Gyroscopic Investing

Tortoise wrote: ↑Sun Jun 09, 2019 2:39 pm Agreed, three years is too short of a timeframe from which to judge the PP.

As has been noted in discussions on this forum over the years, the PP can have (and actually has had, once or twice) negative returns for rolling time windows of up to about three years.

If I recall, there are very few portfolios, if any, that have a better track record than that of the PP in terms of minimizing the worst-case duration of negative returns in a rolling time window.

What the PP lacks in offense, it makes up in defense.

Tortoise wrote: ↑Sun Jun 09, 2019 2:39 pm What the PP lacks in offense, it makes up in defense.

MediumTex wrote: ↑Tue May 03, 2011 12:24 pm

gizmo_rat wrote: The question that I can't answer is at what point would I know if I'm in trouble with the PP ?

As far as how to determine when the permanent portfolio is no longer working, I would say that a rolling three year period of losses would be cause for a re-evaluation of the strategy.  As it is, however, the permanent portfolio has worked almost absurdly well.  I mean, the chart really says it all.  It works (or at least it has worked for almost 40 years). 

I think that the problem people have is they get tangled up in their own analysis--first, they think the PP shouldn't work at all, then they may concede that it appears to have worked in the past, then they say that it will probably stop working soon, but they aren't exactly sure why, and then they start offering their personal analysis of each asset class...and so on.

For people who pride themselves on being sophisticated, clever, intelligent, experienced, etc., I think the permanent portfolio just feels strange, and many of these people simply have no reference point for something so counterintuitive that apparently works so well. 

People often fancy themselves to be humble, but when faced with the real humility that the permanent portfolio asks the investor to embrace, many people struggle, and I think that's why so few investors will ever actually use the PP strategy.

mathjak107 wrote: ↑Tue Jun 11, 2019 5:18 am what i find funny is when there is a short term market downturn everyone seems to cheer about how the pp did so well by not falling but when the results are weak for 3 years all of a sudden you can't tell much from the short term .

mathjak107 wrote: ↑Tue Jun 11, 2019 5:18 am what i find funny is when there is a short term market downturn everyone seems to cheer about how the pp did so well by not falling but when the results are weak for 3 years all of a sudden you can't tell much from the short term .

mathjak107 wrote: ↑Tue Jun 11, 2019 5:18 am what i find funny is when there is a short term market downturn everyone seems to cheer about how the pp did so well by not falling but when the results are weak for 3 years all of a sudden you can't tell much from the short term .

modeljc wrote: ↑Tue Jun 11, 2019 4:11 pm In 47 years the PP has made plus 3% REAL 77% of the time using a 3 year rolling average. 11 years or 23% they have made less. Here are the 11 years:

1977 2.8%
1990 1.1%
1994 2.1%
2000 2.6%
2001 .2%
2002 2.3%
2008 2.8%
2014 2.9%
2015 1.5%
2017 2.6%
2018 2.8%

These numbers are from a friend and not from the book. Still seems a little low since 2014. If you use 2.6% real the PP has done that 89% of the time.

Kbg wrote: ↑Thu Jun 13, 2019 1:19 pm Real is real, that’s why we use it and not nominal.

modeljc wrote: ↑Thu Jun 13, 2019 5:21 pm

Kbg wrote: ↑Thu Jun 13, 2019 1:19 pm Real is real, that’s why we use it and not nominal.

"Shilling notes that U.S. inflation numbers don’t register the full impact of falling prices because the Bureau of Labor Statistics has not kept up with the explosion of new technology products."

The goverment can't measure inflation but deflation is real! Wages are flat. China is real and so is Amazon. Prices have a lid in my view.

Kbg wrote: ↑Fri Jun 14, 2019 12:34 am

modeljc wrote: ↑Thu Jun 13, 2019 5:21 pm

Kbg wrote: ↑Thu Jun 13, 2019 1:19 pm Real is real, that’s why we use it and not nominal.

"Shilling notes that U.S. inflation numbers don’t register the full impact of falling prices because the Bureau of Labor Statistics has not kept up with the explosion of new technology products."

The goverment can't measure inflation but deflation is real! Wages are flat. China is real and so is Amazon. Prices have a lid in my view.

On the wage front, the data says else wise overall. (there is a reason why the Walmarts and McDonalds of the world are no longer fighting the $15 minimum wage...the average retail wage paid in the US is now $18.73 according to the BLS)

I'm more of a data guy now for things I care about because the news just plain sucks in the United States. I watch a short list of economic indicators/measures and I find I have relatively good clarity on the here and now, though I would claim no insight into the future. Saturday I'll pull the latest data and refresh my assessment...however, the economy has been really, really good for a very very long time which has shown up in wages. Recently the news has been blathering about the economy turning over finally. That may very well be accurate, or it could be pure BS (and often is).

If you like facts vs. opinion...here's a pretty good source. https://www.yardeni.com/

Most of it is public data pulled from various locations, but most of the good stuff can be found here in a pre-generated form. Peruse his wages section.

jacksonM wrote: ↑Sat Jun 15, 2019 4:15 pm it's kind of like my old Dodge Caravan

drumminj wrote: ↑Sat Jun 15, 2019 9:07 pm

jacksonM wrote: ↑Sat Jun 15, 2019 4:15 pm it's kind of like my old Dodge Caravan

Let's make sure you don't get put in charge of marketing

sophie wrote: ↑Fri Jun 14, 2019 7:02 am The low 2018 return is a bit artificial. If the year had ended a few weeks later or earlier, it would be a whole different story. The YTD 2019 returns reflect the deep transient market dive at year's end: the PP stands at 7.8% and GB at 9% - and this is just for the first half of the year!

Even though the PP is still doing its thing, it generates enough angst that it should be considered a significant disadvantage of the portfolio. If you'd have less angst with a traditional stock/bond portfolio with the cash on the side (and thus not counted in total returns), then maybe that would be better despite the occasional steep drawdowns. That's because when those happen, you have a massive support group e.g. the entire Bogleheads platform and its prolific collection of authors. With the PP's "tracking error", in which it lags traditional portfolios when stocks are doing well and includes your cash savings in the mix, there's not much beyond this forum and a couple of books for consolation.

The whole point of the PP is to reduce investing stress by increasing portfolio safety, but not everyone values that. It defeats the purpose if you end up increasing your stress by holding the PP. FWIW, the angst passes after a few years for most people, judging by the experience on this forum. I've even gotten to the point where what stresses me the most is the traditional three fund portfolio that I hold in my 403b accounts. That doesn't happen for everyone though, and for some people the PP is just not a good idea.