Rethinking the Permanent Portfolio

Discussion of the Gold portion of the Permanent Portfolio

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gaddyslapper007
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Re: Rethinking the Permanent Portfolio

Post by gaddyslapper007 » Fri Jun 21, 2019 8:07 am

Libra is pegged to US dollar. (AKA not a gold replacement) Facebook will be the bank. Government will regulate / have oversight over facebook as they are subject to money transmission rules and somewhat accountable for their users actions. (KYC Regulations) They are a better PayPal now. (maybe)

"Cryptocurrency's" are a distraction. While maybe most may have been created with good intentions to offer something better / or more than Bitcoin can offer where that strength lies a weakness takes its place....too many to elaborate on. (also with second layer scaling Bitcoin can compete with whatever advantage other cryptos may have...if deemed worthy)

Bitcoin has been in existence for ~10 years (50% as long as the Euro has been existence!). It dwarfs other cryptos in much more than price and market cap. metrics.

I'll leave you to the rabbit hole of other crypto's to figure out for yourself...….but be forewarned. You'll come full circle back to BTC.
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Re: Rethinking the Permanent Portfolio

Post by gaddyslapper007 » Fri Jun 21, 2019 8:17 am

Kbg wrote:
Fri Jun 21, 2019 7:57 am

When any crypto begins to wrack up serious transaction value, governments will be involved. Anyone who does not believe this I think is delusional.
This I agree with....the question becomes WILL they do anything about it?
- If yes, ....CAN they do anything about it?
- - Government CANNOT control Bitcoin.


Government CAN create laws to make using it illegal....and as always its up to people to decide. Price would surely suffer either way.
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Re: Rethinking the Permanent Portfolio

Post by Kriegsspiel » Fri Jun 21, 2019 8:38 am

Kbg wrote:
Fri Jun 21, 2019 7:57 am
I am a bit of a history buff and currently I am listening to a podcast on Byzantine history. Earlier this week the podcast was talking about an emperor who printed/pressed gold coins that were 1/16 less than the previous standard, called them a different name, and forced everyone to accept them at the same value as the larger coin. However, it was standard practice to simply weigh gold as all gold pieces would wear down over time and merchants bought and sold in terms of weight not face value of the coin. Accordingly, the attempt had zero impact.
Please mention the name in the podcast thread, I'm still looking for more good podcasts.
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Re: Rethinking the Permanent Portfolio

Post by dualstow » Fri Jun 21, 2019 8:47 am

Didn’t Harry brush aside worries of gold price manipulation?
I haven’t listened to the Money Talk archives in a few years, but I think so.
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Re: Rethinking the Permanent Portfolio

Post by Kbg » Fri Jun 21, 2019 9:30 am

Kriegsspiel wrote:
Fri Jun 21, 2019 8:38 am
Kbg wrote:
Fri Jun 21, 2019 7:57 am
I am a bit of a history buff and currently I am listening to a podcast on Byzantine history. Earlier this week the podcast was talking about an emperor who printed/pressed gold coins that were 1/16 less than the previous standard, called them a different name, and forced everyone to accept them at the same value as the larger coin. However, it was standard practice to simply weigh gold as all gold pieces would wear down over time and merchants bought and sold in terms of weight not face value of the coin. Accordingly, the attempt had zero impact.
Please mention the name in the podcast thread, I'm still looking for more good podcasts.
https://thehistoryofbyzantium.com

It’s available at the usual places for podcasts and is a direct spinoff of Mike Duncan’s History of Rome. I don’t think it’s as good as Duncan’s podcasts (History of Rome & Revolutions) or Dan Carlin’s podcasts but it gets a solid B. Lazlo Montgomery’s China History Podcast is very good and I also like the BBC’s In Our Time. I like the last one because it’s 45 minutes of learning about random things I would probably not otherwise learn about. I used to listen to quite a few trading/investing/personal finance podcasts but after a while they all started sounding the same and are fairly superficial.

I’ve mentioned it elsewhere I think but my favorite ever single podcast is Planet Money’s “Why Gold” episode

https://www.npr.org/sections/money/2011 ... t-why-gold

It’s so original, interesting, entertaining and funny.
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Re: Rethinking the Permanent Portfolio

Post by gaddyslapper007 » Fri Jun 21, 2019 1:06 pm

dualstow wrote:
Fri Jun 21, 2019 8:47 am
Didn’t Harry brush aside worries of gold price manipulation?
I haven’t listened to the Money Talk archives in a few years, but I think so.
yes he did. from what I recall...something along the lines of too large of a market / too many people to influence to hold the manipulation.
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Re: Rethinking the Permanent Portfolio

Post by Tortoise » Fri Jun 21, 2019 1:31 pm

As an empirical test, let's observe the price behavior of gold vs. various cryptocurrencies in response to the next period of major uncertainty (market crash, secular bear market, global crisis, major war or terrorist attack, etc.).

My feeling is that our technologically-based financial system (including cryptocurrencies) has some inherent fragility, and in a period of extreme uncertainty where the reliability and safety of the technology is questioned, people may temporarily flock to gold while everything is getting sorted out.
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Re: Rethinking the Permanent Portfolio

Post by pmward » Fri Jun 21, 2019 1:45 pm

Tortoise wrote:
Fri Jun 21, 2019 1:31 pm
As an empirical test, let's observe the price behavior of gold vs. various cryptocurrencies in response to the next period of major uncertainty (market crash, secular bear market, global crisis, major war or terrorist attack, etc.).
So far, cryptos seem to be fairly correlated to stocks from what I have seen. Crypto actually led the decline in 2018, it started to drop and stocks soon followed. Similarly, both cryptos and stocks have been recovering in unison this year. It appears to perform as a risk asset not a defensive asset, at least in recent years. We will have to see if these corrections change or hold.
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Re: Rethinking the Permanent Portfolio

Post by Smith1776 » Fri Jun 21, 2019 1:45 pm

Image

I found Speck's arguments for gold price manipulation to be strong. He cites Fed and other central bank meeting minutes and juxtaposes them with market data, timing, and the sheer volume of transactions. It appears that in many cases the only parties with the wherewithal to manipulate the gold price to the extent that has happened is central bank type entities.

The passage I highlighted above from FOMC meeting minutes is from Speck's book. It is one of many in his train of analysis that I find very compelling.
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Re: Rethinking the Permanent Portfolio

Post by Smith1776 » Fri Jun 21, 2019 1:54 pm

Additionally, just some thoughts about Bitcoin and its value.

I used to be part of the crowd that thought that Bitcoin was a poor form of money because it had nothing "backing" it. Also, countless cryptocurrencies can be newly created or forked off of existing ones. Why the heck should Bitcoin be given any credence as a store of value? Gold is actually rare. Its rarity is not enforced by software, but enforced by the laws of nature. It also has thousands of years of history as a monetary asset.

I've changed my tune. Why is Facebook valuable? I'm a programmer myself -- I even specialize in information systems. I could code up a social networking platform quite easily. However, it wouldn't be worth much because of network effects. Facebook is valuable because of the size and scale of the existing network. A billion plus people are on Facebook. Everybody knows the name, and it's part of the zeitgeist of society. In Warren Buffet parlance that's the "moat".

The same is true for Bitcoin. Sure, it doesn't have anything "backing" it, but it's valuable because of network effects. The size, scale, number of developers working on it, recognizability, degree of acceptance, and similar factors are what give it value. To that extent am I no longer troubled by the lack of physical backing.
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Re: Rethinking the Permanent Portfolio

Post by dualstow » Fri Jun 21, 2019 1:57 pm

thank you, gaddyslapper
---
MangoMan wrote:
Fri Jun 21, 2019 1:27 pm
No one in their right mind can think this is a good idea. {Facebook} have proven time and again that they can't be trusted.
I know that Facebook is using a separate entity ("Calibri?") for Libra, but it is deliciously ironic that one of the selling points of bitcoin was anonymity. It's even more safely anonymous than cash in that you don't have to be present for the transaction, and you don't have to send someone in your stead to send or receive payments.

I don't know whether or not Facebook/Calibri will have the gall to make you use your real identity to trade in libras, but if they do, can we still call it a cryptocurrency? I say take out the crypto- prefix.
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Re: Rethinking the Permanent Portfolio

Post by dualstow » Thu Jun 27, 2019 9:02 pm

Smith,

Greg Ip wrote an interesting piece in the WSJ called ‘The Worthy Idea Behind Facebook’s Libra”

Does anyone have a link to a non-paywall version? Maybe it was syndicated.
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Re: Rethinking the Permanent Portfolio

Post by Smith1776 » Fri Jun 28, 2019 2:09 am

dualstow wrote:
Thu Jun 27, 2019 9:02 pm
Smith,

Greg Ip wrote an interesting piece in the WSJ called ‘The Worthy Idea Behind Facebook’s Libra”

Does anyone have a link to a non-paywall version? Maybe it was syndicated.
I think I found it. Definitely looks like a good read, but I too couldn't find a non-paywall version.
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Re: Rethinking the Permanent Portfolio

Post by dualstow » Fri Jun 28, 2019 8:16 am

I don’t know, but search again with

Code: Select all

!google
before that quoted headline.
You will not escape google’s tweaking, but you will get the result you want here.

In other words, at duckduckgo, search

Code: Select all

!google “The Worthy Idea Behind Facebook’s Libra”
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Re: Rethinking the Permanent Portfolio

Post by InsuranceGuy » Fri Jun 28, 2019 10:17 am

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Re: Rethinking the Permanent Portfolio

Post by dualstow » Fri Jun 28, 2019 3:06 pm

InsuranceGuy wrote:
Fri Jun 28, 2019 10:17 am
dualstow wrote:
Fri Jun 28, 2019 8:16 am
In other words, at duckduckgo, search

Code: Select all

!google “The Worthy Idea Behind Facebook’s Libra”
Doing this completely bypasses any privacy of DDG. Because your search is actually taking place on that other site, you are subject to that site’s policies, including its data collection practices.

You might as well go to google.com, bend over, and search “The Worthy Idea Behind Facebook’s Libra” as that is what is happening through DDG.
You’re right. I’ve been wasting my time!
https://medium.com/digiprivacy/why-does ... 75a98d382d

Always assumed there was a little layer of protection there. The !google is pointless, then.
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Re: Rethinking the Permanent Portfolio

Post by Libertarian666 » Fri Jun 28, 2019 10:03 pm

Harry didn't even approve of the use of "paper gold" like commodity futures as a substitute for actual gold.
So I'm pretty sure I know what he would have said about Bitcoin.
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Re: Rethinking the Permanent Portfolio

Post by Smith1776 » Fri Jun 28, 2019 11:40 pm

What's funny about Bitcoin is that as an asset its economic substance is becoming more and more like gold. Even more so than the community even suspected I think.

We PPers think of gold as an alt cash. However, it's really a reserve asset, in that we don't use gold to buy a cup of coffee. It's just too cumbersome. We use our domestic fiat currencies to do that.

Bitcoin, it seems, is inheriting this quality.

Bitcoin's onerous transaction confirmation times, transaction costs, limited block size, and volatility make it unsuitable as real cash. Many of these limitations are due to legacy baggage that can't be changed. As such, even the Bitcoin diehards are resorting to using the cryptocurrency purely for large transactions, or as a long term store for their wealth. Not the proverbial cup of coffee. That isn't unlike gold.
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Re: Rethinking the Permanent Portfolio

Post by dualstow » Sat Jun 29, 2019 7:41 am

I see what you mean, but of course the old differences are still glaring. Until kriegs’ asteroid comes in, gold will always have value because it’s beautiful.

Blockchain is fascinating, but when I heard MIT students were hoarding bitcoin and that the price was getting swingy, I thought, I’m going to stay away.
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Re: Rethinking the Permanent Portfolio

Post by pmward » Sat Jun 29, 2019 8:45 am

I must admit the sheer volatility of Bitcoin the last couple of years really has me thinking about placing 5% in my VP to Bitcoin on the next pull back. With the volatility, 5% can do quite a bit, especially with rebalancing (probably rebalance back to 5% 2x per year since its cycles are so much faster than the other assets). I'm not going to buy it now though, as the chart looks like a clone of late 2017 right before the meltdown. It even started the parabolic rally from almost the same exact level. But when we get the next pullback I just might pull the trigger. I just wish Fidelity would allow crypto trading to retail investors already, it's a hassle to have to open another account specifically for crypto.
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Re: Rethinking the Permanent Portfolio

Post by Ad Orientem » Sat Jun 29, 2019 12:02 pm

Late to this discussion and I haven't read all the comments so apologies if my comment has already been made.

Cryptos are a new and largely untested type of asset with no real history to them. In this sense I don't think they have a place in any PP much less the HBPP. They are at best a speculative investment. It's hard to see them gaining acceptance of the kind we accord to stocks, cash, bonds and gold anytime in what remains of my life. Looking at them on a solely speculative basis, I am not impressed. They strike me as incredibly high risk with all kinds of variables, including potential government regulation, or worse, the continued near complete absence of regulation. And lastly it strikes me as something perilously close to a scam. A sort of tech fantasy turned racket. In the 1970's someone made a fortune marketing "pet rocks." But the big difference was that if you sent in your order with a check, you actually did get a rock mailed back to you. What am I getting here that is real or tangible?
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Re: Rethinking the Permanent Portfolio

Post by Libertarian666 » Sat Jun 29, 2019 6:59 pm

Ad Orientem wrote:
Sat Jun 29, 2019 12:02 pm
Late to this discussion and I haven't read all the comments so apologies if my comment has already been made.

Cryptos are a new and largely untested type of asset with no real history to them. In this sense I don't think they have a place in any PP much less the HBPP. They are at best a speculative investment. It's hard to see them gaining acceptance of the kind we accord to stocks, cash, bonds and gold anytime in what remains of my life. Looking at them on a solely speculative basis, I am not impressed. They strike me as incredibly high risk with all kinds of variables, including potential government regulation, or worse, the continued near complete absence of regulation. And lastly it strikes me as something perilously close to a scam. A sort of tech fantasy turned racket. In the 1970's someone made a fortune marketing "pet rocks." But the big difference was that if you sent in your order with a check, you actually did get a rock mailed back to you. What am I getting here that is real or tangible?
That's why I prefer Beanie Babies for my portfolio! At least you have a plush toy.
(Note: >:D)
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Re: Rethinking the Permanent Portfolio

Post by bitcoininthevp » Wed Jul 03, 2019 12:59 pm

Smith1776 wrote:
Thu Jun 20, 2019 3:36 pm
The question I think is: what should be in that 12.5% cryptocurrency allocation? All Libra? All Bitcoin? An index of ALL cryptocurrencies? Maybe half in Libra and half in Bitcoin? What about the issue of increased complexity vs. a desire for simplicity in the portfolio?

I don't have answers to any of those questions, but I have been thinking on this matter a lot. Either way, I am convinced that this issue is worth considering, because the status of gold as the de facto alt cash in society may not be as strong as it once was in the coming decades.

My personal feeling is that a Libra dominated allocation to cryptocurrencies, with some exposure to others like bitcoin may be prudent in the coming years. Heck, if someone could create a basket or vehicle to hold all of them in one security, that might be the balance one needs to between the increased complexity and the desire to maintain simplicity.

Mind everyone, I am not proposing that we should all just suddenly make a major shift in the PP theory today. I'd like to simply explore what this all means, and not potentially get stuck in the past by stubbornly espousing an investing theory founded by a man who never lived to see this era. No one can know what Browne would have thought.
Libra is simply a peg to a basket of currencies. You could do that now without any counterparty risk with the whole custody thing.

Gold (and not silver, copper, etc) was selected by Harry because it had the highest % of its value derived from monetary value (vs industrial value). You would want to apply the same logic to holding crypto. Hold the "best money" crypto. Not some blockchain token that lets you track organic salmon or some nonsense.

I do think allocation a portion of gold's 25% to another money, Bitcoin, is a good idea. Or perhaps even better, hold it in your Variable Portfolio.
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Re: Rethinking the Permanent Portfolio

Post by dualstow » Wed Jul 03, 2019 1:09 pm

bitcoininthevp wrote:
Wed Jul 03, 2019 12:59 pm
Gold (and not silver, copper, etc) was selected by Harry because it had the highest % of its value derived from monetary value (vs industrial value). You would want to apply the same logic to holding crypto. Hold the "best money" crypto. Not some blockchain token that lets you track organic salmon* or some nonsense.
Is that what Adam Smith meant when he was talking about economies of scale?




*bold, color added
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Re: Rethinking the Permanent Portfolio

Post by Smith1776 » Wed Jul 03, 2019 1:22 pm

Whatever the future may hold, I don't think that anyone who waits to augment their PP or VP with cryptocurrencies will suffer as a result.

There may be another speculative boom in cryptocurrencies, but who cares? There are speculative booms all the time. If you hold the traditional PP, you'll be just fine.
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