Any PP Defectors Here?

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Maddy
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Any PP Defectors Here?

Post by Maddy » Wed Jul 10, 2019 1:41 pm

Over the last several months, the chorus of commentators predicting a cataclysmic crash has become deafening. Some of the voices are, from everything I can tell, reasonably well respected. A number of them have opined that what's different this time is that BOTH the equity and bond markets are unsustainable.

Could Harry have predicted a market in which phony financial instruments and rigged buying have made true values a thing of the past? Would he ever have imagined a financial system in which the failure of a single institution could bring down the whole house of cards?

I'm about as naive an investor that there ever could be; consequently it's hard for me to assess for myself whether my inclination to believe that "it's different this time" has any merit. However, I'm feeling the same fear that was my downfall in 2008.

Are there any adherents to the PP that are feeling the least bit uncomfortable with the portfolio these days?
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europeanwizard
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Re: Any PP Defectors Here?

Post by europeanwizard » Wed Jul 10, 2019 2:06 pm

But what is the alternative then?
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Maddy
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Re: Any PP Defectors Here?

Post by Maddy » Wed Jul 10, 2019 2:07 pm

Let's say, for the sake of discussion, that the "safe" alternative is a treasury money market fund with a ~2% return.
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Re: Any PP Defectors Here?

Post by dualstow » Wed Jul 10, 2019 2:32 pm

I feel safer than ever. Of course I wish I’d held more stocks from 2009 (vp) until now, but now, there’s no portfolio I’d rather be in. Or I’d be in it.

Not only does the pp feel safe, it is potentially antifragile, as defined by Taleb. It was made for cataclysmia.

Caution: I am not a financial advisor, etc etc.

https://en.wikipedia.org/wiki/Antifragile
Vanguard treasury money market now yields 1.73% compounded
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Maddy
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Re: Any PP Defectors Here?

Post by Maddy » Wed Jul 10, 2019 2:56 pm

In a nutshell, what concerns me is the possibility that the negative correlations upon which the PP is based won't function as anticipated. In the past, a crash in one sector meant, invariably, that money would flow to another. Have we ever experienced a situation where that didn't happen? Is it possible that we've reached a point where all asset classes are so artificially ratcheted up that they ALL fall in tandem? I suppose that's what really worries me.
Last edited by Maddy on Wed Jul 10, 2019 4:08 pm, edited 1 time in total.
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Maddy
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Re: Any PP Defectors Here?

Post by Maddy » Wed Jul 10, 2019 3:01 pm

BTW, I appreciate you all's patience with this. I have some decisions to make this week and want to feel a bit more confidence than I do now.
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Re: Any PP Defectors Here?

Post by sophie » Wed Jul 10, 2019 3:49 pm

You might consider that the recent blip in gold & bonds demonstrates that those assets are just as powerful as ever, in response to a perceived negative market signal. In other words, it's a mini stress test that suggests the PP's fundamentals are still intact.

There's no way to perfectly predict what will happen during the next real market crash, but FWIW I have no plans to change course. I suppose you might consider it if you believe that the Federal Reserve really has figured out how to manipulate the market to successfully avoid future downturns, but I wouldn't bet on that personally.
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Re: Any PP Defectors Here?

Post by pugchief » Wed Jul 10, 2019 4:50 pm

I just read an article opining that since Krugman has recently stated that the US is going to 'lose' the trade war with China, that it is a virtual certainty that it will end before the 2020 election, that we will at a minimum get partial victory, and that the stock market will roar as a result. Krugman has been wrong so frequently, he has become a contrarian indicator. Back up the truck!

https://libertythroughwealth.com/2019/0 ... oming-soon
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Re: Any PP Defectors Here?

Post by Smith1776 » Wed Jul 10, 2019 6:08 pm

A lot of the sentiment in this thread seems to be hinting towards the tight money recession scenario -- the scenario that the 25% cash portion of the portfolio is meant for. There can indeed be times in which, say, stocks and bonds both perform poorly simultaneously. We've got that cash (and gold) for a reason, though.

As far as I'm concerned, there hasn't been anything that's happened that would shake my confidence in the PP.

The future is always uncertain. The only thing that changes is our feelings about it.

Remember that famous "The Death of Equities" article published in 1979? That article directly preceded a bull market in equities that gave us double digit returns for 20 years!

Everything seemed rosy in 2007. Little did we know that we'd see a ridiculous bear market over the next 2 years. Then it seemed like everything in the economy was going down the tubes around 2009. People were talking about a second Great Depression. Some were even hinting at hyperinflation, thanks to all the money printing. Little did we know we'd see an amazing bull market for the next 10 years, with stable inflation to boot!
Early to bed and early to rise makes a man healthy, wealthy, and wise.
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Re: Any PP Defectors Here?

Post by Tortoise » Thu Jul 11, 2019 2:20 am

Smith1776 wrote:
Wed Jul 10, 2019 6:08 pm
A lot of the sentiment in this thread seems to be hinting towards the tight money recession scenario -- the scenario that the 25% cash portion of the portfolio is meant for. There can indeed be times in which, say, stocks and bonds both perform poorly simultaneously. We've got that cash (and gold) for a reason, though.
Well said. Even if stocks, bonds, and gold all have a bad year at the same time, the PP's 25% cash portion provides dry powder to buy all the other assets while they're temporarily on sale.

Boglehead investors with stock/bond portfolios just have to ride out the storm if stocks and bonds drop at the same time. They don't get to buy more while they're on sale. PP investors do.
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Re: Any PP Defectors Here?

Post by Maddy » Thu Jul 11, 2019 8:04 am

You guys are great! Thanks a bunch for the wisdom.
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Re: Any PP Defectors Here?

Post by ochotona » Thu Jul 11, 2019 9:12 am

I think at the bottom of the equity market cycle you're going to see many Bogle defectors here. Just exactly when they should be all-in with equities. Psychology.
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