A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Discussion of the Cash portion of the Permanent Portfolio

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Kbg
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Re: A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Post by Kbg » Wed Aug 16, 2017 1:32 pm

For sure gold has been a human favorite for a long time and has a good shot at continuing its run.

Confederate States of America dollars, not so much. There are lots of extinct paper currencies...faith, pure faith.

Break: I like to listen to podcasts and my favorite podcast ever is one by planet Money entitled: why gold? It is very interesting, funny and highly entertaining. Basically a guy goes through the entire periodic table and identifies why various elements arent good as a form of money.

So back to pure weirdness...I touched a button on my iPhone and McDonald's gave me two cheeseburgers, fries, and a large Coke just now.
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Re: A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Post by jhogue » Thu Aug 17, 2017 2:42 pm

Credit or debit?

Even the cards-- which were once a substitute for paper money -- are disappearing.
“Groucho Marx wrote:
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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Kbg
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Re: A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Post by Kbg » Thu Aug 17, 2017 4:44 pm

I only do credit.

Payoff monthly, get points, better personal protection for fraud than debit cards.

I hate debt of any kind except for the mortgage which I also actually hate but know the loan if nothing else will be effectively whittled down by inflation over time...and Uncle Sam subsidizes some of the interest costs.

Rationally it's hard to make a quantitative case for not having a mortgage vs. competitive uses for the same funds. Not to say there aren't a lot of good reasons for paying it off...so please, no need to start the great mortgage payoff debate here. There are a multitude of debates on this board and other places.
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Re: A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Post by jhogue » Fri Aug 18, 2017 8:52 am

Kbg,
I use a credit card for daily purchases too, and for all the same reasons you cited. It is a bit ironic, given that I also share your aversion to debt of any kind. Since I always pay the balance off at the end of every month I figure that the bank (and payers of high interest charges) are subsidizing me.

Yes, no need to re-start the great mortgage payoff debate here but I will touch on one aspect that brings us back to the role of PP Cash: If you choose to have a mortgage, don’t be so aggressive paying it down that you strain the liquidity in PP Cash.
“Groucho Marx wrote:
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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Kbg
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Re: A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Post by Kbg » Fri Aug 18, 2017 10:04 am

Definitely...one thing drilled into my head many years ago at B-school was cash flow, cash flow, cash flow.
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Re: A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Post by jhogue » Sat Aug 19, 2017 11:15 pm

Michelle Singletary weighs in on the problem of consumer debt.

https://www.fidelity.com/insights/perso ... ssion?ah=1
“Groucho Marx wrote:
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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Kriegsspiel
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Re: A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Post by Kriegsspiel » Mon Aug 21, 2017 7:58 am

jhogue wrote:Michelle Singletary weighs in on the problem of consumer debt.

https://www.fidelity.com/insights/perso ... ssion?ah=1
Cullen Roche wrote the counterview a few days ago: http://www.pragcap.com/why-im-not-worri ... hold-debt/
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Re: A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Post by jhogue » Tue Aug 22, 2017 8:24 am

Kriegspiel,

Thanks for posting a very intriguing counter view.

Singletary and Roche appear to be talking about the same thing (the recent rise in household debt), but maybe they actually are not. Have to give this one some additional thought.
“Groucho Marx wrote:
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: A Litany of “thou shalt nots” for Cash in the Permanent Portfolio

Post by jhogue » Wed Sep 06, 2017 7:22 am

Recently, Michelle Singletary, financial columnist for the Washington Post, wrote a piece with the ominous headline: “Consumer debt is at a record high. Haven’t we learned?” She quoted several economists who warned that rising consumer debt is a dangerous form of leverage—particularly coming on the eve of events like the Great Depression and the Great Recession—and it could lead to catastrophic consequences again.

Shortly after I posted that link, Kriegspiel kindly weighed in with a link to a piece Cullen Roche authored. Roche produced a number of graphs and charts supporting a diametrically opposed headline, “Why I’m Not Worried About Household Debt.” His argument was that an analysis of the underlying data shows that the quality of household debt that worries Singletary has actually improved substantially. Most consumer debt today is in the form of secured mortgages negotiated under more rigorous standards than those that led to the sub-prime meltdown of 2008.

So who’s right and who’s wrong?

After mulling it over, let me suggest that both authors have points well worth taking away for the prudent investor. And no, I am not trying to be wishy-washy or playing nice for the sake of playing nice.

At the microeconomic level, Singletary is right to point out that millions of people, mostly working or middle class, got seriously hurt by being overleveraged at the precise moment they could least afford it. They lost their jobs. The value of their biggest asset (their house) cratered. The mortgage was still due at the end of the month. Triple whammy. There are now millions of personal stories demonstrating why Harry Browne was right: You want a really big chunk of cash in your PP at all times and you can’t afford to treat that cash like trash.

At the macroeconomic level, Roche rightly notes that American consumers’ balance sheets have improved since 2008. Even drunks can sober up and they are more likely to do so after they come off a big bender. Roche’s evidence suggest to me that lenders (the banks), borrowers (consumers), and regulators (the watchdogs), all sobered up after a near- financial death experience. Roche points out that household debt as a % of GDP has fallen significantly since about 2010—a fairly unique experience in American history as far as I can tell. This potentially fares well for extending the present bull market. While my PP is fully invested with a 25% stake in gold, I would just as soon live in a country where my gold goes nowhere for the next decade and the PP inches upward in line with what to some might seem to be a measly 25% stake in equities.

I hope everyone had a happy Labor Day 2017.
“Groucho Marx wrote:
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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