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Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 1:26 pm
by ochotona
I'm really happy with

40% stocks
10% gold
10% cash
40% bonds

I haven't lost any sleep over the portfolio.

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 2:51 pm
by Hal
Hi Pointedstick,

Good to hear you got your perspective sorted out.

You may like to read the Marcus Aurelius's book "Meditations".

https://medium.com/personal-growth/marc ... f7a16b6515

http://files.libertyfund.org/files/2133 ... _LFeBk.pdf

But on the investment side, I personally found Benjamins Grahams "Intelligent Investor" very useful.
After witnessing his mothers misfortune, he went about logically, not fearfully, developing a strategy to minimise unnecessary losses.
I see the PP in the same light.

http://www.stockpickssystem.com/benjamin-graham/

Wishing you continued happiness :D

Hal

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 3:02 pm
by Pointedstick
Tyler wrote:
Thu Nov 15, 2018 1:13 pm
My one quibble is your comment that the PP is a fear-based portfolio. [...] However, Harry Browne was not a fearful person nor is every PP investor motivated by fear.
The second rule is "Don't assume you can replace lost wealth." On one hand, that's good advice. But while it's factually true that you might not be able to replace your wealth if you lost it, that's kind of a secondary point. Imagine you were following a philosophy whose very second piece of advice was, "You might never again have the same mobility if you lost your legs." That's factually true in the same manner, but don't you think you'd feel a bit more protective of your legs if you were suffused in a culture where messages of mobility loss like that were commonly expressed? To me, it was a fear-inducing message. Many of the other messages I received within this community and while reading Harry Browne's writings had the same effect on me.

Another example was Browne's bizarre opinions on marriage: don't get married, and if you do, only marry a woman who can carry her own financial weight in the relationship, and if you don't, set aside enough money for her to maintain her own parallel finances. It's like he missed the whole point of love and marriage in the modern era: not as a mercenary financial arrangement or an exercise in two people living together but as independently of one another as possible (???), but as an expression of trust in another person. The extent to which I followed his advice in my own marriage was horribly hurtful to my wife and almost drove her away from me. A happy marriage requires shared vulnerability, interdependence, and trust. You lose access to the majestic river of infinite love when you try to dam it up and store it in a reservoir and measure it in acre-feet and regulate it with legal contracts and parcel it out on the basis of merit.

It's all a matter of focus. This is something I failed to appreciate until recently.

Life has a way of returning back to us what we focus on. When I focused a lot on group traits, differences between people, judgments of things as better and worse, and reciprocity, I tended to see people as embodiments of their group stereotypes rather than as unique individuals, noticed all of their differences, and judged some of them to be better than others, and only gave respect to people who I felt could operate at my level. This is another way of saying that I was an asshole. :) I had to learn that I was much more open to cultural and environmental conditioning than I thought I was.

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 3:05 pm
by Pointedstick
stuper1 wrote:
Thu Nov 15, 2018 1:07 pm
When you get into your 50s+, and in some careers maybe earlier, the possibility of being let go from your job position and not being able to get re-hired into a similarly well-paying position becomes much more likely in many fields.
I lost my job two years ago and found another one that pays me $30,000 less. I'm happy as a clam. The marginal happiness dividend of that extra 30k turned out to be practically nothing. In some senses it may actually have been negative since being in a higher tax bracket with more income hugely complicated my taxes, which was a big stress point every year.

Worry over not being able to replace your same level of income arises from the fear that 1) you never deserved it in the first place, and 2) your life would be negatively impacted by this occurrence. Both are bullshit! You do deserve that income, and if you did lose it, you'd be just fine. In fact you might even find that you didn't even notice the reduction in the size of your paycheck. And if you did because it stressed your ability to pay for things, that's probably a sign that those things are even more sources of unhealthy attachment that you should let go of. Our attachments to things and expenses and money and negative people are what make us unhappy. The fear is just a weird way that our brains try to express this to us.

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 3:11 pm
by Pointedstick
flyingpylon wrote:
Thu Nov 15, 2018 11:33 am
And then, shit happens. The economy goes in the tank around the same time you develop a chronic medical condition or suffer an injury, and then because of the economy you get laid off and can't afford insurance, or even if you can then you get addicted to opioids and end up dying of a fentanyl overdose while living in a van down by the river.

I'm being overly dramatic, but stories like that are all over the place. The truth is that it doesn't always work out
Yeah. I'm not trying to say that everything always works out. Clearly for a lot of people, it doesn't! :(

But riddle me this: have you ever met a happy drug addict? The kind of downward spiral you're picturing happens to people who are miserable and hate themselves, and often others as well. Happy friendly productive people who get down don't stay down, because the positive energy that radiates off of them seems to have a magical way of causing other people to want to help them and opportunities to become visible. In a lot of ways, letting go is an inoculation against falling into a downward spiral of hardship and loss. And if you're unlucky enough that it happens anyway, it will help you weather those dark waters without being destroyed.

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 3:14 pm
by Pointedstick
Mountaineer wrote:
Thu Nov 15, 2018 10:57 am
PS - great to hear from you. I started to put this in the religion thread but was afraid it would lose the context. I'll keep it brief. Your post struck as quite harmonious with the LCMS confessional Christian view: God is in charge of everything and everything we have is a gift from Him. "It's all good" as my Pastor frequently says. I agree with you 100% that once you accept this, or the version you discussed in your post, life is much simpler, and the freedom and peace it brings is awesome. Best wishes. ... Mountaineer
It's not a coincidence. I'm not a Christian, but I have learned a great deal from Christianity recently--real Christianity, that kind that is actually about Jesus and his radical message of compassion, humility, and letting go of worldly power--not the kind of Christianity that worships of wealth and power and rules and domination so common on the American right. Those people are actually worshiping their antichrist. Whoops.

It doesn't seem to be a coincidence that most of the world's major religions emphasize letting go of attachments, or have a mystical tradition that does. There seems to be something buried very deep in the human psyche that wants to control everything that only escalates over time as more control is actually realized. It seems like for thousands of years, religious leaders have been counseling against it. :)

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 3:21 pm
by buddtholomew
100% stocks is ludicrous on many levels, especially what we know about diversification and risk/reward.
Hopefully, you have an emergency fund that will allow you to weather the worst of storms your mind can contrive.

I was drawn to the PP as it provided a safety net to me when fear of loss was the driving force.
Now with a more established portfolio I have decided to invest more aggressively, knowing full well the trade-off for lowering the % in Gold.
I'd rather be an optimist over wishing that stocks would decline so the PP can realize some small gain.
Truly, more money has been lost in trying to avoid these declines than actually investing through them.
That's the most important lesson to take away in my opinion.
Believe in the productivity of the US and ignore the negativity.

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 4:12 pm
by Kriegsspiel
I got another job recently that doesn't pay big bucks, but I get to listen to podcasts all day and it's as close to zero-stress as I could hope for. Sticking with 8-12 years of expenses in the PP. Oddly, I do have kinda the same mindset as Pointed Stick wrt investments, but I am fine with having a chunk in a stable, low real return and taking risks with the rest. No fear. I am going to make more money because having a bunch of money is fucking awesome. And I just feel like working and being productive right now.

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 4:13 pm
by Kriegsspiel
It's good to hear from you again Pointed Stick. Did you grow a wizard beard to go along with that chill philosophy?

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 8:12 pm
by Ad Orientem
Pointedstick wrote:
Thu Nov 15, 2018 1:04 am
Hi, I'm Pointedstick, and I'm a recovering PP investor. I got help, and I'd like to help you, too.

Investing in the Permanent Portfolio in my 20s has so far been the costliest mistake I've ever made in my life. It caused me to lose out on more than $250,000 in avoided gains compared to the 100% stock portfolio I was perfectly happy with before I learned about the PP and I was convinced to adopt it by my fear of not being to replace my job and income should I lose them.

The PP is a fear-based portfolio. You fear loss, and want to avoid it. And the PP helps you avoid big losses, it's true. But I observed over the years I spent here that a good deal of people were not comfortable with even tiny unrealized losses. The fear radiating off of them was palpable. The problem is not the portfolio or the drawdowns. The problem is our own minds.

All of us here are INTJ-ish control freaks. It is so easy for us to become convinced that we can control things. Letting go of that is one of the hardest things for people like us! I now believe that loss is inevitable. Denying this is a kind of obsessive-compulsive disorder. If your kids (or grandkids!) haven't yet gotten you to see Kung Fu Panda, Let me highly recommend it--and in particular, this scene from it: https://www.youtube.com/watch?v=DLpUev1FvS0

Control is an illusion. Not because it's never possible (obviously it is), but because paradoxically, the more you strive for it, the less of it you come to find that you ultimately have, and the less flexibility you'll manifest when things don't go according to plan. The lure of control will drive you mad and turn you into an asshole. I was an asshole. It sucked. I'm sorry, everyone.

We must learn to let go. It's okay if you lose money. It's okay if you get fired from your job, or your house burns down, or your proudest achievement is destroyed and forgotten, or your greatest love is desecrated right in front of you, or your spouse and children all die tragically, or your god is dead. It's okay because you are strong enough to withstand them and come out on the other side! You're not a glass cannon or a fraud or a one-trick pony or an incapable loser. The power of creation has made you a radiant human being who can survive anything. You don't have to lock the pain away. Embrace the pain, let it wash over you, and observe your wholeness. You will survive!

Not only will you survive, but you'll thrive. Because ironically, the more at peace you become with those kinds of awful outcomes, the less likely they seem to happen, or if they do, the more likely you are to quickly recover from them! Life is funny that way.

I learned to live with loss, and I abandoned the PP. I'm back in 100% stocks now, and feel totally at peace with my portfolio. I have no idea how the stock market is doing, and I don't care. I have no clue what my net worth is. It must be okay because I can support my family and even buy nice things once in a while. I simply have no interest in closely following and worrying about and trying to control those things anymore. If the stock market tanks for 30 years and the USA collapses into warring tribes, I'll be okay. And so will you. So will we all.

Everything is going to be okay.
That's great philosophy if you are not over 50, don't have a family depending on your support, don't care if you spend your retirement living in a tent and/or are planning on withdrawing to a monastery. Money is not everything, and that is a lesson a lot of people need to learn. But it aint fertilizer either. And for the vast majority of people, no, it's not OK if your house burns down, you lose your job, your family is killed etc. And frankly I think saying otherwise is bullshit. I've known a few people who drank deep from the Buddhist kool-aid pitcher but I don't think even they would have suggested anything as batshit crazy as that. Evil things do happen in life. That doesn't make them OK.

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 8:21 pm
by Ad Orientem
ochotona wrote:
Thu Nov 15, 2018 1:26 pm
I'm really happy with

40% stocks
10% gold
10% cash
40% bonds

I haven't lost any sleep over the portfolio.
I have been mentally inching in that direction for a while. I still like the HBPP but I am not in a position where I need to be ultra-conservative... yet. Having said that, I have doubts about whether year 9 of the biggest bull market since the 1920's is the right time to add weight to equities. hmmm...

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 9:57 pm
by Kbg
Interesting thread going here, good reading. Thanks to all those who have posted.

Re: Fear is the mind-killer

Posted: Thu Nov 15, 2018 11:19 pm
by boglerdude
Where can I get whatever Pointedstick is smoking =)

As a determinist, I mostly agree, but I'm not sure the mind can accept the reality that the future is already written. We're just monkeys and we love chimping out.

And this "fear based" forum is calmer than Bogleheads, with their academic arguments about "factors"

Re: Fear is the mind-killer

Posted: Fri Nov 16, 2018 7:45 am
by WiseOne
Welcome back Pointedstick! I do wonder, though, what precisely motivated you to come back?
Pointedstick wrote:
Thu Nov 15, 2018 9:43 am
I know the market may drop 75% tomorrow and take 40 years to recover. And I say, "so what?" I don't care. The one time I found myself living off of my investments, I hated it. I felt like a useless penny-pinching sponge. Earning money by contributing things of value to the tapestry of human existence makes me feel better in every way. I was previously afraid that if I lost my income, I wouldn't be able to regain it, because deep down I was afraid that I was an imposter who got them through an accident of fate rather than merit. What a bunch of nonsense!
So this is about early retirement rather than investing, right? As I read the FIRE movement, no one is suggesting that you should limit yourself to sitting home and pinching pennies. The idea is to free you from the need to do meaningless work in a cubicle in order to survive, so that you can do stuff you REALLY, fervently, want to accomplish in life. What specifically is that, for you? I thought you were planning to start a sustainable building company.

I remember what my outlook was at age 31, and trust me, it's VERY different now. At 31, I wanted to go out there and put my stamp on the planet in as many ways as possible. Now, I just want to focus on the rewarding and productive parts of my career, devote time to friends & family, and tell the corporate leeches and bean counters to go f**k themselves. In order to do that, I need the confidence that stems from being financially independent and having a sustainable lifestyle. And, I can also see how I don't necessarily want to be running on this treadmill forever. The ability to get off, whether I use it or not, is priceless.

Call this fear-based if you like, but it's just plain reality. The fact is that bad stuff happens to people, and if you haven't learned that by age 31 you assuredly will as you get older. Friends and colleagues in their 40s and 50s dying of pancreatic cancer, glioblastoma, or heart attacks; elderly relatives needing expensive end of life care; kids wanting to go to colleges costing $60K/year tuition; a divorce that left my brother with zero savings apart from his business & home, and >15 years of high financial obligations. Money won't prevent those things nor is it the answer to everything, but it will make dealing with life's little surprises a lot easier.

Re: Fear is the mind-killer

Posted: Fri Nov 16, 2018 8:16 am
by Cortopassi
WiseOne wrote:
Fri Nov 16, 2018 7:45 am
Now, I just want to focus on the rewarding and productive parts of my career, devote time to friends & family, and tell the corporate leeches and bean counters to go f**k themselves. In order to do that, I need the confidence that stems from being financially independent and having a sustainable lifestyle. And, I can also see how I don't necessarily want to be running on this treadmill forever. The ability to get off, whether I use it or not, is priceless.
You have read my mind WiseOne.

Re: Fear is the mind-killer

Posted: Fri Nov 16, 2018 12:23 pm
by Tortoise
For me, switching to the PP was definitely not a result of fear. My investing strategy prior to the PP was fear-based (mostly gold bullion and various contrarian stock funds) because I was listening to people like Peter Schiff who constantly warned of our economy and currency completely collapsing. My switch to the PP was a result of my finally letting go of that fear and admitting to myself that I couldn't predict the future and wanted to stop trying.

The PP is the most broadly diversified portfolio I could find, and I felt that it provided sufficient protection that I could stop worrying about my investments.

People don't buy insurance because they're in constant fear of burning down their house, crashing their car, or having emergency surgery; they buy it precisely so that they won't have to live in constant fear of those things. The PP is very similar. For me, it's just another form of insurance.

Re: Fear is the mind-killer

Posted: Fri Nov 16, 2018 1:39 pm
by Cortopassi
Tortoise wrote:
Fri Nov 16, 2018 12:23 pm
My investing strategy prior to the PP was fear-based (mostly gold bullion and various contrarian stock funds) because I was listening to people like Peter Schiff who constantly warned of our economy and currency completely collapsing.
Another exact representation of what happened with me.

Re: Fear is the mind-killer

Posted: Fri Nov 16, 2018 7:02 pm
by Kbg
One must always remember, fear sells a lot of stuff. When you understand that, particularly when it comes to the financial industry and the news media, you are a much wiser person. You can't eliminate every risk in life. If you read much of the financial planning stuff you will save every last penny you have to invest it, spend thousands insuring against every possible catastrophe, and provide many fees to lawyers, financial planners and accountants for estate planning.

I'm not saying any of this is bad, but what I am saying is that you are being fed a constant diet of stuff you "need" from the financial industry.

Re: Fear is the mind-killer

Posted: Sat Nov 17, 2018 9:33 am
by ochotona
Ad Orientem wrote:
Thu Nov 15, 2018 8:21 pm
ochotona wrote:
Thu Nov 15, 2018 1:26 pm
I'm really happy with

40% stocks
10% gold
10% cash
40% bonds

I haven't lost any sleep over the portfolio.
I have been mentally inching in that direction for a while. I still like the HBPP but I am not in a position where I need to be ultra-conservative... yet. Having said that, I have doubts about whether year 9 of the biggest bull market since the 1920's is the right time to add weight to equities. hmmm...
It is all about fear the mind-killer. It's about titrating what amount of each asset you can tolerate in order to get the least-bad outcome.

GOLD - I want it for all the reasons Harry Browne outlined. But 25%? So then, I ask, if gold were to go down to $600, how much could I tolerate in my portfolio and take that kind of hit, understanding that physical gold really is buy-and-hold, retail trading physical is an exercise in stupidity. Oh, Ray Dalio says 5%-10%. Jim Rickards says 10%. OK then, 10%.

STOCKS - Stocks could go down 50%, but historically long-term momentum techniques have limited the drawdowns to 25%. How much of a stock-induced drawdown could I tolerate, with downside protections in place? Maybe a 10% draw. OK, if I have 40% stocks, and it goes down by 25%, then I can stomach that.

CASH - I need a ton because of this stupid industry I am in (upstream oil & gas) and I could get unemployed. OK, 10% or even more

BONDS - the rest is T-bonds, the only question is duration. Sitting on the fulcrum between Fear of Loss if interest rates go up, and FOMO if interest rates go down, I stand unequivocally in the mushy middle, with average duration in my bond portfolio around 4 years (current yield 2.88%).

That's how I got where I am. But if we ever get to another March 2009 situation, I think it's going to be:

GOLD 10%
CASH 10%
BONDS 10%
STOCKS 70%

Re: Fear is the mind-killer

Posted: Sat Nov 17, 2018 12:02 pm
by flyingpylon
ochotona wrote:
Sat Nov 17, 2018 9:33 am
But if we ever get to another March 2009 situation,
How will you know?

Re: Fear is the mind-killer

Posted: Sat Nov 17, 2018 12:04 pm
by Kbg
If I were you I'd ladder the whole cash & bonds portion. Solves both problems you have.

Re: Fear is the mind-killer

Posted: Sat Nov 17, 2018 1:18 pm
by ochotona
flyingpylon wrote:
Sat Nov 17, 2018 12:02 pm
ochotona wrote:
Sat Nov 17, 2018 9:33 am
But if we ever get to another March 2009 situation,
How will you know?
How can you not know? Stuff will be flying all over the place like a tornado hit it. You'll know, the question is, what will you do?

Re: Fear is the mind-killer

Posted: Sat Nov 17, 2018 8:14 pm
by dualstow
Great title and first post (of this thread) Mr Stick. So glad to hear from you, no matter whether you’re in the pp, all stocks, or pork belly futures.

I read it with relish- well actually I read it over coconut-curry-lemongrass soup. Homemade.
And I look forward to reading the rest!

Re: Fear is the mind-killer

Posted: Sun Nov 18, 2018 7:31 am
by barrett
ochotona wrote:
Sat Nov 17, 2018 1:18 pm
flyingpylon wrote:
Sat Nov 17, 2018 12:02 pm
ochotona wrote:
Sat Nov 17, 2018 9:33 am
But if we ever get to another March 2009 situation,
How will you know?
How can you not know? Stuff will be flying all over the place like a tornado hit it. You'll know, the question is, what will you do?
ocho, what did you actually do in March of 2009? Have you really learned a lot since then? Not only about markets, but about yourself and your willingness to take on risk? Not trying to be a smart ass... just asking. With only 10% cash in your portfolio you wouldn't be positioned to ramp up to 70% stocks. It's really easy in retrospect to see that March of 2009 was a great time to load up on equities, but at the time I didn't hear too many people saying with any confidence that the bottom was in.

I think the best outcomes during that crash was for people who entered 2008 with a lazy portfolio with a high cash position who also had the discipline to keep rebalancing into stocks. The second best position was probably for investors who didn't lose their jobs and who also actually kept purchasing stocks. But even that strategy was only effective for a relatively short time as the bounce back was quick.

I just can't predict this stuff. It might be March of 2001 for gold right now. I just have no clue.

Re: Fear is the mind-killer

Posted: Sun Nov 18, 2018 8:11 am
by ochotona
barrett wrote:
Sun Nov 18, 2018 7:31 am
ochotona wrote:
Sat Nov 17, 2018 1:18 pm
flyingpylon wrote:
Sat Nov 17, 2018 12:02 pm


How will you know?
How can you not know? Stuff will be flying all over the place like a tornado hit it. You'll know, the question is, what will you do?
ocho, what did you actually do in March of 2009? Have you really learned a lot since then? Not only about markets, but about yourself and your willingness to take on risk? Not trying to be a smart ass... just asking. With only 10% cash in your portfolio you wouldn't be positioned to ramp up to 70% stocks. It's really easy in retrospect to see that March of 2009 was a great time to load up on equities, but at the time I didn't hear too many people saying with any confidence that the bottom was in.

I think the best outcomes during that crash was for people who entered 2008 with a lazy portfolio with a high cash position who also had the discipline to keep rebalancing into stocks. The second best position was probably for investors who didn't lose their jobs and who also actually kept purchasing stocks. But even that strategy was only effective for a relatively short time as the bounce back was quick.

I just can't predict this stuff. It might be March of 2001 for gold right now. I just have no clue.
As 2008 unfolded, I lightened up on stocks from an aggressive position maybe 80% to about 50% before the Lehmann Moment. I didn't have much cash, but had bonds. In March 2009 I decide to take my bonds and redeploy into stock in ten monthly steps. I remember that talk with my wife, almost a decade later.

In retrospect, I was lucky. The S&P500 might've gone from 666 to 333. I didn't have a process other than "buy when others are fearful". That process (lack thereof) has failed me since in different sectors; energy, gold.

I have learned a lot. The value of cash as an asset (it's a call option on anything), I had no gold in 2008-2008, and I'm using simple but robust technical indicators, and I've found researchers that I like (Kathy Jones for bonds; Ned Davis, Lance Roberts, I find value in the bearishness of Hussman, he's the Roman slave whispering in my ear "this too shall pass").

In 2000, I was fully exposed to the bear market. I was unaware of it mostly; I don't remember feeling any angst during that period. I had much less money back then, and still 26 years from retirement. Now I'm 7.5 years out.

I wish I knew in 2000 what I know now. My net worth would be 50% greater. I'm passing the learnings on to my daughter. She's graduating with a BSEE and going to work in EE in June. I think that's how families get wealthy. I loved my Dad, but didn't learn Jack from him about money. Learned much more from Mom. She practised Couch Potato portfolio investing.