy any of the four assets as long as it’s in small amounts.
https://www.city-journal.org/journalism-advocacy-over-reporting
User avatar
eufo
Executive Member
Executive Member
Posts: 243
Joined: Mon Dec 05, 2016 7:17 pm

Re: Is the PP going to hold up?

Post by eufo » Sat Feb 10, 2018 7:40 am

Smaller moves are much easier to make for me as well. If I received a large lump sum of money, I would have great difficulty putting it all to work immediately. I would slowly and methodically add to my positions over a course of time that felt adequate for the amount involved. It's likely too conservative, but it helps me sleep at night.
Don't agree with me too strongly or I'm going to change my mind
clacy
Executive Member
Executive Member
Posts: 1128
Joined: Mon Mar 14, 2011 8:16 pm

Re: Is the PP going to hold up?

Post by clacy » Sat Feb 10, 2018 9:36 am

My personal opinion is that gold is going to explode up soon. Of course timing is never easy and I'm talking over the next 5-7 years, I see gold out-performing stocks significantly.

In my business, I see costs skyrocketing.

-Construction costs on commercial projects are 20-25% higher than they were 4 years ago. There is a lot of building going on so contractors can bid high.

-Wages have been rising rapidly recently.

-Other input costs are rising, almost across the board.

To me that signals inflationary pressure. Inflation has been virtually non-existent for over a decade now. It's been relatively tame for 3 decades.
User avatar
sophie
Executive Member
Executive Member
Posts: 4287
Joined: Mon Apr 23, 2012 7:15 pm

Re: Is the PP going to hold up?

Post by sophie » Sat Feb 10, 2018 12:23 pm

glennds, thanks for that! I figured there might be a delay but didn't realize it could take two months before gold and bonds start picking up the slack. I guess sellers are hanging on to the cash and waiting to see if the market will go back up. Classic sell-low-buy-high behavior, which is what we want to avoid.

If this is a market blip, this past week won't make any difference except if you took the opportunity to rebalance. Too soon to tell if that's what this is. The nice thing about the PP is that it doesn't matter if it's a blip or not - you're covered either way. The PP does need down markets to justify its existence though. As long as there is such a thing as down markets, I'll keep using the PP.
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2159
Joined: Fri May 21, 2010 4:16 pm

Re: Is the PP going to hold up?

Post by buddtholomew » Sat Feb 10, 2018 12:41 pm

Here’s what I’m struggling with at the moment.
I want to buy stocks following the recent decline but the PP tells me to buy LTT’s to restore AA since I am very cash heavy at the moment.
Maybe I’ll buy a little of each and hope they done decline together.
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2159
Joined: Fri May 21, 2010 4:16 pm

Re: Is the PP going to hold up?

Post by buddtholomew » Sat Feb 10, 2018 12:43 pm

dualstow wrote:
Mr Vacuum wrote:
dualstow wrote:
I'll be nibbling at stocks on a regular (weekly) schedule,
dualstow, I forget your plan. Is that nibble a long term increase plan or micro rebalancing or what?


Choice #1. It’s not so much rebalancing as a long term plan to continue to accumulate stocks, pp or not, while I’m still relatively young. It’s probably best to just lump sum early, but my lump sum is already invested.

Most importantly, this is the only way I can overcome paralysis. I can buy any of the four assets as long as it’s in small amounts.
Ditto.
Mr Vacuum
Executive Member
Executive Member
Posts: 164
Joined: Tue Jan 19, 2016 11:51 am

Re: Is the PP going to hold up?

Post by Mr Vacuum » Sat Feb 10, 2018 1:08 pm

dualstow wrote:
Mr Vacuum wrote:
dualstow wrote:
I'll be nibbling at stocks on a regular (weekly) schedule,
dualstow, I forget your plan. Is that nibble a long term increase plan or micro rebalancing or what?


Choice #1. It’s not so much rebalancing as a long term plan to continue to accumulate stocks, pp or not, while I’m still relatively young. It’s probably best to just lump sum early, but my lump sum is already invested.

Most importantly, this is the only way I can overcome paralysis. I can buy any of the four assets as long as it’s in small amounts.
Gotcha. I’m sure there have been threads here recommending the lump sum move, at least when going from cash to PP. Changing existing volatile portfolios seems more complex. I got a bit singed lump sum converting from all stocks to the PP in May 2014. I had studied the portfolio for some time and knew I wanted the additional safety. What could go wrong moving quickly to the safer portfolio? It turned out I missed a PP run up earlier in the year and a stocks run up later and ended up underperforming both for the year. Kids, that is why investors underperform the funds in which they invest.

My other horror story is trying to buy FLVCX at the bottom in 2008... small chunks but too much and too many times. Why THAT fund? I have no idea. It was dumb. But that one actually worked out because even though it kept going down into 2009, I held and it outperformed through the early recovery years. Whew.
User avatar
dualstow
Executive Member
Executive Member
Posts: 11530
Joined: Wed Oct 27, 2010 10:18 am
Contact:

Re: Is the PP going to hold up?

Post by dualstow » Sat Feb 10, 2018 3:54 pm

Re: getting singed - I suppose it comes down to luck in the short term. I believe Craig went all in when he adopted the pp and it worked out well for him. If I had bought all my 30-year bonds when I bought the first tranche, I’d be better off today. Y’never know.
https://www.city-journal.org/journalism-advocacy-over-reporting
User avatar
Tyler
Executive Member
Executive Member
Posts: 1970
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Is the PP going to hold up?

Post by Tyler » Sat Feb 10, 2018 5:51 pm

FYI -- This thread inspired a longer post about the benefits of investing firewalls, and naturally there's a good PP example. For full effect, be sure to read it while drinking coffee next to a warm fire. ;)

https://portfoliocharts.com/2018/02/10/ ... e-markets/
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
User avatar
Ugly_Bird
Senior Member
Senior Member
Posts: 133
Joined: Sun Mar 08, 2015 8:06 pm

Re: Is the PP going to hold up?

Post by Ugly_Bird » Sat Feb 10, 2018 7:58 pm

buddtholomew wrote:Here’s what I’m struggling with at the moment.
but the PP tells me to buy LTT’s to restore AA since I am very cash heavy at the moment.
Maybe I’ll buy a little of each and hope they done decline together.
Mine doesn't tell me do anything. Nothing is close to 15/35 or even 20/30 bands.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: Is the PP going to hold up?

Post by ochotona » Sat Feb 10, 2018 9:17 pm

buddtholomew wrote:Here’s what I’m struggling with at the moment.
I want to buy stocks following the recent decline but the PP tells me to buy LTT’s to restore AA since I am very cash heavy at the moment.
Maybe I’ll buy a little of each and hope they done decline together.
Interest rates won't go up forever. It's a self-limiting process. Once they get high enough, they'll choke off the economy, and they they will fall as activity drops.
User avatar
buddtholomew
Executive Member
Executive Member
Posts: 2159
Joined: Fri May 21, 2010 4:16 pm

Re: Is the PP going to hold up?

Post by buddtholomew » Sun Feb 11, 2018 9:16 am

ochotona wrote:
buddtholomew wrote:Here’s what I’m struggling with at the moment.
I want to buy stocks following the recent decline but the PP tells me to buy LTT’s to restore AA since I am very cash heavy at the moment.
Maybe I’ll buy a little of each and hope they done decline together.
Interest rates won't go up forever. It's a self-limiting process. Once they get high enough, they'll choke off the economy, and they they will fall as activity drops.
Ugly_bird, I have excess cash > 35% at the moment.
Right Ocho, I plan to buy both stocks and LTT’s.
Can’t pick the bottom in equities and forget about predicting the top in rates.
DS, like you I am buying in smaller increments.
Helps on both a psychological and emotional level.
User avatar
sophie
Executive Member
Executive Member
Posts: 4287
Joined: Mon Apr 23, 2012 7:15 pm

Re: Is the PP going to hold up?

Post by sophie » Sun Feb 11, 2018 10:03 am

Buddtholomew, what are you struggling with exactly? Is it just buying anything in this climate that is unnerving? I can relate to that, but so far I can stick with PP therapy. I'd definitely look at alternatives if that got too difficult to implement.

What about switching to the Desert portfolio? It's tailor made for you. Enough stocks to let you enjoy the good times, just enough gold to cushion the losses in a 1970s style scenario, and the rest is extremely user-friendly short to intermediate bonds. And not much of the worst type of PP tracking error. If you did that, your rebalance would have you buying a bit of gold, a nice slug of attractively priced stocks, and 5 year bonds to be held to maturity instead of LTTs. If you even need to rebalance.
Post Reply