Gyroscopic Investing

If you're looking for a reason to stick with 30-year treasury bonds, this article is not it. This article adds confirmation to my decision to scale back 30-year bonds to 5% of (formerly permanent) portfolio.

https://www.zerohedge.com/markets/fed-o ... reaking-it

The new normal for bonds is that they become more and more about simply guessing at central bank moves, and less about real-world fundamentals because investors will turn elsewhere to express such views -- precious metals, various equity sectors, commodity baskets and so on.

I don't know that we necessarily need them to be about fundamentals as opposed to the Fed; we just need them to be volatile and uncorrelated.

Xan wrote: ↑Wed Mar 30, 2022 9:59 am

The new normal for bonds is that they become more and more about simply guessing at central bank moves, and less about real-world fundamentals because investors will turn elsewhere to express such views -- precious metals, various equity sectors, commodity baskets and so on.

I don't know that we necessarily need them to be about fundamentals as opposed to the Fed; we just need them to be volatile and uncorrelated.

They’re certainly volatile, un-correlated not so much.

buddtholomew wrote: ↑Wed Mar 30, 2022 11:29 am

Xan wrote: ↑Wed Mar 30, 2022 9:59 am

The new normal for bonds is that they become more and more about simply guessing at central bank moves, and less about real-world fundamentals because investors will turn elsewhere to express such views -- precious metals, various equity sectors, commodity baskets and so on.

I don't know that we necessarily need them to be about fundamentals as opposed to the Fed; we just need them to be volatile and uncorrelated.

They’re certainly volatile, un-correlated not so much.

Why do you post here?

buddtholomew wrote: ↑Wed Mar 30, 2022 11:29 am

Xan wrote: ↑Wed Mar 30, 2022 9:59 am

The new normal for bonds is that they become more and more about simply guessing at central bank moves, and less about real-world fundamentals because investors will turn elsewhere to express such views -- precious metals, various equity sectors, commodity baskets and so on.

I don't know that we necessarily need them to be about fundamentals as opposed to the Fed; we just need them to be volatile and uncorrelated.

They’re certainly volatile, un-correlated not so much.

Do you even understand what correlation means?

dockinGA wrote: ↑Thu Mar 31, 2022 6:17 am

buddtholomew wrote: ↑Wed Mar 30, 2022 11:29 am

Xan wrote: ↑Wed Mar 30, 2022 9:59 am

The new normal for bonds is that they become more and more about simply guessing at central bank moves, and less about real-world fundamentals because investors will turn elsewhere to express such views -- precious metals, various equity sectors, commodity baskets and so on.

I don't know that we necessarily need them to be about fundamentals as opposed to the Fed; we just need them to be volatile and uncorrelated.

They’re certainly volatile, un-correlated not so much.

Do you even understand what correlation means?

Do you?

buddtholomew wrote: ↑Thu Mar 31, 2022 7:40 am

dockinGA wrote: ↑Thu Mar 31, 2022 6:17 am

buddtholomew wrote: ↑Wed Mar 30, 2022 11:29 am

Xan wrote: ↑Wed Mar 30, 2022 9:59 am

The new normal for bonds is that they become more and more about simply guessing at central bank moves, and less about real-world fundamentals because investors will turn elsewhere to express such views -- precious metals, various equity sectors, commodity baskets and so on.

I don't know that we necessarily need them to be about fundamentals as opposed to the Fed; we just need them to be volatile and uncorrelated.

They’re certainly volatile, un-correlated not so much.

Do you even understand what correlation means?

Do you?

Your best answer here is to explain why you think that long term treasuries are not uncorrelated to the stock market. Otherwise it would be helpful if you would keep your unfounded opinions to yourself.

dockinGA wrote: ↑Thu Mar 31, 2022 9:20 am

buddtholomew wrote: ↑Thu Mar 31, 2022 7:40 am

dockinGA wrote: ↑Thu Mar 31, 2022 6:17 am

buddtholomew wrote: ↑Wed Mar 30, 2022 11:29 am

Xan wrote: ↑Wed Mar 30, 2022 9:59 am

The new normal for bonds is that they become more and more about simply guessing at central bank moves, and less about real-world fundamentals because investors will turn elsewhere to express such views -- precious metals, various equity sectors, commodity baskets and so on.

I don't know that we necessarily need them to be about fundamentals as opposed to the Fed; we just need them to be volatile and uncorrelated.

They’re certainly volatile, un-correlated not so much.

Do you even understand what correlation means?

Do you?

Your best answer here is to explain why you think that long term treasuries are not uncorrelated to the stock market. Otherwise it would be helpful if you would keep your unfounded opinions to yourself.

You’re who again?
You want them to be un-correlated or negatively correlated but they haven’t been either YTD.

buddtholomew wrote: ↑Thu Mar 31, 2022 9:27 am

dockinGA wrote: ↑Thu Mar 31, 2022 9:20 am

buddtholomew wrote: ↑Thu Mar 31, 2022 7:40 am

dockinGA wrote: ↑Thu Mar 31, 2022 6:17 am

buddtholomew wrote: ↑Wed Mar 30, 2022 11:29 am

Xan wrote: ↑Wed Mar 30, 2022 9:59 am

The new normal for bonds is that they become more and more about simply guessing at central bank moves, and less about real-world fundamentals because investors will turn elsewhere to express such views -- precious metals, various equity sectors, commodity baskets and so on.

I don't know that we necessarily need them to be about fundamentals as opposed to the Fed; we just need them to be volatile and uncorrelated.

They’re certainly volatile, un-correlated not so much.

Do you even understand what correlation means?

Do you?

Your best answer here is to explain why you think that long term treasuries are not uncorrelated to the stock market. Otherwise it would be helpful if you would keep your unfounded opinions to yourself.

You’re who again?
You want them to be un-correlated or negatively correlated but they haven’t been either YTD.

Let's see the facts.

Prove me wrong.
We can play this game all day.

The PP is directionless and the hope is that one or more assets increase more than the other assets decline to produce a positive return.

Sometimes one or more assets are down and the remaining asset that is positive doesn’t increase enough to cover the losses.

Volatility works in both directions, not always in your best interests.

I’ve always liked the philosophy but in action you lose a lot to a traditional 60/40 and especially in taxable where you rebalance to maintain the 4x25.

buddtholomew wrote: ↑Thu Mar 31, 2022 9:35 am Prove me wrong.
We can play this game all day.

The PP is directionless and the hope is that one or more assets increase more than the other assets decline to produce a positive return.

Sometimes one or more assets are down and the remaining asset that is positive doesn’t increase enough to cover the losses.

Volatility works in both directions, not always in your best interests.

I’ve always liked the philosophy but in action you lose a lot to a traditional 60/40 and especially in taxable where you rebalance to maintain the 4x25.

Then go with the 60/40 and stop posting on this message board.

Waaaahhh!!!!! Waaaaahhhhh!!!! I claim to be a permanent portfolio believer but I'm pissed that after 10+ years in a portfolio I knew was supposed to be conservative that I have less money than my peers that are all stocks or in a 60/40 portfolio or all crypto!!!!!!!

Frankly, you're as bad as mathjak. And about as useful too.

dockinGA wrote: ↑Thu Mar 31, 2022 1:42 pm

buddtholomew wrote: ↑Thu Mar 31, 2022 9:35 am Prove me wrong.
We can play this game all day.

The PP is directionless and the hope is that one or more assets increase more than the other assets decline to produce a positive return.

Sometimes one or more assets are down and the remaining asset that is positive doesn’t increase enough to cover the losses.

Volatility works in both directions, not always in your best interests.

I’ve always liked the philosophy but in action you lose a lot to a traditional 60/40 and especially in taxable where you rebalance to maintain the 4x25.

Then go with the 60/40 and stop posting on this message board.

Waaaahhh!!!!! Waaaaahhhhh!!!! I claim to be a permanent portfolio believer but I'm pissed that after 10+ years in a portfolio I knew was supposed to be conservative that I have less money than my peers that are all stocks or in a 60/40 portfolio or all crypto!!!!!!!

Frankly, you're as bad as mathjak. And about as useful too.

So you’re only interested in those that share your misguided beliefs?
It’s ok, my 65/35 BH portfolio enabled me to retire a wealthy man, just not as rich as if I had forgone the PP altogether.
Go back to your dingy (home) and piddly life unlike myself and Blackjack.

buddtholomew wrote: ↑Thu Mar 31, 2022 2:02 pm

dockinGA wrote: ↑Thu Mar 31, 2022 1:42 pm

buddtholomew wrote: ↑Thu Mar 31, 2022 9:35 am Prove me wrong.
We can play this game all day.

The PP is directionless and the hope is that one or more assets increase more than the other assets decline to produce a positive return.

Sometimes one or more assets are down and the remaining asset that is positive doesn’t increase enough to cover the losses.

Volatility works in both directions, not always in your best interests.

I’ve always liked the philosophy but in action you lose a lot to a traditional 60/40 and especially in taxable where you rebalance to maintain the 4x25.

Then go with the 60/40 and stop posting on this message board.

Waaaahhh!!!!! Waaaaahhhhh!!!! I claim to be a permanent portfolio believer but I'm pissed that after 10+ years in a portfolio I knew was supposed to be conservative that I have less money than my peers that are all stocks or in a 60/40 portfolio or all crypto!!!!!!!

Frankly, you're as bad as mathjak. And about as useful too.

So you’re only interested in those that share your misguided beliefs?
It’s ok, my 65/35 BH portfolio enabled me to retire a wealthy man, just not as rich as if I had forgone the PP altogether.
Go back to your dingy (home) and piddly life unlike myself and Blackjack.

Make sure to check back in next time the market crashes.....

It’s ok, PP won’t help you.

buddtholomew wrote: ↑Thu Mar 31, 2022 9:35 am Prove me wrong.
We can play this game all day.

The PP is directionless and the hope is that one or more assets increase more than the other assets decline to produce a positive return.

Sometimes one or more assets are down and the remaining asset that is positive doesn’t increase enough to cover the losses.

Volatility works in both directions, not always in your best interests.

I’ve always liked the philosophy but in action you lose a lot to a traditional 60/40 and especially in taxable where you rebalance to maintain the 4x25.

Budd

Where did you get your PP info that has the portfolio performance being judged against a 60/40 portfolio?

I have the book Fail- Safe Investing and I do not see any claims by Harry of the PP outperforming a 60/40 portfolio

I don't know of any investment portfolio made up of 25% stocks that should out preform (over a long period) a portfolio made up of 60% stocks.

buddtholomew wrote: ↑Thu Mar 31, 2022 2:02 pm

dockinGA wrote: ↑Thu Mar 31, 2022 1:42 pm

buddtholomew wrote: ↑Thu Mar 31, 2022 9:35 am Prove me wrong.
We can play this game all day.

The PP is directionless and the hope is that one or more assets increase more than the other assets decline to produce a positive return.

Sometimes one or more assets are down and the remaining asset that is positive doesn’t increase enough to cover the losses.

Volatility works in both directions, not always in your best interests.

I’ve always liked the philosophy but in action you lose a lot to a traditional 60/40 and especially in taxable where you rebalance to maintain the 4x25.

Then go with the 60/40 and stop posting on this message board.

Waaaahhh!!!!! Waaaaahhhhh!!!! I claim to be a permanent portfolio believer but I'm pissed that after 10+ years in a portfolio I knew was supposed to be conservative that I have less money than my peers that are all stocks or in a 60/40 portfolio or all crypto!!!!!!!

Frankly, you're as bad as mathjak. And about as useful too.

So you’re only interested in those that share your misguided beliefs?
It’s ok, my 65/35 BH portfolio enabled me to retire a wealthy man, just not as rich as if I had forgone the PP altogether.
Go back to your dingy (home) and piddly life unlike myself and Blackjack.

Dear Budd.

Boasting about your wealth is very unbecoming.

Best.

Budd, tell us exactly when you entered the PP. I know you have said about 10 years, but i want to know the exact date.

GT wrote: ↑Thu Mar 31, 2022 3:04 pm

buddtholomew wrote: ↑Thu Mar 31, 2022 9:35 am
Prove me wrong.
We can play this game all day.

The PP is directionless and the hope is that one or more assets increase more than the other assets decline to produce a positive return.

Sometimes one or more assets are down and the remaining asset that is positive doesn’t increase enough to cover the losses.

Volatility works in both directions, not always in your best interests.

I’ve always liked the philosophy but in action you lose a lot to a traditional 60/40 and especially in taxable where you rebalance to maintain the 4x25.

Budd

Where did you get your PP info that has the portfolio performance being judged against a 60/40 portfolio?

I have the book Fail- Safe Investing and I do not see any claims by Harry of the PP outperforming a 60/40 portfolio

I don't know of any investment portfolio made up of 25% stocks that should out preform (over a long period) a portfolio made up of 60% stocks.

Correct. The Permanent Portfolio should not be compared to other investment scenarios on a non-adjusted risk basis.

I used to advocate the PP as the holy grail to investing and even shared the book with family and friends.

I was drawn to the philosophy as it aligned quite well with my mental composition. I long for the days when I felt secure holding 4x25 come hell or high water (rebalanced a few times). LTT’s saved the day on a few occasions and stocks pulled their weight over the last decade. I purchased gold high in 2011 so it was always a thorn in my side. Rebalanced opportunistically along the way to carve out a suitable gain.

The PP no longer functions in the same fashion when Stocks and LTT’s decline at the same time. Gold has not gained enough to offset any YTD losses in the other assets. With the writing seemingly on the wall, I chose to sell LTT’s for Cash and a Stable Value fund in the 401K. The risk of losses as yields rise is too much to bare and Cash seems a good alternative for the time being. I would rather have this liquidity to purchase stocks and have done so already when SPY was down around 14%.

LTT’s may turnaround at any moment and that’s the risk I am willing to take. If they do, I expect the remaining assets will get a boost as well.

murphy_p_t wrote: ↑Thu Mar 31, 2022 4:00 pm

buddtholomew wrote: ↑Thu Mar 31, 2022 2:02 pm

dockinGA wrote: ↑Thu Mar 31, 2022 1:42 pm

buddtholomew wrote: ↑Thu Mar 31, 2022 9:35 am Prove me wrong.
We can play this game all day.

The PP is directionless and the hope is that one or more assets increase more than the other assets decline to produce a positive return.

Sometimes one or more assets are down and the remaining asset that is positive doesn’t increase enough to cover the losses.

Volatility works in both directions, not always in your best interests.

I’ve always liked the philosophy but in action you lose a lot to a traditional 60/40 and especially in taxable where you rebalance to maintain the 4x25.

Then go with the 60/40 and stop posting on this message board.

Waaaahhh!!!!! Waaaaahhhhh!!!! I claim to be a permanent portfolio believer but I'm pissed that after 10+ years in a portfolio I knew was supposed to be conservative that I have less money than my peers that are all stocks or in a 60/40 portfolio or all crypto!!!!!!!

Frankly, you're as bad as mathjak. And about as useful too.

So you’re only interested in those that share your misguided beliefs?
It’s ok, my 65/35 BH portfolio enabled me to retire a wealthy man, just not as rich as if I had forgone the PP altogether.
Go back to your dingy (home) and piddly life unlike myself and Blackjack.

Dear Budd.

Boasting about your wealth is very unbecoming.

Best.

It is not my intent to boast about wealth, was merely pointing out that a traditional Boglehead allocation has done the job satisfactorily. Im sure others on this board have more than me.

Don’t forget, anyone who’s been invested in any reasonable allocation during the past 40 years has done quite well. Sometimes I congratulate myself for my investing performance but it’s been more about right place, right time.

I Shrugged wrote: ↑Tue Apr 05, 2022 3:57 pm Don’t forget, anyone who’s been invested in any reasonable allocation during the past 40 years has done quite well. Sometimes I congratulate myself for my investing performance but it’s been more about right place, right time.

This is absolutely correct, and it also means there could be significant issues lurking around the corner. The time when the PP will shine is not likely to be obvious to anyone ahead of time. Nor is it likely that it will 'catch up' to anyone's more aggressive choices (100% stocks, 60/40, or maybe i could actually catch a 60/40, who knows). But it will close the gap, and we will hopefully have enjoyed a much smoother, but still slightly choppy ride.

As an aside, given that I have been aggressively stashing money consistently into a PP style portfolio for the past 8 or so years, the difference between the PP and 100% stocks is not as large as one might think. I think at this point the difference is only about 15% compared to 100% stocks. As recently as March 2020 I was dead even, and actually ahead of 60/40. Would I like to have that extra 15-20% right now? You bet. Would I have had the guts to not sell out with the market hitting the circuit breakers in March 2020 and staring down the barrel of a pandemic induced depression? I'm not sure. I'd like to say I've got nerves of steel to ride it out, but my performance in 2008 as a younger person without much money wasn't promising. Instead, the PP allowed/required me to buy many thousands of dollars worth of stock, purely by chance on March 23 at closing prices that turned out to be the absolute bottom. Not a snowball's chance I would've done that as an active trader, or if I was putting a bigger chunk of my life savings on the line in what at the time looked like bottomless stocks.

Yes, the pp will lose less purchasing power than 60/40 over the next 2 years. And it will gain less than 60/40 whenever the rebound comes

dockinGA wrote: ↑Tue Apr 05, 2022 6:57 pm
This is absolutely correct, and it also means there could be significant issues lurking around the corner. The time when the PP will shine is not likely to be obvious to anyone ahead of time. Nor is it likely that it will 'catch up' to anyone's more aggressive choices (100% stocks, 60/40, or maybe i could actually catch a 60/40, who knows). But it will close the gap, and we will hopefully have enjoyed a much smoother, but still slightly choppy ride.

But over time it doesn't close the gap. For example, let's pick a random year like 1985. If you compare 100% stocks to a PP from 1985 forward, the 100% stock portfolio gets so far ahead that even in the worst years from 2000-2002 when stocks lost 40% cumulatively and in 2008 when stocks lost 37% (and the PP had minimal gains and or losses) they were STILL ahead of the PP. I guess I understand the mental side of not wanting to see your portfolio down 40% so in those years the PP helps you sleep better. But you certainly wind up with a lot less money for that feeling of security.

I do understand that age is a factor though. If you were older you may not want to risk going with an all stock portfolio knowing that a 2008 could happen next year and it could take you a while to recover.

jalanlong wrote: ↑Wed Apr 06, 2022 5:45 pm

dockinGA wrote: ↑Tue Apr 05, 2022 6:57 pm
This is absolutely correct, and it also means there could be significant issues lurking around the corner. The time when the PP will shine is not likely to be obvious to anyone ahead of time. Nor is it likely that it will 'catch up' to anyone's more aggressive choices (100% stocks, 60/40, or maybe i could actually catch a 60/40, who knows). But it will close the gap, and we will hopefully have enjoyed a much smoother, but still slightly choppy ride.

But over time it doesn't close the gap. For example, let's pick a random year like 1985. If you compare 100% stocks to a PP from 1985 forward, the 100% stock portfolio gets so far ahead that even in the worst years from 2000-2002 when stocks lost 40% cumulatively and in 2008 when stocks lost 37% (and the PP had minimal gains and or losses) they were STILL ahead of the PP. I guess I understand the mental side of not wanting to see your portfolio down 40% so in those years the PP helps you sleep better. But you certainly wind up with a lot less money for that feeling of security.

I do understand that age is a factor though. If you were older you may not want to risk going with an all stock portfolio knowing that a 2008 could happen next year and it could take you a while to recover.

You're correct, the farther along in your accumulation phase you go, it doesn't close the gap. But, take a look at this link, which hypothetically shows someone starting with 10k in 1985, adding 10k annually. This changes things significantly, and the PP was ahead as recently as 2009 by as much as $150k. The GB was ahead as recently as 2012, a full 27 years after the simulation began.

https://www.portfoliovisualizer.com/bac ... tion5_3=20