Fancy a 27.9% annualised since 1972, -0.17% worse, +125% best, 21.3% std dev ?

[Clive]

?

[MediumTex]

So each year all you have to do is pick which PP asset will do best that year and go all in on January 1, right?

[moda0306]

So each year all you have to do is pick which PP asset will do best that year and go all in on January 1, right?

Duh, MT.

Easy.

[MediumTex]

So each year all you have to do is pick which PP asset will do best that year and go all in on January 1, right?

Duh, MT.

Easy.

With all of the 12 month predictions that come out each January it's just a matter of picking the one that is right.

Each January I sit through at least one institutional investor presentation describing how a rise in interest rates is simply inevitable and the only question is how quickly and how high they will rise.

Every year I have to bite my tongue to keep from asking them if their advice comes with a warranty.

[moda0306]

The aversion to LTT's by anyone and everyone outside of PP land is mind boggling to me.

It'd be one thing if we didn't have a preview of our current situation in another country like... oh I don't know... Japan.... but WE DO!

It'd be one thing if it wasn't an asset that showed its ability to protect a portfolio against a deflationary financial crisis.... but IT DID!

It'd be one thing if we had sufficient short-term default-risk-free rates to pay out decent income.... but WE DON'T.

It may be valid if the U.S. were hamstrung like Greece to a non-sovereign currency where it can actually default... but WE AREN'T.

I don't skew my portfolio to LTT's, so in a sense I'm not "putting my money where my mouth is," and while we all have our favorite PP asset, I don't think anyone can argue that LTT's are probably the most hated or at least ignored asset out there.  Gold has bugs... stocks have bulls... cash has hoarders... LTT's have grandmas, MT, Paul Krugman, and the spattering of PP adherents out there... most of which have to probably get half-plowed to go online and actually buy TLT or 30 year bonds.

This isn't meant to insult any LTT fearers... moreso that you'd think there'd be a balance out there in what people are willing to tout, investment wise.

[KevinW]

The aversion to LTT's by anyone and everyone outside of PP land is mind boggling to me.

I agree with your sentiments, but just to fact-check that statement, there are a few long term treasury proponents out there.  Dominguez and Robin (Your Money or Your Life) advocate 100% LTTs.  And Zvi Bodie (Worry Free Investing) suggests holding mostly long term TIPS.

Also remember that the total bond market includes LTTs, currently about 8%.  So any balanced portfolio using a total bond fund has a small, though not insignificant, allocation to LTTs.

[moda0306]

Kevin,

Touche... you're obviously more on top of the punditry than I am.

[Lone Wolf]

The aversion to LTT's by anyone and everyone outside of PP land is mind boggling to me.

In the end, this might not be such a bad thing, though.  Falling in love with long-term Treasuries as a diversifier is a great thing.  But the idea of people relying on some kind of LTT-bug portfolio the way that you see stockbug and goldbug portfolios... not such a pretty picture.

If you were making the case for long-term Treasuries as an investment apart from as a diversifier, how would you do it?  I don't think I could.

It'd be one thing if we didn't have a preview of our current situation in another country like... oh I don't know... Japan.... but WE DO!

Maybe, but we really just don't know yet how well Japan's narrative applies here.  One day we might look back and say, "Dude!  We're Japan!"  Or perhaps instead we'll look back from some inflation-ravaged future and marvel at how good the Japanese had it.  Our story's not done being told yet (and neither is Japan's, for that matter.)

most of which have to probably get half-plowed to go online and actually buy TLT or 30 year bonds.

Ha!  This is me.  One night I pounded down a case of cheap Scotch and woke up in Atlantic City with a pounding headache and an IRA full of 30-year government bonds.  (This is how I originally found my way to the Permanent Portfolio.)

[Storm]

Ha!  This is me.  One night I pounded down a case of cheap Scotch and woke up in Atlantic City with a pounding headache and an IRA full of 30-year government bonds.  (This is how I originally found my way to the Permanent Portfolio.)

LW, is that you?  http://www.theonion.com/articles/man-wa ... s-s,19858/  

[moda0306]

I guess I don't think it'd be a horrible VP play to toss in some EDV... but that's about it.

The Japan narrative isn't a guarantee... I totally agree... I guess it's some pretty interesting evidence though, and some people won't hear it.

Regarding your scotch-fuelled buying binge, I had to do the same thing, but it was Goldshlager and I'll let you guess which PP asset was tough for me to swallow.  (there's a decent pun in there somewhere)

[KevinW]

Kevin,

Touche... you're obviously more on top of the punditry than I am.

I read a lot of material on conservative and alternative investing on my journey from stock-heavy slice-and-dice to here.

If you were making the case for long-term Treasuries as an investment apart from as a diversifier, how would you do it?  I don't think I could.

There's a chapter of Your Money or Your Life dedicated to making that case.  YMOYL's Web 2.0 progeny financialintegrity.org has a similar argument in their Program Guide ( http://www.financialintegrity.org/image ... 090421.pdf ).

IIRC, the authors' goal is to find an investment that: produces steady, predictable income; has no credit risk; can be purchased directly without middlemen or significant fees; and requires minimal expertise and upkeep.  The only security that meets all those requirements are nominal treasuries, and if you're in it forever you might as well get long term ones.

There's the little matter (ahem) of inflation, which they don't address adequately IMO.

[Lone Wolf]

LW, is that you?  http://www.theonion.com/articles/man-wa ... s-s,19858/  

LOL.  That is awesome!  Poor Ben Taylor.  I feel your pain, buddy.

Regarding your scotch-fuelled buying binge, I had to do the same thing, but it was Goldshlager and I'll let you guess which PP asset was tough for me to swallow.  (there's a decent pun in there somewhere)

  I hear ya.  I was never a gold hater but I did at one time think of it as something reserved to speculators and Scrooge McDuck.

I actually came around on gold after a big binge of history reading a few years back (before I'd heard of the PP.)  Looking for some way to blend stocks and gold into some kind of all-weather portfolio is what brought me to the Permanent Portfolio.

There's the little matter (ahem) of inflation, which they don't address adequately IMO.

Absolutely right.  Inflation and interest-rate risk are a couple of biggies (but then, all non-diversified portfolios have just the same sort of Achilles heel.)

I'll be sure to read the case they make for it, thanks for the tip.

[Tortoise]

I was never a gold hater but I did at one time think of it as something reserved to speculators and Scrooge McDuck.

I resent that.

[Pkg Man]

Ha!  This is me.  One night I pounded down a case of cheap Scotch and woke up in Atlantic City with a pounding headache and an IRA full of 30-year government bonds.  (This is how I originally found my way to the Permanent Portfolio.)

LW, is that you?  http://www.theonion.com/articles/man-wa ... s-s,19858/  

That is one of the funniest things I've ever seen!

[MediumTex]

A few comments:

1. Remember that the U.S. treasury market is the deepest bond market in the world, which means that LOTS of people own LT treasuries, they just don't come on CNBC very often.

2. I read "Your Money or Your Life" many years ago and ever since discovering the PP I have thought that it was a FAR superior allocation to the 100% LT treasury approach described in the book.  The book is very good, though, and when it was written interest rates were much higher than they are now.  I can see living off of a 7% dividend stream, but I don't know about a 4.2% dividend stream.

3. I know that the Japanese like to drink, and I have always wondered if their huge treasury holdings were the result of a long bond bender.