When all asset classes are overvalued

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bedraggled
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Re: When all asset classes are overvalued

Post by bedraggled » Fri Mar 02, 2018 6:53 pm

I take great pleasure to see 2 original forum members, Kevin K and Roy, from 2010, posting on a topic. I often scroll through members to see who might be still active. There is so much on this forum. Too bad we've lost Machine Ghost and Melveyr (for now?).

As has been recently suggested, this forum may be for the eclectics, as opposed to the traffic jam at Bogleheads.

Thanks to all of you.

And I suspect all asset classes have been overvalued before. Correct, Tyler?
Roy
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Re: When all asset classes are overvalued

Post by Roy » Fri Mar 02, 2018 7:12 pm

Kevin K. wrote: It's really a pleasure to see your name pop up here and it gives me the opportunity to thank you for your many insightful posts over the years.

You're right on all counts about the Larry portfolio of course and it's good to be reminded of what the original one was since he's offered so many other iterations since. And you're also more-than-correct about the proliferation of specialized ETFs in recent years that are more than adequate substitutes for most if not all of the DFA funds.

Two other iterations of the LP have also intrigued me: 70% Intermediate Treasuries with 15% Small Cap Value, 8% Int'l Small Cap and 7% Emerging Markets, and Desert's 60% ITT, 10% Gold, 25% Total U.S. Stock Market and 5% Total International Stock. Both are viable low fat tail alternatives to the PP that overcome the understandable resistance some of us have to large amounts of gold and/or owning a ton of 30 year Treasuries. I especially like the first one which comes from Swedroe's "Black Swans" book. I mean as long as you're going to take on tracking error might as well have the equities most likely to outperform given current valuations.
Kevin.

Good to see you. I recall your many fine posts. Your writings also contributed to my nostalgic bent—haha. And Bedraggled also speaks to this sensibility, so I know it’s not just me! The PP discussions attracted a great mix of guys. No doubt much of that came from the leaders. A moment in time…

Those allocations work well too. And for the equites, 15% Small Cap Value, 8% Int’l Small Cap and 7% Emerging Markets, that Larry mix is likely more robust and better diversified than the Larry original, that I recall. (I’ve seen this with 10% IS and 5% EM too.)

As you know, the stocks are going to be the dominant driver, even at only 30%, but especially with the volatility in those classes. That was his intent—go ever more volatile, and higher expecting in return (they often go together), and then shave even more off the equity commitment. If I recall right, when he was done, he had it down to 25% and no rebalance.

And with all that volatility in a portfolio fruitcup, you get stability. Markowitz would be pleased.

To Larry’s credit he made that move in the late 90s, about 2 years too “early” in that bull run, growth, speculative top-off—but better being early than a little late.

2008-09 showed how strong the Intermediate Treasuries could be, and one cannot go badly there (guys who championed TBM should have looked more closely at what actually happened between the funds—and why). Of course, we are hundreds of basis points removed from that time. Larry’s original 2-year Treasury implementation (which he made prior to the last crash), was in expectation of all-weather, which includes this very different current climate, even as they were talking Bond Bull back then.

Fun stuff.
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Tyler
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Re: When all asset classes are overvalued

Post by Tyler » Fri Mar 02, 2018 8:19 pm

bedraggled wrote: And I suspect all asset classes have been overvalued before. Correct, Tyler?
I definitely know that there have been plenty of times historically when every asset has individually sucked, so IMHO nothing is new.

BTW, one should note that the author linked in the OP goes on for quite a bit about how stocks are overvalued, how bonds are due for a correction, and how Bitcoin is untrustworthy as an alternative store of value. You may also notice that he recommends diversifying into "alternative assets", commodities, and cash as a better store of value and I admit I am intrigued. Maybe someone should invent a portfolio that adds cash and a high-value commodity like gold to stocks and bonds in order to build a fail-safe asset allocation. I bet they could write a nice book about it. ;)
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Re: When all asset classes are overvalued

Post by Kevin K. » Sat Mar 03, 2018 8:52 am

How gratifying it is to see this thread morph into something worthwhile thanks to the amazing caliber of so many who post and/or lurk here. And yeah, Mssrs. Rowland and Lawson certainly deserve the lion's share of the credit going way back to their epic threads on the PP on Bogleheads, their great book and of course the precursors to this forum as well as the current version.

I was chagrined to find out that one of my favorite quotes of all time ("I'm more concerned with the return OF my capital than the return ON my capital") was in fact incorrectly attributed to Will Rogers but the sentiment still stands and this forum is one of the few places where those of us who are willing to consider asset allocations other than what Wall Street is feeding us can converse.

Having Tyler chime in here so usefully is for me the icing on the cake as his posts here and on other forums and his amazing Portfolio Charts site are the most stimulating and inspiring resources to come my way in 2+ decades of fumbling my way through the investing world. He's really taken Harry Browne's wisdom to a whole new level and even if a lot of the implications are beyond my pay grade it's pretty great that such a mind is looking at this stuff.
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Re: When all asset classes are overvalued

Post by barrett » Sun Mar 04, 2018 6:42 am

Tyler wrote:BTW, one should note that the author linked in the OP goes on for quite a bit about how stocks are overvalued, how bonds are due for a correction, and how Bitcoin is untrustworthy as an alternative store of value. You may also notice that he recommends diversifying into "alternative assets", commodities, and cash as a better store of value and I admit I am intrigued. Maybe someone should invent a portfolio that adds cash and a high-value commodity like gold to stocks and bonds in order to build a fail-safe asset allocation. I bet they could write a nice book about it.
Thanks for posting what I think is obvious, Tyler. Until this morning I have recently been too busy to post but have had just enough free time to lurk. Just one question... your observations about a potential solution come free of charge, right?? O0
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Tyler
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Re: When all asset classes are overvalued

Post by Tyler » Mon Mar 05, 2018 9:47 am

barrett wrote: Just one question... your observations about a potential solution come free of charge, right?? O0
Doh! I'm clearly not very good at this monetization thing. ;)
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buddtholomew
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Re: When all asset classes are overvalued

Post by buddtholomew » Mon Mar 05, 2018 2:29 pm

200K invested per my current PP allocation at 6:33AM PST.
I was tired of thinking what to do and pulled the trigger.

I’m now 60/40 SPY/IJS for the equity portion from 60/35.
Purchased Gold and LTT’s as well to restore 5.62 FI duration from 4.97.

Nothing more to do now.
O0
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eufo
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Re: When all asset classes are overvalued

Post by eufo » Mon Mar 05, 2018 6:07 pm

Good luck to you, Budd, and good luck to us all!
Don't agree with me too strongly or I'm going to change my mind
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buddtholomew
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Re: When all asset classes are overvalued

Post by buddtholomew » Mon Mar 05, 2018 7:01 pm

eufo wrote:Good luck to you, Budd, and good luck to us all!
Good luck to the eu :o
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