The GOLD scream room

[ochotona]

I wonder if $1150 is a possibility? It would hurt, but also help. I think the gold play is a very long-term thing, years long. Gold will shine when we run into really severe budget problems and can't honor our debts, and the can can't be kicked forward any longer.

[buddtholomew]

Blah blah blah...everyone looking for excuses why it is going down. Bottom line, PP (gold) investors are losing significantly to equities year after year after year and especially small-cap now. My IJS purchase is up 25+% while gold falls like a lump of shit. Same amount of $ yet that investment will send my kids through private school. I know the “supposed” reasons for holding gold in a diversified portfolio but it sure hasn’t worked out that way for me at all. The PP assets, the essence of the portfolio that distinguishes itself from other portfolios - ie gold and LTT’s have hurt me more than they have helped me going on 9 years now.

[Xan]

Budd, why not go 100% into T-bills? Serious question.

[buddtholomew]

Budd, why not go 100% into T-bills? Serious question.

I’m not looking to retire from investing, but rather looking for a portfolio suitable for the rest of my life. Where’s the benefit to holding this portfolio (PP). All I see is everything else going up and 50% of the PP going down with cash earning 2% now. Lost opportunity is substantial.

PP is like a child to me, giving them everything possible to flourish and somehow the last step eludes them. They’re one step away from being magical with all the gifts any athlete strives to possess, but they keep coming in 4th.

[stuper1]

You got $14M in the bank, and you don't feel like you can retire?

At my spending level, I could retire on $14M right now in my early 50s, even if the future portfolio return was negative every year until my death.

[buddtholomew]

You got $14M in the bank, and you don't feel like you can retire?

At my spending level, I could retire on $14M right now in my early 50s, even if the future portfolio return was negative every year until my death.

Comment was in response to Xan on converting to T-Bills.
I’m not complaining just rooting “sooo bad” for the PP to “win” but maybe it only “loses” less. Serious.

[dualstow]

The pp has been a smooth ride and it will continue to be, but I have always expected limited upside compared to just stocks, by definition.

I think it’s a fine portfolio for x>$10 million. (Wouldn’t be surprised if Craig has at least that from his sale to Cisco). Easy to hold gold, because you can live off interest and dividends from the other 75% of holdings. I think?

I don’t know about you, Budd, but if I sell everything and go all stocks, that’s when this bull market crumbles faster than Egypt in the World Cup yesterday.

[buddtholomew]

The pp has been a smooth ride and it will continue to be, but I have always expected limited upside compared to just stocks, by definition.

I think it’s a fine portfolio for x>$10 million. (Wouldn’t be surprised if Craig has at least that from his sale to Cisco). Easy to hold gold, because you can live off interest and dividends from the other 75% of holdings. I think?

I don’t know about you, Budd, but if I sell everything and go all stocks, that’s when this bull market crumbles faster than Egypt in the World Cup yesterday.

I can’t think of an alternative other than adjusting asset weighting’s to suit your needs. It just feels like a crapshoot when a high allocation to gold is added to a portfolio.

[stuper1]

That's exactly what it is, a crapshoot, because gold is uncorrelated to stocks/bonds, at least that's what the data say. The theory is that when stocks/bonds go out of favor, that money will shift to cash or gold. But that shift may have a lag time of weeks or months, based on past results. The lag time could be even longer when things are just going sideways for a while.

[Cortopassi]

What time frame, budd? IJS, Dow, S&P, vs. PP? YTD, here are the comparisons for my allocation. PP better than bonds, on par with Dow, better than foreign, only S&P significantly better. Drop that to 30 days and PP looks even better.

Isn't this all somewhat just noise on a slow steady, not spectacular, CAGR?

[buddtholomew]

What time frame, budd? IJS, Dow, S&P, vs. PP? YTD, here are the comparisons for my allocation. PP better than bonds, on par with Dow, better than foreign, only S&P significantly better. Drop that to 30 days and PP looks even better.

Isn't this all somewhat just noise on a slow steady, not spectacular, CAGR?

Agree, timeframe matters. My foreign holdings are + 6-7% YTD with mid-cap and SCV up around +8 and +10% respectively. REITs are flat and IT bonds around -2%.

Gold is already dropping below my target allocation and I’m concerned with allocating more capital somewhere down the line. Getting in at a lower price doesn’t ease my distress as it can stay lower than cost basis for decades.

[ochotona]

So own gold using a momentum strategy, and only own it when it's above the 200 day moving average.

http://mebfaber.com/2010/10/28/timing-t ... bernstein/

[Mark Leavy]

Budd,

I've seriously enjoyed your commentary. Angst is what makes us all think.

How much gold would you hold if you thought it was nothing more than a currency hedge?

I.e. Most of your assets are valued in US dollars. Imagine that gold represents a basket of all of the other world currencies. Nothing more, nothing less. Gold goes down if the dollar goes up. Gold goes up if the dollar goes down.

What percentage of your portfolio should be allocated to a dollar hedge?

Just brainstorming here...

Mark

[buddtholomew]

Budd,

I've seriously enjoyed your commentary. Angst is what makes us all think.

How much gold would you hold if you thought it was nothing more than a currency hedge?

I.e. Most of your assets are valued in US dollars. Imagine that gold represents a basket of all of the other world currencies. Nothing more, nothing less. Gold goes down if the dollar goes up. Gold goes up if the dollar goes down.

What percentage of your portfolio should be allocated to a dollar hedge?

Just brainstorming here...

Mark

Thanks Mark; I just don’t know the answer to your question - PP is around 20% now and overall portfolio 6.9%. Target is around 7.5%

“Gold up if dollar down” - sure; but what about International stocks as a currency hedge (VWILX holding > +40% since 2017). I’ve had success with everything but gold. Maybe one day I’ll break even.

[Xan]

I’ve had success with everything but gold. Maybe one day I’ll break even.

Isn't that exactly the PP plan? At least one asset is going to stink up the joint. You just don't know which. So far for you it's been gold.

[buddtholomew]

I’ve had success with everything but gold. Maybe one day I’ll break even.

Isn't that exactly the PP plan? At least one asset is going to stink up the joint. You just don't know which. So far for you it's been gold.

Yes Xan but it’s the asset that distinguishes the PP from other portfolios right - a whole 25%. I’m just screaming in the gold room, not changing anything

[Cortopassi]

We should be in the Bond scream room. They are both sucking YTD

[bedraggled]

Budd,

mathjack107 reported success with the Fidelity Monitor & Insight Newsletter. He mentioned an annual gain of approximately 11% or a bit more. Sounds OK for a high net worth individual. I believe the newsletter deemphasizes gold.

The newsletter might be nice when implementing a VP.

[buddtholomew]

Dollar up, gold down
Dollar down, gold down

[WhiteElephant]

When you start a PP you know that gold can easily go down for 10-20 years. As long as one or more other assets make up for it. PP has performed exactly as expected.

It's not a portfolio to make money, it's for protecting your money.
There was a lot of talk about 'solid 3-5% real returns', but I don't think Browne ever said something like that himself. It was always about protecting what you can't afford to lose. So far the PP has done exactly that, during the 'lost decade' and this bull run.

What are your expectations Budd?

[thisisallen]

Budd,

mathjack107 reported success with the Fidelity Monitor & Insight Newsletter. He mentioned an annual gain of approximately 11% or a bit more. Sounds OK for a high net worth individual. I believe the newsletter deemphasizes gold.

The newsletter might be nice when implementing a VP.

Hulbert Financial Digest independently tracks the success/failure of newsletters. It is pretty well respected (?)
This the the 20 track record of several newsletters including the Fidelity Insight one. Doesn’t look like the results that mathjak107 spoke of, although his mix may have generated more. It also shows the risk levels.

http://hulbertratings.com/20-year-scoreboard/

[buddtholomew]

When you start a PP you know that gold can easily go down for 10-20 years. As long as one or more other assets make up for it. PP has performed exactly as expected.

It's not a portfolio to make money, it's for protecting your money.
There was a lot of talk about 'solid 3-5% real returns', but I don't think Browne ever said something like that himself. It was always about protecting what you can't afford to lose. So far the PP has done exactly that, during the 'lost decade' and this bull run.

What are your expectations Budd?

Somehow everyone thinks the PP is doing what it is supposed to be doing. You mean it has been going up the last decade because of equities, right? I’ll believe it when I see Gold or LTT’s carry the portfolio during my lifetime that it is doing what it is designed to do.
All I see is a drag on performance.

[Cortopassi]

I love clipping these charts. This is for all of 2000s, peak to trough. No rebalancing, 10,000 in each. A clear winner.

BUT, to budd's point, the same test for any time period 1997 and earlier to present, S&P destroys gold easily. So things are really time sensitive.

I would imagine in the matter of a short few months or years starting difference, you can have people on one side who hate gold and love stocks and vice versa just because of when they started their investing life.

So I'd rather just spread it around and accept a lower overall return, knowing I might be missing out, but also better mentally with less severe drawdowns and less concerns about most of my eggs in one basket.

ANY of the methods, 100% stocks, 60/40, PP would have been better than my haphazard investing style, as long as you are able to stick with it.

[Tortoise]

All I see [from gold] is a drag on performance.

The PP is designed to trade some long-term performance for protection against volatility and extreme drawdowns. It's a feature, not a bug.

Just as one buys a Honda Accord instead of a Ferrari if he prioritizes reliability over flashiness, one invests in the PP instead of an all-stock portfolio if he prioritizes downside protection and stability over maximum long-term return.

Also, just as most car drivers' time is better spent driving and not constantly peeking under the hood and poking around at all the moving parts, most PP investors' time is better spent focusing on the performance of the overall portfolio and not that of its component assets.

[Xan]

Also, just as most car drivers' time is better spent driving and not constantly peeking under the hood and poking around at all the moving parts, most PP investors' time is better spent focusing on the performance of the overall portfolio and not that of its component assets.

Or, indeed, their time is better spent focusing on their real life (family, job, hobbies, volunteering) instead of their investments.