Gyroscopic Investing

I also hope that both Budd and Mr Vacuum stick around. But if they don't, they're making the right choice for them.

I think Budd's is a cautionary tale. Rationally or not, I believe (and I bet many others here do too) that if I could only hit X million dollars in the brokerage account, then I wouldn't have to worry about money anymore. I could do something more productive and interesting with my life.

Budd has enough saved up for several lifetimes of comfortable living. Yet he's completely bent out of shape at the slightest loss. Not even loss: at the underperformance of his assets against some other asset he could have owned instead.

As an outsider to this situation, I can say that the right answer to Budd's money situation is to put it into, well, largely anything (apart from things that can really go to zero like a small number of individual stocks, junk bonds, etc) and then forget about it.

But would I really be able to do that if I were in that situation? Or would I be like Ebeneezer Scrooge, counting my millions every day to make sure I hadn't lost any? Or worse, counting to make sure I am growing richer as fast as I possibly can, and lamenting if otherwise?

What a pitiable life.

One thing the PP does for me is bring this "don't care" attitude into the here and now, without the millions in the bank. It's simple, it won't lose much, it will recover quickly, and its historical returns are respectable. Also because it's so smooth, I can plan on it being there in case I need to withdraw, whenever that might be. I still have to keep earning and saving, but I certainly hope that when that time is over, I will be doing other things with my life than worrying about not having maximized the gains in my savings.

Xan wrote: ↑Sat Dec 08, 2018 3:02 pm if I could only hit X million dollars in the brokerage account, then I wouldn't have to worry about money anymore.

One thing the PP does for me is bring this "don't care" attitude into the here and now, without the millions in the bank. It's simple, it won't lose much, it will recover quickly, and its historical returns are respectable. Also because it's so smooth, I can plan on it being there in case I need to withdraw, whenever that might be.

There are so many lessons on this forum I only wish I had back when I graduated college...and not taken until my 40s to figure out!

One of the fellows on the Bogleheads forums has posted recently about how the Permanent Portfolio is probably the best portfolio allocation for those wanting to setup a family trust -- a portfolio to last indefinitely. I've done some thinking on the issue, and I'm inclined to do the same thing for my children and theirs with the same goal.

If we're talking about the purpose of the PP, it seems to me that time horizon plays a huge role. People like Budd might lament at the PP's short term performance, but I'm beginning to see that the word permanent in the name of the portfolio isn't just for alliteration. If you want to preserve wealth for your heirs and to have the most bulletproof strategy (without crazy complexity), it seems to me that the PP is pretty much where it's at.

Smith1776 wrote: ↑Sat Dec 08, 2018 6:39 pm One of the fellows on the Bogleheads forums has posted recently about how the Permanent Portfolio is probably the best portfolio allocation for those wanting to setup a family trust -- a portfolio to last indefinitely.

I think that’s why I don’t mind holding gold. I’m not wealthy by many (most?) people’s standards, but I’ll be ok if gold does nothing in my lifetime. It may perform for my heirs one day.

Yes, me too.

One thing I want to touch on. A lot of people say that gold probably won't do as well if a 70s inflationary environment comes back. They cite that the discoupling from the gold standard and the subsequent price explosion was a one-time event.

I'd submit that if the 70s happens again, gold's price doesn't have to skyrocket to show that its inclusion was worthy. All it has to do is even just maintain purchasing power, which I suspect it would in such a scenario.

Here the key point: it's not just that the 70s was great for gold, it's that it was astonishingly bad for just about everything else. Even if the 70s price spike doesn't happen again, it can still make for an effective diversifier.



The above, as i'm sure we're all familiar with, is the PP (blue) vs a 50/50 (red) portfolio of stocks and bonds in real returns. The 50/50 is underwater for about 12 years. Yes, the PP went up because of the price explosion in gold. However, again, the next time such a scenario happens all gold has to do is just maintain purchasing power and you'll be ahead of the typical boglehead portfolio.

As for TIPS? I still don't like them for the same reasons Craig articulated.

For me, the hope is that the PP avoids big losses and beats inflation by a decent amount. I have a big nest egg too, and the PP gives me a lot of peace of mind. Let's say a person has 10 million hard-earned dollars. Then imagine losing 4 or 5 million of them in a stock market downturn. You could say it's only temporary, ride it out and they will return. Yeah, that's pretty easy to say in abstract. But in real life, hoo boy. I'm down about 800K from the peak early this year. It's a little uncomfortable but I'm not panicking. My 10 year IRR is 6.5% as of today. And for that whole time I've split stocks between US and foreign, and that has cost me.

I will admit to dissonance when a normal stock portfolio beats the PP. It's only natural. The one thing I don't like to see is a negative year. As Budd I think pointed out, there have been more of them lately than advertised. But I think it's because cash has been worthless for several years. To me that is the biggest bug that I have uncovered.

2018 YTD performance:

4x25 PP: 1.9% loss, 5.0% volatility
60/40 All-world benchmark: 3.8% loss, 8.0% volatility

What’s not to like about the PP in the comparison above? Lower loss and lower volatility. I’ll take it!

As others have pointed out, it’ll be fun to watch the influx of new and old members flood into this forum the next time the stock market has a really bad year and the PP surprises the BH community by holding steady or even rising.

Oops, accidentally replied to my post when I meant to edit it. Looks like you can’t delete posts on this forum...

Nonsense, I delete like half my posts. There's a little 'x' in the top right corner of the post, beside the edit pencil.

I must say, after an absence from the forums for a while, I've quite enjoyed reading Budd's posts since coming back.

Budd's negativity towards the PP always forces me to reconsider my thinking and my position. I believe in one of the posts he mentioned groupthink. Budd has forced me to be introspective and really consider whether the PP is the best choice for me. And for me, I still believe it is.

Kriegsspiel wrote: ↑Sun Dec 09, 2018 11:59 am Nonsense, I delete like half my posts. There's a little 'x' in the top right corner of the post, beside the edit pencil.

Weird, on my new posts like this one I do see the ‘x’ delete-post button, but on my previous two posts I don’t. (I’m using the mobile version of the site, for what it’s worth.)

Probably expires.

Tortoise wrote: ↑Mon Dec 10, 2018 2:31 am

Kriegsspiel wrote: ↑Sun Dec 09, 2018 11:59 am Nonsense, I delete like half my posts. There's a little 'x' in the top right corner of the post, beside the edit pencil.

Weird, on my new posts like this one I do see the ‘x’ delete-post button, but on my previous two posts I don’t. (I’m using the mobile version of the site, for what it’s worth.)

My guess is it has to do with activity in the meantime. For example, you can always edit your posts, but if you do it after somebody else has seen it, then the system adds an "Edited on" message.

I bet you can delete posts up until somebody replies.

Had to post these. Yes, my portfolio is at its lowest YTD, dammit. But,

Above S&P return for the year:



and look at the 1 year returns:



For sure, budd and mathjak would say given more time, stocks will come back again and blow the pants off bonds and gold. Probably right. But how many heavy stock holders are watching a >15% downward price swing in only 2.5 months trying not to be nervous?

This is why it never felt right to try something like 100% stocks.
Yay, Team PP! We’re losing the least!

Cortopassi wrote: ↑Wed Dec 19, 2018 8:25 pm Had to post these. Yes, my portfolio is at its lowest YTD, dammit. But,

Above S&P return for the year:



and look at the 1 year returns:



For sure, budd and mathjak would say given more time, stocks will come back again and blow the pants off bonds and gold. Probably right. But how many heavy stock holders are watching a >15% downward price swing in only 2.5 months trying not to be nervous?

They will be right almost certainly over the long run and I could not fault budd for wanting to rebalance out if he hated gold as much as he appeared to. But at least for me, I was/am relatively convinced doing it now is not a good idea. The US market has been on a 9 year absolute tear, was very overbought and for about the last 3 months economic data has been softening. Once the market goes down say 20% or more, OK then you have a reasonable rebalance out scenario. Something super simple is to use momentum, a trend line or a moving average to rebalance out of gold once stocks have turned the corner and are going back up.

By way of stats gold (GLD) is up 7%ish since the August low and my souped up version with UGLD in it is up 20%

Kbg wrote: ↑Thu Dec 20, 2018 8:40 am But at least for me, I was/am relatively convinced doing it now is not a good idea. The US market has been on a 9 year absolute tear, was very overbought and for about the last 3 months economic data has been softening.

In 2013, I took a little bit of profits from vp stocks, just a little. Anytime the market went down, I got nervous. Why didn’t I take more profits?! The market’s overbought! And then....it went up for five more years. (shrug)

dualstow wrote: ↑Thu Dec 20, 2018 8:49 am

Kbg wrote: ↑Thu Dec 20, 2018 8:40 am But at least for me, I was/am relatively convinced doing it now is not a good idea. The US market has been on a 9 year absolute tear, was very overbought and for about the last 3 months economic data has been softening.

In 2013, I took a little bit of profits from vp stocks, just a little. Anytime the market went down, I got nervous. Why didn’t I take more profits?! The market’s overbought! And then....it went up for five more years. (shrug)

Nothing is certain, but it's helpful to buy and sell financial assets like you do cars, computers etc. Buy when cheap, sell when expensive. For some reason we like to do the exact opposite with financial assets. I think that's why W.B has been so successful.

WB?

Warren buffet?

drumminj wrote: ↑Thu Dec 20, 2018 8:34 pm Warren buffet?

Ah, of course.

Need to post the comparison again. Also, now with cash paying 2+% again, I see the wisdom of HB esp. when cash paid 5%. 25% cash for the past couple months would have been nice, vs. the 10% I am at.

Cortopassi wrote: ↑Mon Dec 24, 2018 12:35 pm25% cash for the past couple months would have been nice, vs. the 10% I am at.

Yeah, I was a bit bummed being 4x25 earlier (vs golden butterfly-ish) in the year as stocks out-performed, but right now am happy to be 25% cash

Cortopassi wrote: ↑Mon Dec 24, 2018 12:35 pm Need to post the comparison again. Also, now with cash paying 2+% again, I see the wisdom of HB esp. when cash paid 5%. 25% cash for the past couple months would have been nice, vs. the 10% I am at.

The LTT's I bought when I first started the PP have been throwing off a relatively nice return of about 3.5% on average, deposited twice a year into my IRA's. As interest rates rise and fall, the market value will affect the overall value of my portfolio one way or the other but I don't look very often because this is one thing that has helped to convince me that taking a snapshot of your portfolio at any given point in time is a somewhat meaningless exercise for any other reason than to re-balance. They call them LTT's for a reason.

PP's doing its thing lately, guys.