Gyroscopic Investing

Tyler,

Thanks for the link.

I have heard math people refer to elegant solutions. Is the Desert Portfolio an elegant portfolio or just terrific.

I reflect on the Desert concoction as it might be perfect for a person who truly wishes to “set and forget.” Yes, I know the Golden Butterfly has had at most 2 consecutive down years but with the Desert, why bother looking at all. Craig Rowland checks once per year with th HBPP but with the Desert, a person could misplace all paperwork and forget passwords- and, so what? Maybe find the info in 5 years. No rush or worry....

Desert Portfolio might be really good for a person with $10 million. That person has won the race.

I guess I wait for the GB and 4x25 people to point to some things I missed.

Jeffreyalan wrote: ↑Sat Dec 29, 2018 10:52 pm Any love here for The Desert Portfolio that has outperformed the PP since 2008 with less volitility?

The Desert Portfolio was designed for someone skittish about holding gold, and it does very well though doesn't allow for as high a withdrawal rate as the PP/GB. Its weakness is performance during a long 1970s style inflation, so I guess it depends if you think that could happen again. I personally don't think we are immune from repeating any financial event that has happened in the past.

I was able to pull up the Portfolio Charts page by googling it - the link may be gone but the page is still there.

How far can one deviate from the 4x25 allocation and still consider themselves invested in the Permanent Portfolio?

Is it sufficient to hold all 4 assets or does percent allocated to each asset determine whether one holds the PP or some other variant thereof?

Wrestling with this obviously for a long time.

i would propose that holding all 4 assets and sticking to rebalance bands (even with minor variations to % or allocations to ad-ons) equals a pp --- constantly changing or playing with the percentages or adding and removing assets outside the basic four breaks the permanence and is not a pp....

From my perspective (I think HB mentioned himself) the PP is invalidated when one of the assets is < 15% of portfolio.

I’m not sure Permanent applies to holding a fixed allocation and rebalancing although these are main traits of a successful investor.

buddtholomew wrote: ↑Sun Dec 30, 2018 9:24 am I’m not sure Permanent applies to holding a fixed allocation and rebalancing although these are main traits of a successful investor.

Rebalancing according to a formula/bands vs tinkering and timing in the guise of rebalancing. I think that’s the significant difference.

dualstow wrote: ↑Sun Dec 30, 2018 9:31 am

buddtholomew wrote: ↑Sun Dec 30, 2018 9:24 am I’m not sure Permanent applies to holding a fixed allocation and rebalancing although these are main traits of a successful investor.

Rebalancing according to a formula/bands vs tinkering and timing in the guise of rebalancing. I think that’s the significant difference.

Agree DS, but the above doesn’t differentiate the PP from other portfolios. Any investor, not specifically a PP one would benefit from adhering to rebalance bands vs. market timing purchases and sales.

Let me rephrase with an example:
When you go to a party and talk about the PP, how is it presented? 4x25 or other when discussing economic climates, etc.

Speaking of repeating past financial events...

I got "Too Big to Fail" by Andrew Sorkin to read over the holidays. It starts out a bit dry but eventually reads as sort of a financial thriller. More to the point, it makes it very clear just how narrowly we escaped another Great Depression in 2008: we were lucky enough to have a Fed Chairman who happened to be a noted scholar of the Great Depression, plus some brave souls in the Treasury Dept who were humble enough to cross the partisan divide to get support for TARP.

If that event happened now with the current cast of characters I don't think we'd be so lucky. I think that because of that narrow escape, people may be thinking that nothing that bad is ever going to happen again, so there's no point in having insurance assets in your portfolio. Before you follow that line of reasoning, you might want to pick up this book, or at least see the HBO movie.

@sophie: Love Sorkin! He always puts out interesting articles.

buddtholomew wrote: ↑Sun Dec 30, 2018 9:44 am

dualstow wrote: ↑Sun Dec 30, 2018 9:31 am

buddtholomew wrote: ↑Sun Dec 30, 2018 9:24 am I’m not sure Permanent applies to holding a fixed allocation and rebalancing although these are main traits of a successful investor.

Rebalancing according to a formula/bands vs tinkering and timing in the guise of rebalancing. I think that’s the significant difference.

Agree DS, but the above doesn’t differentiate the PP from other portfolios. Any investor, not specifically a PP one would benefit from adhering to rebalance bands vs. market timing purchases and sales.

Well, how much magic do we want to ascribe to the word “permanent?” Plenty of people permanently stick with a 60/40 stock/bond allocation.

I think of the pp as an all-weather portfolio, something you shouldn’t have to abandon in extreme inflation, deflation, etc. But, what if you’re an all-stock investor and the stock market of your country is wiped out? What if some event sends people fleeing to gold? More likely to jump ship?

The pp could be called “The Agnostic Portfolio.” It just doesn’t have that fine alliteration.

I was surprised at how good the HBO movie from "Too Big To Fail" was. Strong performances by William Hurt as Treasury Secretary Hank Paulson and Paul Giamatti as Fed Chair Ben Bernanke. My favorite scene was Paulson (R) literally getting down on his knees and begging Nancy Pelosi (D) to support the TARP bill in the US House.

Unfortunately, stock market crashes, bank panics, and depressions have been more common in American history than most people think. After the Civil War, the triumphant North went on a speculative and highly-leveraged railroad building binge that ended with a stock market crash in 1873. The depression that followed went on for five years and wiped out half of the railroad companies in the US.

buddtholomew wrote: ↑Sun Dec 30, 2018 9:44 am

dualstow wrote: ↑Sun Dec 30, 2018 9:31 am

buddtholomew wrote: ↑Sun Dec 30, 2018 9:24 am I’m not sure Permanent applies to holding a fixed allocation and rebalancing although these are main traits of a successful investor.

Rebalancing according to a formula/bands vs tinkering and timing in the guise of rebalancing. I think that’s the significant difference.

Agree DS, but the above doesn’t differentiate the PP from other portfolios. Any investor, not specifically a PP one would benefit from adhering to rebalance bands vs. market timing purchases and sales.

Let me rephrase with an example:
When you go to a party and talk about the PP, how is it presented? 4x25 or other when discussing economic climates, etc.

the permanent portfolio as established by HB would be a tight adherence to the original plan and philosophy as he wrote it, and i would present it that way.. the PP as discussed and dissected on this forum would be a little looser, it would be a portfolio that still adherers to the philosophy and is primarily made up of the 4 assets, and sticks to rebalance bands, but allows for some variation as long as it is preserving money you cant afford to loose, not timing the market, and staying true to the underling concepts/understanding of economics. (i think this is accurate but it is a bit of a semantics question, so it may not be a easy difference to split.)

sophie wrote: ↑Sun Dec 30, 2018 8:07 am

Jeffreyalan wrote: ↑Sat Dec 29, 2018 10:52 pm Any love here for The Desert Portfolio that has outperformed the PP since 2008 with less volitility?

The Desert Portfolio was designed for someone skittish about holding gold, and it does very well though doesn't allow for as high a withdrawal rate as the PP/GB. Its weakness is performance during a long 1970s style inflation, so I guess it depends if you think that could happen again. I personally don't think we are immune from repeating any financial event that has happened in the past.

I was able to pull up the Portfolio Charts page by googling it - the link may be gone but the page is still there.

So would an ETF approximation of the Desert Portfolio be:

IEF - 60%
VTI - 30%
IAU - 10%

This seems very easy and simple to replicate in any brokerage account.

I think of the Permanent Portfolio more as a state of mind than strict adherence to 4x25. So while I might initially explain it to someone using the orthodox 4x25 allocation, I would explain that there's also room for flexibility depending on each individual's needs.

How much flexibility, though, fp?

You don’t have to have the 25%, but you need to have the 4.
Remember all those threads like “pp with no cash”?
I don’t know what that is, but it’s clear from the radio archives that it’s not a pp.

A little more solid than state of mind.

For what it's worth, Harry Browne in Best Laid Plans said that he hoped the reader would put no less than 20% and no more than 35% in each of the given asset classes.

Maybe that changed in the intervening time between that book and his radio show.

Smith1776 wrote: ↑Sun Dec 30, 2018 3:36 pm For what it's worth, Harry Browne in Best Laid Plans said that he hoped the reader would put no less than 20% and no more than 35% in each of the given asset classes.

Maybe that changed in the intervening time between that book and his radio show.

If I could just figure out how to put 35% in each of the asset classes, I'd be set!

drumminj wrote: ↑Sun Dec 30, 2018 4:20 pm

Smith1776 wrote: ↑Sun Dec 30, 2018 3:36 pm For what it's worth, Harry Browne in Best Laid Plans said that he hoped the reader would put no less than 20% and no more than 35% in each of the given asset classes.

Maybe that changed in the intervening time between that book and his radio show.

If I could just figure out how to put 35% in each of the asset classes, I'd be set!

In Mr. Smith’s defense, I believe he meant don’t let any asset drift lower than 20% or higher than 35% - Ive heard something similar but with 10% re-balance bands the lower end of the range is 15%, higher end 35%

buddtholomew wrote: ↑Sun Dec 30, 2018 5:11 pm In Mr. Smith’s defense, I believe he meant don’t let any asset drift lower than 20% or higher than 35% - Ive heard something similar but with 10% re-balance bands the lower end of the range is 15%, higher end 35%

Yes, I was not meaning to give Smith a hard time, was just making a bad joke

drumminj wrote: ↑Sun Dec 30, 2018 5:12 pm

buddtholomew wrote: ↑Sun Dec 30, 2018 5:11 pm In Mr. Smith’s defense, I believe he meant don’t let any asset drift lower than 20% or higher than 35% - Ive heard something similar but with 10% re-balance bands the lower end of the range is 15%, higher end 35%

Yes, I was not meaning to give Smith a hard time, was just making a bad joke

It was funny though haha

dualstow wrote: ↑Sun Dec 30, 2018 3:04 pm How much flexibility, though, fp?

You don’t have to have the 25%, but you need to have the 4.
Remember all those threads like “pp with no cash”?
I don’t know what that is, but it’s clear from the radio archives that it’s not a pp.

A little more solid than state of mind.

Well, as long as one self-identifies as a Permanent Portfolio investor it's probably okay.

I agree that having the 4 assets is key, as is the hands-off approach. I just don't get that hung up on the individual percentages if they remain within the rebalancing bands. If you're someone that checks your portfolio infrequently and only rebalances when a band is hit then the percentages can be pretty far off from 4x25 at any given time.

I'm probably just grouping a lot of "lazy portfolios" together in contrast to some of the other approaches out there. It's a big tent that can accommodate some variation. It works for me but I realize others like to stick with strict definitions.

70/10/10/10 holds all 4 asset classes but many would not consider this a permanent portfolio.

35/15/15/35 or 15/35/35/15 for that matter I would consider a permanent portfolio-like AA. For me, it’s an allocation between 15 and 35 to all 4 assets that distinguishes the PP from other portfolios.

Got up the nerve to do my yearly portfolio review. This is the second year since my switch to the Golden Butterfly so I was worried about what would be the effect of the increased stock allocation given current events in the stock market.

Was pleased to learn the overall portfolio was only down about 3.4%. Given that I was up about 11.5% last year I'm pretty happy with the two year result.

Reminds me of the year that gold crashed a few years ago and I was pleasantly surprised to see I was only down about 2% overall.

This is basically why I use the PP strategy. So far it has succeeded very well in protecting me in volatile situations.

Well whaddya know? The 4x25 HBPP works.

Without touching a thing(*) my personal portfolio was down only 1.97% for 2018, and it actually rebalanced itself. I only check my portfolio twice a year-- when I do my yearly rebalance and my year end check-in.

Stocks: IWV(*)
Bonds: TLT(*)
Cash: Capital One 360, SCHO(*), SHY(*), ETrade cash reserves(*)
Precious Metals: Physical gold, tiny amount of silver

(*) The lone X-factor was when Capital One Sharebuilder was taken over by ETrade earlier this year, any fractional shares of stock were converted to cash at the time, so that got lumped in with my year-end cash numbers-- has these fractional shares remained, the numbers would have been different.

Also, I did not add to my portfolio/rebalance in 2018, though I plan to do my 2018 contribution within the next 2 months.

I was a little heavy on precious metals and TLT going in to the year; the tumult of the market took care of that. As of this evening, my 4 asset classes are a statistical dead heat-- no more than 26.1%; no less than 24.2% in any one category... and stocks are exactly at 25%. Crazy.

When I started with the PP way back when, I felt more comfortable buying PRPFX. I still have a sizable chunk over there-- and even with automatic dividend reinvesting factored in, I lost over 6% on that fund for the year. 4x25 is the way to go.

Hal French wrote: ↑Mon Dec 31, 2018 7:54 pm Well whaddya know? The 4x25 HBPP works.

I didn't end up quite as balanced as you (I did contribute some to lagging assets this year), but look to have ended up down ~1.91% on the year, heaviest in cash at 28.33%. Note that I haven't annualized/pro-rated my contributions, just assume they were all purchased on 1/1 at whatever I actually paid for them, so the math is a bit fuzzy there..

Net worth ended up positive on the year given additions to cash savings outside of the PP (PP is about 75% of my overall portfolio at this point). Not gonna complain one bit.

jhogue wrote: ↑Sun Dec 30, 2018 10:56 am I was surprised at how good the HBO movie from "Too Big To Fail" was. Strong performances by William Hurt as Treasury Secretary Hank Paulson and Paul Giamatti as Fed Chair Ben Bernanke. My favorite scene was Paulson (R) literally getting down on his knees and begging Nancy Pelosi (D) to support the TARP bill in the US House.

Unfortunately, stock market crashes, bank panics, and depressions have been more common in American history than most people think. After the Civil War, the triumphant North went on a speculative and highly-leveraged railroad building binge that ended with a stock market crash in 1873. The depression that followed went on for five years and wiped out half of the railroad companies in the US.

Thanks for this review. Will start watching it tonight until my eyes can no longer stay open.

Vinny