PERM vs. PRPFX - which is best?

[jpausten]

In researching the new ETF PERM I came across this Bolg and learnt about the Permanent Portfolio concept and PRPFX, incredible risk adjusted returns.  If I wanted to use PERM or PRPFX instead of doing it myself for simplicity, which is best and closer to the original concept from Harry Browne?  This is the allocation from their respective websites:

PERM:
http://globalxfunds.com/Investment_Case ... t_Case.pdf

Gold ETFs / ETCs 20%
Silver ETFs / ETCs 5%
U.S. Treasury Bonds (Long-Term) 25%
U.S. Treasury Bills and Bonds (Short-Term) 25%
Stocks 25%
• U.S. Large Cap Stocks 9%
• U.S. Small Cap Stocks 3%
• International Stocks 3%
• U.S. Real Estate Stocks 5%
• U.S. and Foreign Natural Resource Stocks 5%

PRPFX
http://www.permanentportfolio.com/pdfs/perm/PRPFX.pdf

Gold 20%
Silver 5%
U.S. Treasury Bills, Bonds and Other Dollar Assets 35%
Swiss Franc Assets 10%
Aggressive Growth Stocks 15%
U.S. and Foreign Real Estate and Natural Resource Stocks 15%

Any other factors beyond asset allocation that may make one fund better than the other?

[craigr]

Honestly PERM may be fine, but it is brand new. I would give it a year or two to make any decisions. I advise the same thing about any new fund on the market.

[clacy]

I personally would just go with a 4 x 25% split with the following ETF's:

25% VTI (total US stock market)
25% TLT (20+ yr US treasuries)
25% SHY (1-3 yr US treasuries)
25% GLD (gold etf)

See how PERM performs and at least give it time to pick up some liquidity.  If it more or less tracks the PP over the next year, then you could make the switch for simplicity's sake.

[longeyes]

You know what they say about v1.0...

Patience.

[MediumTex]

I don't really see what the added value is here.

It reminds me of those bags of fruit in the supermarket where you can get apples, oranges and bananas in the same bag.

[Reub]

PRPFX holds physical gold versus ETF gold for Perm.  +1 for PRPFX
Perm has much more long-term treasuries. +1 for PERM
Perm has lower costs. +1 for PERM
Perm has less REITS and agriculture stocks. +1 for PERM
Perm does not have Michael Cuggino. +1
Perm holds no Swiss Francs (now tied to Euro). +1

It sounds like Perm might be worth considering.

[longeyes]

I'd have felt better if PERM came from an investment packager with a more traditional legacy.  Vanguard, among others, comes to mind.  Global X trolls the margins of investing looking for "innovative niches."  In practice this means they slice and dice the market into often undigestible bits; they will introduce ten new and improved ETFs and scuttle five in a year when they don't pull in enough dollars.

[MachineGhost]

I don't really see what the added value is here.

It reminds me of those bags of fruit in the supermarket where you can get apples, oranges and bananas in the same bag.

LOL!  You're hysterical.

MG

[MachineGhost]

PRPFX holds physical gold versus ETF gold for Perm.  +1 for PRPFX
Perm has much more long-term treasuries. +1 for PERM
Perm has lower costs. +1 for PERM
Perm has less REITS and agriculture stocks. +1 for PERM
Perm does not have Michael Cuggino. +1
Perm holds no Swiss Francs (now tied to Euro). +1

It sounds like Perm might be worth considering.

Good summary.  I missed the memo on Cuggino.  What's wrong with him (other than his stupid Symantec warrants fiasco)?

MG

[pershing83]

The proof is in the eating. PRPFX has outperformed, albeit slightly, the classic pp last 10 yrs. The reason not to own Global -X fairly clear, brand new, are they going to outperform PRPFX? or, the classic pp?? Not to save 3/10 of 1%. I don't know about Global, either.

I pointed out yesterday... the Symentec warrants and PRPFX has 15 bil in assets- would not seem a problem for PRPFX.

BTW, PRPFX is up 7% YTD. How is the pp doing. I am not being confrontational, just asking. If I had it to do over, I'd go with the classic, but I'm not selling. The LT bonds still make me nervous. They just can't go up again, can they?

[shoestring]

I don't really see what the added value is here.

It reminds me of those bags of fruit in the supermarket where you can get apples, oranges and bananas in the same bag.

It takes willpower out of it.

We're all a little different.  I for one would be an absolute wreck trying to be a stock picker.  My emotions and nuances would get the better of me, I'd lose my shirt.  But if you say to me buy this index fund and get a perfectly average result, problem solved!  I don't care that I can't beat the index because I'm still ahead.

Now I am disciplined enough I can handle things in discrete chunks at the "fund" level, but I know people who would freak out and get into and out of certain assets as the prices swung if they had all four components broken out.

Also I'm lazy.  I personally would love to just buy one thing, just this one thing, sit on it and be done.  Just buying four things isn't a problem for me, but if I can be lazier still, I shall!

[Ad Orientem]

When I first heard about this a while back I was highly skeptical.  I am now dialing that down to somewhat skeptical.  PERM's asset allocation more closely mirrors the HB PP than PRPFX and there is less risk that comes from stock picking.  And while PERM's F&E are on the high end for what I consider acceptable for a passively managed fund they are about 1/3 lower than PRPFX.  I don't really have an issue with Mike Cuggino.  He seems to have done a good job putting PRPFX back on a sound footing after some problems in it's early days.  And he has (thus far) done a good job at stock picking.  But that's one of those things where you never when your guy's hot streak is going to go stone cold.

Right now I have a few conclusions.  First the HB PP is still your best long term bet for safety, low volatility and reasonable returns.  PRPFX remains an acceptable second choice and probably the best for those who are looking for one stop shopping and zero hassle with rebalancing.  PERM looks interesting and MAY eventually prove to be slightly superior to PRPFX.  But I agree with Craig.  This is a wait and see thing.

On a side note, may I suggest that one of the moderators move this to the PRPFX forum.  I actually started posting on this over there before I found out this thread was up.

[lazyboy]

I called Global x for a PERM question and asked what the rebalancing bands are. They rebalance yearly and when one asset class gets too big or small. No numbers given. So it's a subjective call on their part on when to rebalance. I imagine that they would want to keep it close to 25% bands because people are buying it throughout the year, much like PRPFX, which rebalances more often than a HBPP.  They may be holding physical gold and silver, although that is unclear.
For the sake of simplicity it might be a good fund with a decent expense ratio=.49% . It misses the benefit of longer rebalancing bands and it introduces an extra layer of risk.
 

[alvinroast]

I don't really see what the added value is here.

It reminds me of those bags of fruit in the supermarket where you can get apples, oranges and bananas in the same bag.

I've never seen this in the supermarket, but probably only because my wife won't let me go in the store with her. Why? Because I tend to point and laugh at things like this I see. I never cease to be amazed by such things. Wall St. has to work really hard to complicate things to take their cut. With only four ETFs you can cut the expenses easily.

[MediumTex]

It will be interesting to see what kind of tax efficiency this fund has.

It's nice with PRPFX not to have to worry about big end of year distributions (at least not for the last decade or so).

[craigr]

It will be interesting to see what kind of tax efficiency this fund has.

It's nice with PRPFX not to have to worry about big end of year distributions (at least not for the last decade or so).

The prospectus says they rebalance once a year no matter what. That's a recipe for a big distribution. IMO.

But like all new investment products, I live by the mantra: "You first."

I would definitely let it percolate a couple years before considering it. For all we know, the thing will be shut down if the Permanent Portfolio strategy losses attractiveness again due to a booming stock market.

[MachineGhost]

The proof is in the eating. PRPFX has outperformed, albeit slightly, the classic pp last 10 yrs. The reason not to own Global -X fairly clear, brand new, are they going to outperform PRPFX? or, the classic pp?? Not to save 3/10 of 1%. I don't know about Global, either.

I pointed out yesterday... the Symentec warrants and PRPFX has 15 bil in assets- would not seem a problem for PRPFX.

BTW, PRPFX is up 7% YTD. How is the pp doing. I am not being confrontational, just asking. If I had it to do over, I'd go with the classic, but I'm not selling. The LT bonds still make me nervous. They just can't go up again, can they?

If you are aware of the weakness of the PP to rising real interest rates, it goes double whammy for the PRPFX.  It is too commodity heavy.  That's why its had a better peformance vs PP the last decade.

When I last looked at the Symantec warrants when PRPFX was a lot smaller in assets they seemed to be a large portion that made me uncomfortable, but I'll take your word for it that it's a small percentage now.

MG

[jediclampet]

If you are aware of the weakness of the PP to rising real interest rates, it goes double whammy for the PRPFX.  It is too commodity heavy.  That's why its had a better peformance vs PP the last decade.

What kind of investments do well (or less poorly) in an environment of rising interest rates?  I am just trying to learn - please excuse my ignorance.

[Ad Orientem]

If you are aware of the weakness of the PP to rising real interest rates, it goes double whammy for the PRPFX.  It is too commodity heavy.  That's why its had a better peformance vs PP the last decade.

What kind of investments do well (or less poorly) in an environment of rising interest rates?  I am just trying to learn - please excuse my ignorance.

Honestly, I think most PP advocates will tell you that broadly speaking there are no really "good" asset classes in a rising interest rate environment.  Generally however this sort of event does not last long, because it can cause very serious economic dislocation and if taken to extremes can lead to a deflationary recession/depression. Think early 1930's.  In a sharply rising interest period the term "cash is king" would probably apply.  This is mainly why Harry put the large slug of cash in the PP, to help you ride out the rough patches.

The only instance I can think of when this has happened in modern times was in 1981 when Paul Volker drastically jacked interest rates at the FED in order to break the great inflation we had been suffering from for the better part of a decade.  It worked but we suffered a brutal recession that lasted about two years.  I think the PP was down slightly that year (about -4%) but then rose dramatically the year following (+23%).

EDIT: Typos

[MachineGhost]

The only instance I can think of when this has happened in modern times was in 1981 when Paul Volker drastically jacked interest rates at the FED in order to break the great inflation we had been suffering from for the better part of a decade.  It worked but we suffered a brutal recession that lasted about two years.  I think the PP was down slightly that year (about -4%) but then rose dramatically the year following (+23%).

The real maximum drawdown during 1981 was the worst in PP's floating exchange rate history but it closed the year at a -12.95% real loss.

1994 was similar.  Greenspan raised rates 25 basis points in late 1993 up to a final 50 first quarter next year and the world went to pot.  There's so much leverage in the system now, it doesn't take much.

MG

[Alanw]

Just clicked on the ad for PERM on the gyroscopicinvesting web site.  After looking at their information, I thought I was reading excerpts from HB's "Fail Safe Investing".

Looks like PP with a twist.

[Ad Orientem]

Just clicked on the ad for PERM on the gyroscopicinvesting web site.  After looking at their information, I thought I was reading excerpts from HB's "Fail Safe Investing".

Looks like PP with a twist.

LOL what a novel idea. Clicking on an add to get information on the product.  I am going to file that away for future use.

[MediumTex]

Just clicked on the ad for PERM on the gyroscopicinvesting web site.  After looking at their information, I thought I was reading excerpts from HB's "Fail Safe Investing".

Looks like PP with a twist.

LOL what a novel idea. Clicking on an add to get information on the product.  I am going to file that away for future use.

I don't recall, but do the PERM materials mention Harry Browne's name or credit him with the concept in any way?

It's interesting to me that in looking through all of PRPFX's materials and listening to many Cuggino interviews, I don't recall ever reading or hearing the name "Harry Browne."

I would have a hard time not regularly giving credit to Harry Browne if I ran a Permanent Portfolio-type fund.  Failing to acknowledge someone whose ideas you are using just seems to me to be bad form.  It's not that you necessarily "owe" that person anything--it just seems to me that if you respect them enough to use their ideas, why wouldn't you respect them enough to give them a little bit of credit for coming up with them?

[Alanw]

Just clicked on the ad for PERM on the gyroscopicinvesting web site.  After looking at their information, I thought I was reading excerpts from HB's "Fail Safe Investing".

Looks like PP with a twist.

LOL what a novel idea. Clicking on an add to get information on the product.  I am going to file that away for future use.

I don't recall, but do the PERM materials mention Harry Browne's name or credit him with the concept in any way?

It's interesting to me that in looking through all of PRPFX's materials and listening to many Cuggino interviews, I don't recall ever reading or hearing the name "Harry Browne."

I would have a hard time not regularly giving credit to Harry Browne if I ran a Permanent Portfolio-type fund.  Failing to acknowledge someone whose ideas you are using just seems to me to be bad form.  It's not that you necessarily "owe" that person anything--it just seems to me that if you respect them enough to use their ideas, why wouldn't you respect them enough to give them a little bit of credit for coming up with them?

Never saw Harry Browne's name mentioned in the ad material and disclosures.  It's as if they came up with this revolutionary investment vehicle all on their own.

[SmallPotatoes]

Every time I read PERM it conjures images of curlers and hairspray.

I used PRPFX until I got more comfortable with the HBPP and now I'm all in (gold bullion, long bonds through brokerage, cash in bank/mm/safe in basement, and a dozen Blue Chip company stocks with a little S&P 500 ETF for rebalancing).  My annual ER is approximately ~0.05 BP and there is basically total transparency in my investments as well as sound leadership. 

PERM if you have to, but nothing compares to the real thing.