The GOLD scream room

Discussion of the Gold portion of the Permanent Portfolio

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stuper1
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Re: The GOLD scream room

Post by stuper1 » Wed Feb 21, 2018 12:09 pm

Budd, what is your time horizon for possibly needing to withdraw money from your portfolio?
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buddtholomew
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Re: The GOLD scream room

Post by buddtholomew » Wed Feb 21, 2018 12:13 pm

stuper1 wrote:Budd, what is your time horizon for possibly needing to withdraw money from your portfolio?
PP in taxable serves primarily as an emergency fund with a short timeframe and if not used is part of my overall retirement portfolio (70/30, tax deferred). Don’t expect to touch those assets for 20 years.
stuper1
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Re: The GOLD scream room

Post by stuper1 » Wed Feb 21, 2018 1:04 pm

If your PP is your emergency fund, then maybe that is why you are so worried about short-term dips. Historically, the PP as an overall portfolio has had drawdowns as much as 20% or more, so I'm not sure that a PP is meant to be an emergency fund. On the other hand, it should be okay to view the cash in your PP as your emergency fund.

For example, if your monthly expenses are $5k, and you want a 6-month emergency fund of $30k, then you need a PP of at least $120k, so that the cash in your PP can be your $30k emergency fund. As long as you have enough cash in your PP to serve as your emergency fund, don't worry about short-term PP dips. They will come back a lot faster than they would with most other portfolios (if backtesting is to be believed).

And if you don't expect to touch those assets for 20 years, then sure, it makes sense to over-weight stocks a bit, as long as your employment prospects are good (although some of us may tend to be overly optimistic about such things). But make sure you know your risk tolerance, so that you won't panic and sell when stocks go into a downturn. And make sure you have a re-balancing plan in place ahead of time, along with a plan to taper the stocks down as you get closer to retirement. Use robust backtesting to test your plan. Follow the plan. If you try to follow your gut, you will likely end up buying and selling at the wrong times and losing money.
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Re: The GOLD scream room

Post by iwealth » Wed Feb 21, 2018 2:00 pm

Budd, you've known for years that the PP does not do what you want it to do. You want it to zig while stocks zag on an intraday basis. It does not do that. And it's creating a massive drag on your returns during one of the greatest and longest bull markets in history.

Why would you allocate any of that 200k to gold or long bonds?
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Ugly_Bird
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Re: The GOLD scream room

Post by Ugly_Bird » Wed Feb 21, 2018 2:00 pm

buddtholomew wrote:I have 200K to add to the portfolio.
I’m having a difficult time deciding between 70/30 and the PP.
It’s stocks up, PP up; stocks down, PP down.
100k to PP
100k to 70/30
And forget about it... For a while... :-)
Would be good to compare the performance in 10 years. :-)
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buddtholomew
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Re: The GOLD scream room

Post by buddtholomew » Wed Feb 21, 2018 2:06 pm

iwealth wrote:Budd, you've known for years that the PP does not do what you want it to do. You want it to zig while stocks zag on an intraday basis. It does not do that. And it's creating a massive drag on your returns during one of the greatest and longest bull markets in history.

Why would you allocate any of that 200k to gold or long bonds?
That’s why I have a 70/30 allocation for retirement since the PP hasn’t met my needs at all. A whole lot of volatility with the hopes that one asset outperforms. For the last 7 years it’s been stocks.

Another beating today, no surprise there.
Guess who? That’s right Gold and LTT’s.
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buddtholomew
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Re: The GOLD scream room

Post by buddtholomew » Wed Feb 21, 2018 2:29 pm

I'm not going to post anymore since obviously I haven't reached the zen that others have investing in the PP.
Good luck to all.
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Re: The GOLD scream room

Post by stuper1 » Wed Feb 21, 2018 2:59 pm

It really doesn't take zen. When the PP experiences a drop, compare the current drop to drops that have happened in the past using a back-testing tool like portfoliovisualizer.com. If the current drop is no larger than drops that have happened previously, then shrug your shoulders and find something else to worry about. Also, you have to realize that the PP is going to lag a stock-heavy portfolio when stocks are going through a bull market. When a stock downturn hits, the PP will catch up quite a bit, but probably not all the way. If you are sure that you can ride it out all the way through a stock downturn and the years-long return to the previous peak, then you may be better off with a stock-heavy portfolio. But what happens if you lose your job during the downturn and need to draw on some of your assets?
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ochotona
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Re: The GOLD scream room

Post by ochotona » Wed Feb 21, 2018 3:58 pm

It being Lent and all, our church advises cutting back on social media as a Lenten discipline so as to put emphasis on personal interactions.

Maybe totally giving up on daily portfolio checking would also be helpful.
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Re: The GOLD scream room

Post by Mr Vacuum » Wed Feb 21, 2018 4:52 pm

buddtholomew wrote:I have 200K to add to the portfolio.
I’m having a difficult time deciding between 70/30 and the PP.
All I have witnessed in my investing life which started in 2008 is stocks out-performing all other assets with minimal/short-lived declines.
While psychologically I like the PP, I have yet to witness the portfolio zigging when stocks zag.
It’s stocks up, PP up; stocks down, PP down.
Have you ever invested in the Permanent Portfolio? YES! And how did that make you feel? LIKE A LOSER! (remember the old Late Show Crystal Clear Party Ice ad?)

I don't have daily data for all three assets, but here is some perspective on the monthly losers. From 1968-2007 all three assets were down 9.4% of months. Starting 2008, 7.5%.

Image
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Cortopassi
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Re: The GOLD scream room

Post by Cortopassi » Wed Feb 21, 2018 4:55 pm

Not checking day to day is a HUGE help to me. And purposely not trying to care. Seriously, what am I going to do, micromanage my portfolio again? Disaster and stress if I do.

Other than the PP, the other thing I did about 6 months ago was quit Quicken and go to an online bank/portfolio accounts tracker. Not selling it, but it is Personal Capital.

What it has done for me is change my daily routine. I would come home, fire up Quicken, download transactions. Enter receipts manually and match when they cleared, and obsess about the top line number.

With changing to online, the transactions are downloaded automatically. I enter nothing. A quick 3 seconds to see that a receipt matches and I shred the receipts. Changes a 10-15 minute daily process to 1 minute, and it is not in my head anymore.

So my portfolio is down another $3-4k on paper today. Whatever. Does that change my ability to retire, send my kids to college and pay day to day bills? No. So the hell with worrying about it.
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Re: The GOLD scream room

Post by Kriegsspiel » Wed Feb 21, 2018 5:22 pm

BUDD YOU HAVE TO STAY MY GYROSCOPICINVESTING DRINKING GAME IS WORTHLESS WITHOUT YOU NOOOOOOO
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