What have we learned over last 10 years?

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ochotona
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Re: What have we learned over last 10 years?

Post by ochotona » Fri May 24, 2019 4:58 pm

jhogue wrote:
Fri May 24, 2019 4:53 pm

-I hold most of my gold in tax-deferred ETFs, and therefore not as much physical as I would like. Gold ETFs seem to have performed its uncorrelated role in these “normal” times, but they have not really been tested in a serious crisis. Will they be tested and will they survive?

-I predict that the Treasury will start phasing out Series I and Series EE savings bonds. They have done it before with Series E and Series H bonds so there is nothing stopping them from doing it again. Pugchief will shed no tears, but I will be sad to say a long goodbye to Deep Cash.
I have a to-do item set in the distant future which asks: "Physical vs ETF gold... was physical worth it?" So I paid a premium for physical, but wonder if it will have been worth it in the end.

Agree about the risk of I-Bonds going away.
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Re: What have we learned over last 10 years?

Post by stuper1 » Fri May 24, 2019 6:41 pm

ochotona wrote:
Fri May 24, 2019 4:58 pm
jhogue wrote:
Fri May 24, 2019 4:53 pm

-I hold most of my gold in tax-deferred ETFs, and therefore not as much physical as I would like. Gold ETFs seem to have performed its uncorrelated role in these “normal” times, but they have not really been tested in a serious crisis. Will they be tested and will they survive?

-I predict that the Treasury will start phasing out Series I and Series EE savings bonds. They have done it before with Series E and Series H bonds so there is nothing stopping them from doing it again. Pugchief will shed no tears, but I will be sad to say a long goodbye to Deep Cash.
I have a to-do item set in the distant future which asks: "Physical vs ETF gold... was physical worth it?" So I paid a premium for physical, but wonder if it will have been worth it in the end.

Isn't this like lying on your death bed and wondering why you paid all those homeowner's insurance premiums when your house never burned down? You buy insurance just in case something bad happens, but that doesn't mean that you really want something bad to happen.
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Re: What have we learned over last 10 years?

Post by ochotona » Fri May 24, 2019 8:04 pm

stuper1 wrote:
Fri May 24, 2019 6:41 pm
Isn't this like lying on your death bed and wondering why you paid all those homeowner's insurance premiums when your house never burned down? You buy insurance just in case something bad happens, but that doesn't mean that you really want something bad to happen.
Yes!
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Re: What have we learned over last 10 years?

Post by mathjak107 » Sat May 25, 2019 8:31 am

however if that insurance cost 25% of the price of the house it was insuring i would think twice about it , especially with the odds of it burning down so low..
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Re: What have we learned over last 10 years?

Post by pmward » Sat May 25, 2019 8:38 am

I personally think the only real risk in gold ETF's in a crisis is that the holding company decides to cash you out and hold the gold for themselves. At the very least, they have to cash you out for fair value, the SEC will make sure of this in the very least. I think ETF's are safe. But I still have a number in mind I want to build up to and hold physical just because I think there is value in having some of your assets in physical form. The gold I hold physical I plan on holding for life and never selling, except in a crisis scenario. Over a lifetime hold, the cost is nil.

As for the next 10 years... here's my speculative guess of a base case scenario:

Economy: I think we start the decade off struggling with deflationary forces caused by corporate debt deleveraging. I predict there will be at least 1 major company that gets bailed out or goes bankrupt in this time. This won't be as bad as 2008, but will still be a decent recession. The Fed lowers rates back to 0 and it does all of squat, so they have to start the QE machine back up again. In line with that MMT gets a test run in congress since the Fed is not able to reflate the economy with their limited firepower. We get some form of tax cuts, infrastructure spending, and/or helicopter money in unison with the QE (i.e. MMT the legal way here in the U.S.) and that successfully reflates the economy and gets things moving again. The problem being, that while it works to reflate the economy in the next recession, politicians take that as a green light to start abusing it after and we get back up into mid to upper single digit inflation by decades end. I also think the odds of war in the next decade are also high, just by looking back at the history of growing nationalism and populism tending to lead to war. Wars tend to be inflationary in the economy. This makes it hard for the Fed to fight the inflation, as they have to be easy for the sake of funding the war efforts.

Stocks: Going to be a volatile decade. At the end of the decade, in real inflation adjusted returns, this decade will return much lower than average. I think value stocks wind up out performing growth in the 2020's as bottom line growth starts to become scarce and valuations start to matter again for safety reasons. I also think we will have some antitrust proceedings against some of the large growth tech companies early to mid-2020s and that will put a wet blanket on growth temporarily. Late 2020s - 2030's will be gangbusters for growth stocks however as the deflationary forces provided by the boomers retiring will have finally run its course, millennials will finally be fully into the work force and spending/investing at a large clip, AI technology (as well as some other yet to be thought up technology that comes in the next 10 years) starts to finally work its way into our daily lives and prove profitable, the potential breakup spinoff companies from any tech antitrust proceedings start getting their footing and start growing at a faster clip than they did when they were a part of the large monolith, and of course an uptick in inflation helps over leveraged "growth" companies to delever and further invest in growth that finally starts hitting the bottom line in the late 2020's to early 2030's (and that means 2030's are going to be a monster decade for stocks obviously).

Bonds: Going to be a volatile decade here as well. We are going to rally really hard over the next couple of years while the entire globe struggles with a lot of disinflationary forces. I think we have potential to see a "blowoff top" in bonds to end the long bull run with a bang. As such, bonds will be the best returning asset the first couple of years of the decade. However, we will reach the turning point where inflation will pick up, yields will finally rise, and the long awaited bear market in bonds will finally begin... of course, this will start at the very moment when the markets are most bullish on bonds.

Gold: Going to move sideways in the same boring bullish wedge formation it's been in since 2013. Somewhere around 2020 - 2022 it will finally break out above that strong 1350-1375ish resistance level, and when it breaks out it is going to break out like it stole something. We will start the next official bull market in gold, and by the end of the decade gold will be the best performer of the next 10 years overall. Cryptos might also have a monstrous decade; that is the ones that don't face plant and actually become a legit long term asset. If this happens, cryptos might prove to be a potential digital gold replacement.

TLDR: decade starts with bonds rallying hard, stocks and gold neutral to slightly up. Decade ends with gold out performing, bonds finally in the long awaited bear market, and stocks in real inflation adjusted terms averaging below historic return rates (probably something like 2-4% CAGR when it's all said and done). The PP, of course, continues to chug along and averages it's dependable 3-5% real over the decade.
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Re: What have we learned over last 10 years?

Post by ochotona » Sat May 25, 2019 11:17 am

I run into so many Baby Boomers slightly older than me whose investment worldview is so firmly planted in the years when they were young and hopeful... the 1980s, the 1990s. They are still aggressively long US equities, they scoff at gold, for them it will be Three Strikes You're Out... Tech Bubble, GFC, and the Next Decade of Nada.
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Re: What have we learned over last 10 years?

Post by Kbg » Sat May 25, 2019 12:11 pm

I predict highly confidently that my ability to predict is very poor. :-)

In a SHTF scenario I do not see the particular value of gold. I think gold is a highly marketed piece of metal. If you are truly concerned about a SHTF scenario then go all in and be a survivalist. Or even better, buy some land that is productive from a grow things perspective, learn how things were done before large scale mechanism and electricity (e.g. Raise vegetables, grains and meats, spin basic cloth, tan hides etc.). These are the people who will likely be collecting your gold if they want it for some reason. If this is too much, then buy a year's worth of food, store up some old clothes, shoes and coats that you can use (or buy some durable new ones), store up some fuel and perhaps get some firearms. All in my view, way more likely to be useful than some shiny yellow metal.

OK, I will make a prediction. Mankind is more likely to advance, than regress. The track record is pretty good here with some serious diversions from time to time.
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Re: What have we learned over last 10 years?

Post by mathjak107 » Sun May 26, 2019 5:04 am

i agree ...i use gold as a trading vehicle.. not for visions of a zombie or shtf scenario
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Re: What have we learned over last 10 years?

Post by jhogue » Mon Jun 03, 2019 1:39 pm

mathjak107 wrote:
Sat May 25, 2019 8:31 am
however if that insurance cost 25% of the price of the house it was insuring i would think twice about it , especially with the odds of it burning down so low..
Bad analogy. Gold is a store of value and a hedge against economic chaos; not an insurance policy that costs you 25% of your portfolio. If the price of gold goes nowhere in the next 10 years you would lose the opportunity cost of a better performing investment plus your expense ratio/storage fees.
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A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: What have we learned over last 10 years?

Post by jalanlong » Mon Jul 01, 2019 8:22 am

Tyler wrote:
Thu May 23, 2019 11:43 pm
pmward wrote:
Thu May 23, 2019 3:05 pm
Like you, I don't feel anybody fully understands gold. This is all just conjecture. But that's part of it's allure and a great reason why it's such a potent diversifier. Harry Browne was MPT before MPT was a thing. I buy and hold gold mostly because of how well it compliments a portfolio of stocks and bonds. The reasoning behind it doesn't matter as much to me, so long as it continues to stay uncorrelated to stocks and bonds over the long haul.
Well said.

Gold is a lot more complicated than even its biggest fans often give it credit for. I like to think of it as the "chaos asset" (in contrast to stocks as the "prosperity asset"). Runaway inflation, stock market crashes, political instability -- lots of things can drive up the price and to single out one does it a disservice. Stop thinking about dry macroeconomic factors and start thinking about the feeling of raw financial desperation, and it will start to make more sense why gold will always have a place in a well-balanced portfolio.
The question I struggle with is how much of my portfolio should be taken up by a "chaos asset." 25% seems like a lot..equal to stocks, bonds and cash? The fact that it is uncorrelated to stocks and bonds doesn't sway me because there are hundreds of places I could put my money that are uncorrelated with the broad stock and bond market. That doesn't mean I want my money in them. Placing gold on an even level with traditional investments seems a bit risky to me so I am more drawn to the Desert Portfolio and topping my gold at 10%.
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Re: What have we learned over last 10 years?

Post by pmward » Mon Jul 01, 2019 9:36 am

jalanlong wrote:
Mon Jul 01, 2019 8:22 am
Tyler wrote:
Thu May 23, 2019 11:43 pm
pmward wrote:
Thu May 23, 2019 3:05 pm
Like you, I don't feel anybody fully understands gold. This is all just conjecture. But that's part of it's allure and a great reason why it's such a potent diversifier. Harry Browne was MPT before MPT was a thing. I buy and hold gold mostly because of how well it compliments a portfolio of stocks and bonds. The reasoning behind it doesn't matter as much to me, so long as it continues to stay uncorrelated to stocks and bonds over the long haul.
Well said.

Gold is a lot more complicated than even its biggest fans often give it credit for. I like to think of it as the "chaos asset" (in contrast to stocks as the "prosperity asset"). Runaway inflation, stock market crashes, political instability -- lots of things can drive up the price and to single out one does it a disservice. Stop thinking about dry macroeconomic factors and start thinking about the feeling of raw financial desperation, and it will start to make more sense why gold will always have a place in a well-balanced portfolio.
The question I struggle with is how much of my portfolio should be taken up by a "chaos asset." 25% seems like a lot..equal to stocks, bonds and cash? The fact that it is uncorrelated to stocks and bonds doesn't sway me because there are hundreds of places I could put my money that are uncorrelated with the broad stock and bond market. That doesn't mean I want my money in them. Placing gold on an even level with traditional investments seems a bit risky to me so I am more drawn to the Desert Portfolio and topping my gold at 10%.
I have said this many times before, but the fundamental principles of the PP matter much more than the 4x25 breakdown. Harry had multiple variations of the PP, but in his later life he simplified it down to 4x25. Mostly, I think he did this for his own sanity because it eliminated a lot of questions and 4x25 was simple and good enough. There's definitely room for fluctuation. That being said, 10% does seem a bit low to me. That's not really enough to move the needle if you need it. If you're going to include it in your portfolio, it's best to have enough so it can actually matter. I would be more comfortable myself with 15% as opposed to 10%. But that's my own subjective opinion on the matter.
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Re: What have we learned over last 10 years?

Post by dualstow » Mon Jul 01, 2019 10:20 am

Totally agree with Mr Ward above. The Architect himself (Harry Browne, not that guy in The Matrix) had a caller on 'Money Talk' who asked about exactly this. The caller started out with 4x25% but had let his portfolio drift. I forget what was wrong with the other out-of-whack asset, but primarily, he had let gold drift down to 10%. "Hmm", Harry said. You don't really have a Permanent Portfolio."

Still, there are perfectly good portfolios with less gold, and I think PortfolioCharts bears that out.

I keep 25% in the pp to run it properly, but if you add the vp, gold is 10% of my grand total. I guess you could say my pp is permanently in beta, like Google products, and part of the reason for that is that I don't want 25% in gold until I have millions of dollars.

The takeaway, then, is to choose an allocation of gold that you can stick with, give or take a rebalancing range. Like Desert's.
Plenty of people I know offline have 5% in gold. (I think less than 5% in anything is probably not worth discussion). But, they don't stray far from that 5%, ever. Not timing, no sudden switch to 20% in gold at the expense of something else. It's not a pp. It works for them.
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Re: What have we learned over last 10 years?

Post by Thomas Hoog » Tue Jul 02, 2019 9:06 am

Agree, you can vary your allocations but after that you have to stick to it to make it work.
The funny thing is, I have 17 years PP experience (I have a 20 % Gold allocation) and I did my calculations this weekend (I do that quarterly).
And beside the 13 % yield Year to Day, really not normal !, the markets are nuts.
Over 17 years the bruto yield is about 6 %, (cash about 4%, bonds and Gold about 8 % and Stocks about 6 %). So Gold is more that just an asset against catastrophe, it did yield very well.
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Re: What have we learned over last 10 years?

Post by sophie » Wed Jul 03, 2019 6:49 am

You've been using the PP for 17 years?? Wow, there is a story there if you want to tell it? 17 years ago there were not a lot of people on that bandwagon.

That's the kind of long view I hope to have about 12 years from now. It's a refreshing perspective, compared to loading up on angst over the performance of this or that single asset for the past year, or even few years.
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Re: What have we learned over last 10 years?

Post by Smith1776 » Wed Jul 10, 2019 12:28 pm

I'm a PP youngin'. I really only discovered it and got into it around 2016/2017. A large part of me finds that unfortunate, as I completely missed the original epic thread on the Bogleheads forum, in addition to being able to interact with MediumTex and craigr. I'm currently watching one of Craig's YouTube videos on computer security. Super compelling stuff.

Anywho, in regard to the PP, I can still look at past data and old forums posts.

My take on the past 10 years of the PP is that the PP is to asset allocation, as indexing is to individual stocks.

We don't know which companies are going to do better than others. Unexpected things happen all the time. We index the stock market as a concession of our inability to predict the future. The PP is exactly the same concept applied to asset allocation. We like to think we can predict the future of asset classes, but we can't. Being confident about the future is not the same thing as knowing the future. And even if you end up being right about the future, it seldom happens on the timeline that you wanted/expected.

When friends and family ask me for investing advice, I always tell them to start with the PP and go from there.
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Re: What have we learned over last 10 years?

Post by dualstow » Wed Jul 10, 2019 2:26 pm

Smith1776 wrote:
Wed Jul 10, 2019 12:28 pm
I'm a PP youngin'. I really only discovered it and got into it around 2016/2017. A large part of me finds that unfortunate, as I completely missed the original epic thread on the Bogleheads forum, in addition to being able to interact with MediumTex and craigr.
That is kind of sad that they don’t post anymore. MediumTex was fun!
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Re: What have we learned over last 10 years?

Post by Smith1776 » Wed Jul 10, 2019 5:57 pm

dualstow wrote:
Wed Jul 10, 2019 2:26 pm
Smith1776 wrote:
Wed Jul 10, 2019 12:28 pm
I'm a PP youngin'. I really only discovered it and got into it around 2016/2017. A large part of me finds that unfortunate, as I completely missed the original epic thread on the Bogleheads forum, in addition to being able to interact with MediumTex and craigr.
That is kind of sad that they don’t post anymore. MediumTex was fun!
Definitely. Some of those old forum posts of his were very insightful, even with the passage of time.

I wonder if both Craig and Tex are still PP users...
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Re: What have we learned over last 10 years?

Post by pmward » Thu Jul 11, 2019 11:49 am

Smith1776 wrote:
Wed Jul 10, 2019 5:57 pm
dualstow wrote:
Wed Jul 10, 2019 2:26 pm
Smith1776 wrote:
Wed Jul 10, 2019 12:28 pm
I'm a PP youngin'. I really only discovered it and got into it around 2016/2017. A large part of me finds that unfortunate, as I completely missed the original epic thread on the Bogleheads forum, in addition to being able to interact with MediumTex and craigr.
That is kind of sad that they don’t post anymore. MediumTex was fun!
Definitely. Some of those old forum posts of his were very insightful, even with the passage of time.

I wonder if both Craig and Tex are still PP users...
If you look at Craig's post history, his last post was only a couple years ago and he said he had just rebalanced and was still in.
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Re: What have we learned over last 10 years?

Post by Thomas Hoog » Tue Jul 23, 2019 6:49 am

sophie wrote:
Wed Jul 03, 2019 6:49 am
You've been using the PP for 17 years?? Wow, there is a story there if you want to tell it? 17 years ago there were not a lot of people on that bandwagon.

That's the kind of long view I hope to have about 12 years from now. It's a refreshing perspective, compared to loading up on angst over the performance of this or that single asset for the past year, or even few years.
Well, a boring story just as the PP strategy. After the crash in 2001, I was looking for a more stable strategy and I came in contact with the Belgium Marc de Mesel (he was on this forum also) and he told me about Harry Browne which made much sense to me. So I switched to a PP protfolio. Marc went on with Bitcoins (He is good) , don't know what he doing right now. I stayed with the PP.
During the years, I changed from 4x25 to 10 % cash, 20 % gold, 30 % LTB, 40 % equities because of the low yield and I have a high risk-appetite.
The most intriguing observations:
How low the yield on bonds can get; I think for almost 17 years, Yield on Bonds must go up but they still get lower and lower and lower.
My X-mass predictions of the next investing year are always wrong.
The impossibility to convince friends and family, no matter the results, they don't get convinced about the PP strategy.
I think that choosing an investing strategy is not a rational decision. It is based on your personality. There was a Briggs-Meijer test here on the forum and there was significant majority of the INTP-type. So if you are a INTP type you might like the PP strategy, if you are not, you prefer an other strategy. We are all just humans.
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Re: What have we learned over last 10 years?

Post by craigr » Wed Aug 07, 2019 8:17 pm

Smith1776 wrote:
Wed Jul 10, 2019 5:57 pm
Definitely. Some of those old forum posts of his were very insightful, even with the passage of time.

I wonder if both Craig and Tex are still PP users...
I heard he bailed out a long time ago after banking his book profits in the Bahamas.

Yeah, I still use the portfolio. Sadly, a few months back I had to sell down some bonds to buy some real estate and now they've gone through the roof! But otherwise, still stocks, gold, cash and less bonds that I want right now.

Hope everyone is doing well.
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Re: What have we learned over last 10 years?

Post by Mark Leavy » Wed Aug 07, 2019 8:19 pm

craigr wrote:
Wed Aug 07, 2019 8:17 pm
Hope everyone is doing well.
Doing well. Thank you for making a lot of lives much better.
Mark
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Re: What have we learned over last 10 years?

Post by AdamA » Wed Aug 07, 2019 8:20 pm

Wow! A post from Craig. This is better than the time Satoshi Nakamoto emailed me!
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Re: What have we learned over last 10 years?

Post by dualstow » Wed Aug 07, 2019 8:22 pm

This is an embarrassment of riches. O0
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Re: What have we learned over last 10 years?

Post by craigr » Wed Aug 07, 2019 8:23 pm

The truth is I've been extremely busy on my start-up and have no time to look at investment stuff much. I check my portfolio maybe quarterly for tax planning reasons. I don't read any investment news, but watching the headlines pop up over and over about stock market highs gives me that 2000 feeling all over again.

Keep your powder dry!
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Re: What have we learned over last 10 years?

Post by AdamA » Wed Aug 07, 2019 8:26 pm

What's the startup?
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