Gyroscopic Investing

It's interesting to read all the posts about bonds that ask how to compensate for the crash we've witnessed, sentiment seems to be extremely poor. I see ideas floating around such as switching to lower duration bonds , abandoning the permanent portfolio 4x25% structure, going international etc. Is every one of these approaches not an attempt at market timing and trying to "game the system", the exact thing we are not supposed to do by the permanent portfolio philosophy?

If it helps anyone struggling with the LTT and stock bear market, I can say the following-

1. We have no clue what will happen in 3 months, 6 months or a year. Inflation "could" settle down and the Fed goes QE crazy again to stimulate growth, who knows? Conversely we could go into a horrible stagflation for the next decade and only gold/cash will keep us afloat. It would be gambling to place a bet on one side or the other and the PP has natural mechanisms to prevent wild fluctuations.

2. Correlations, YTD and short term figures are scary and sometimes deceiving. Yes stocks and bonds are going down together short term, but there are hours, days, weeks and quarters like that. It's highly unlikely the figures will look the same at year end or in a longer timeline.

3. Bond interest offsets the apparent capital loss , in my own portfolio I'm calculating about 4-5 years compounded bond interest to break even from the 20% down so far this year.

For those in the accumulation phase-
4., averaging in of new LTT funds can substantially raise portfolio yield

5. In any sector, a bear market is what you want. Everything is on sale, cheap shares, cheap bonds with higher yields, much more satisfying in a few years to look back on how low you paid for some assets (like those who bought gold in the 2000s-2010's when sentiment was much like how it is now toward stocks and LTTs)

I don't know if this is helpful to anyone but as my grey hairs come in and I witness my second bear market I felt a need to contribute.

i love my treasuries. they won't let me down

Today was a good LTT day

If one is down 20% they are not getting the current interest rate yield of about 3% ….they must have bought in at around 2% so they are getting less yield

So with a 14 year duration it is going to take way longer than 5 years ….


Just look at a hypothetical bond fund with a 5 year duration and paying 5% hypothetically.

If rates go up one percent , nav falls to 9.50 and one gets an extra 1% for five years ..so they will take 5 years to get even and see the 5% they originally were at .

Tlt is a 14 year duration so 5 years to recovery seems way to short

mathjak107 wrote: ↑Thu May 19, 2022 2:53 am Tlt is a 14 year duration so 5 years to recovery seems way to short

I see that it's current duration is 18.08 here:

https://www.ishares.com/us/products/239 ... lsrc=aw.ds

And I agree with mathjak that it will take longer than five years to recoup that loss with interest payments only.

Those of us who are retired and don't have new money to invest are in a different boat than those who are still working and can buy the "on sale" shares. It sometimes seems like on these forums that there should be one section for accumulators and another for retirees.

I always hate that word on sale as all we have is a price that something is valued at .

There are those here who thought Tlt was on sale at 145 or so .

A lower price does not mean a sale …

We spend 80% of all our investing time between the last low and last high .

Is your buy really on sale when it had been cheaper At the low ? You may be buying high

@Mike59 thanks for the post. Excellent insights. I am about to rebalance. Hopefully, I won’t lose my nerve before I jump further into the LTT pool!

The longest drawdown for this portfolio is about a year. I'd do nothing, put all new money to cash, but then rebalance on Jan 1, 2023. That's what I'd do.

mathjak107 wrote: ↑Thu May 19, 2022 9:27 am I always hate that word on sale as all we have is a price that something is valued at .

There are those here who thought Tlt was on sale at 145 or so .

A lower price does not mean a sale …

We spend 80% of all our investing time between the last low and last high .

Is your buy really on sale when it had been cheaper At the low ? You may be buying high

I see that phrase constantly in stock forums these days. Buy stocks now while they are "on sale!" Stocks could be dropping for a reason. A future recession could harm profits and make a company less valuable than it is today. You have no way of knowing whether or not a stock is "on sale" right now unless you know future macro events.

This phrase is the result of a decade of market dips that are always followed by a greater run-up afterwards. People now have been conditioned to believe that a stock dip is a great time to buy as the stock will head straight up again soon enough.

jalanlong wrote: ↑Sun Jul 10, 2022 8:13 pm

mathjak107 wrote: ↑Thu May 19, 2022 9:27 am I always hate that word on sale as all we have is a price that something is valued at .

There are those here who thought Tlt was on sale at 145 or so .

A lower price does not mean a sale …

We spend 80% of all our investing time between the last low and last high .

Is your buy really on sale when it had been cheaper At the low ? You may be buying high

I see that phrase constantly in stock forums these days. Buy stocks now while they are "on sale!" Stocks could be dropping for a reason. A future recession could harm profits and make a company less valuable than it is today. You have no way of knowing whether or not a stock is "on sale" right now unless you know future macro events.

This phrase is the result of a decade of market dips that are always followed by a greater run-up afterwards. People now have been conditioned to believe that a stock dip is a great time to buy as the stock will head straight up again soon enough.

Too true. If investors "bought the dip" during the October 1929 crash thinking it was an opportune time to buy, they still would have lost their shirts.

Sometimes big price declines aren't just because of FUD.