The value of physical gold

[Xan]

well you are still betting on a particular outcome .  you are betting on at least average returns  in more thn one asset class or above average returns in one asset class in order to succeed .  how do you know that will happen ?  can't we have below avrae returns  ?  interest rates are already way below in two of the category's.

a 50/50 mix  can produce a nice return with only 5-6% equity returns ,.  in either case we are both betting on something being in place that my not happen and that is my point .

What do you mean "succeed"?  I'm taking what the markets give me.

[mathjak107]

meeting your goals with the  portfolio . whether savings goals if in the accumulation stage or income and legacy money goals if in retirement .

as i said if i was in the pp i would not have just retired because it would not have met my savings goals the last 30 years .

so a portfolio has to reach the end game goals . 

[Xan]

meeting your goals with the  portfolio . whether savings goals if in the accumulation stage or income and legacy money goals if in retirement .

I think what you actually mean is meeting your goals.

[mathjak107]

well if you have no goals and don't care what you end up with then good luck if you fall short of meeting the standard of living you hoped to have when you retire . or perhaps never have enough to buy that house or whatever it is .  not a goo idea to drift like a cork in water to wherever you end up with with no idea where you stand or are going ..  is that what what you are saying  you do ?

[Xan]

well if you have no goals and don't care what you end up with then good luck if you fall short of meeting the standard of living you hoped to have when you retire . or perhaps never have enough to buy that house or whatever it is .  not a goo idea to drift like a cork in water to wherever you end up with with no idea where you stand or are going ..

I don't plan on getting lucky, if that's what you mean.  I certainly don't plan on becoming an investment professional in addition to my real job.  I plan on earning money and saving it.

[mathjak107]

so counting on not having below average returns  going  forward  so your pp can grow enough isn't getting lucky ?  you need to worry about 4 assets allowing each  other to grow enough , i worry about 2 .

you are betting as much as me on the unknown .

[Xan]

so counting on not having below average returns  going  forward  so your pp can grow enough isn't getting lucky ?  you need to worry about 4 assets allowing each  other to grow enough , i worry about 2 .

Getting lucky is putting all your eggs in one basket and having it work out.

NOT getting lucky is widely diversifying, saving, and taking what the market gives you.

[Pointedstick]

What this comes down to is that Mathjak is predicting that gold will be, on average, a loser forever. Because of this, he believes that adding it to any portfolio amounts to dragging down returns. Now, Mathjak acknowledges that purposely reducing expected returns to dampen downside volatility is a legitimate goal, as he practices this himself with his 50/50 portfolio.

However, I believe the difference is that in his estimation, the PP does not have enough stocks to counter the return-dragging-down effects of particularly gold, and secondarily cash and long-term treasuries, which he thinks are going to get massacred as soon as interest rates rise.


What it really boils down to is this:

Mathjak may be right that interest rates are about to rise and slaughter long treasuries and gold is going to suck much more often than it shines. If he is right, then the PP will struggle.

Most people here don't share Mathjak's pessimism about these two assets, though. And that's all it is: pessimism. An opinion. A forecast. A belief. We see things differently and believe that there is room for gold to do well and for long bonds to perform even in a climate of low rates. If we are right, then the PP is just fine.

Who is right? Nobody knows. Everyone needs to decide for themselves whose arguments and opinions are more persuasive and seem to mirror reality more.

[mathjak107]

no , a diversified portfolio is not all your eggs in one basket  .

there is no guarantee just because you split up those eggs that they will not spoil and turn rotten before you eat them  .

[mathjak107]

What this comes down to is that Mathjak is predicting that gold will be, on average, a loser forever. Because of this, he believes that adding it to any portfolio amounts to dragging down returns. Now, Mathjak acknowledges that purposely reducing expected returns to dampen downside volatility is a legitimate goal, as he practices this himself with his 50/50 portfolio.

However, I believe the difference is that in his estimation, the PP does not have enough stocks to counter the return-dragging-down effects of particularly gold, and secondarily cash and long-term treasuries, which he thinks are going to get massacred as soon as interest rates rise.


What it really boils down to is this:

Mathjak may be right that interest rates are about to rise and slaughter long treasuries and gold is going to suck much more often than it shines. If he is right, then the PP will struggle.

Nobody else here shares Mathjak's pessimism about these two assets, though. And that's all it is: pessimism. An opinion. A forecast. A belief. We see things differently and believe that there is room for gold to do well and for long bonds to perform even in a climate of low rates. If we are right, then the PP is just fine.

Who is right? Nobody knows. Everyone needs to decide for themselves whose arguments and opinions are more persuasive and seem to mirror reality more.

i said gold has been the loser  since we were able to own it in the past , i can't predict the future . i said NOW is not the time i would put as much in gold as all the other assets , but then again now is not the time i would bet so heavy on long term treasury's going forward either  but that is me .

no one hear is pessimistic about those assets because you own them ,. you wouldn't own them otherwise unless you just don't like selling losers so you sit with it .
i have not been in any of the  bogle head permanent portfolio discussions but i bet they would tear the pp apart  just  because they don't own it .

no one likes to own or admit they own something that may not be the best way to do something so we all believe our way is best  , it is like religion

[dutchtraffic]

What this comes down to is that Mathjak is predicting that gold will be, on average, a loser forever. Because of this, he believes that adding it to any portfolio amounts to dragging down returns. Now, Mathjak acknowledges that purposely reducing expected returns to dampen downside volatility is a legitimate goal, as he practices this himself with his 50/50 portfolio.

However, I believe the difference is that in his estimation, the PP does not have enough stocks to counter the return-dragging-down effects of particularly gold, and secondarily cash and long-term treasuries, which he thinks are going to get massacred as soon as interest rates rise.


What it really boils down to is this:

Mathjak may be right that interest rates are about to rise and slaughter long treasuries and gold is going to suck much more often than it shines. If he is right, then the PP will struggle.

Nobody else here shares Mathjak's pessimism about these two assets, though. And that's all it is: pessimism. An opinion. A forecast. A belief. We see things differently and believe that there is room for gold to do well and for long bonds to perform even in a climate of low rates. If we are right, then the PP is just fine.

Who is right? Nobody knows. Everyone needs to decide for themselves whose arguments and opinions are more persuasive and seem to mirror reality more.

i said gold has been the loser  since we were able to own it in the past , i can't predict the future . i said NOW is not the time i would put as much in gold as all the other assets , but then again now is not the time i would bet so heavy on long term treasury's going forward either  but that is me .

no one hear is pessimistic about those assets because you own them ,. you wouldn't own them otherwise unless you just don't like selling losers so you sit with it .
i have not been in any of the  bogle head permanent portfolio discussions but i bet they would tear the pp apart  just  because they don't own it .

no one likes to own or admit they own something that may not be the best way to do something so we all believe our way is best  , it is like religion

Who says nobody is pessimistic?? I certainly am for some assetclasses.

And the religion part, i think you need a mirror......people here do not scout the forum 24/7 and insta-respond to new replies with an attempt to bash their portfolio, only 1 person does that here 

[mathjak107]

if i am addressed i reply . if no one references my posts then i have no reason to reply and we can move on to other subjects .

[Xan]

no one hear is pessimistic about those assets because you own them ,. you wouldn't own them otherwise unless you just don't like selling losers so you sit with it .

Who says nobody is pessimistic?? I certainly am for some assetclasses.

Dutch is exactly right: it's certainly normal for a PP investor to have to hold his nose when buying one or two of the four assets.  But that's just it: we might be (and likely are) wrong!  Mathjak is not cursed with doubt in his own ability to guess the future, but the rest of us are.  The PP is insurance against being wrong.

[Pointedstick]

no one hear is pessimistic about those assets because you own them ,. you wouldn't own them otherwise unless you just don't like selling losers so you sit with it .
i have not been in any of the  bogle head permanent portfolio discussions but i bet they would tear the pp apart  just  because they don't own it .

no one likes to own or admit they own something that may not be the best way to do something so we all believe our way is best  , it is like religion

I think you're dead wrong about this. Virtually all members of this board question the PP constantly. We poke it from different angles, we worry about gold and bonds just like you do, and we are in my experience 100% opposite from your frequent characterization as a bunch of goldbug lemmings blindly following an obsolete dogma without thinking about it at all.

Really, the primary difference between you and most of the people here is that you believe that it is possible to successfully and consistently do macro-scale market timing.

[mathjak107]

interesting enough today my model and the pp are up .44% as of this minute .  so as an example gold is up  today and gld is  up 2% . both treasury's and stock are up about .50% . 

all my model needed to get  to this level is less than a 1% rise in stocks when combined with the intermediate term bonds  . to achieve the same level took a way above average return  of 2% on gold .

that is why i say while you think you are not betting on outcomes you certainly are . you need to count on much stronger gains in assets in order to get to the same level .  i may be betting on a narrow band of assets but i am betting less on how much i need in gains to move forward . the pp bets on a wider band of assets that are more volatile except for cash and needs to count on higher gains to move forward for the mot part .

[Pointedstick]

interesting enough today my model and the pp are up .44% as of this minute .  so as an example gold is up  today and gld is  up 2% . both treasury's and stock are up about .50% . 

all my model needed to get  to this level is less than a 1% rise in stocks when combined with the intermediate term bonds  . to achieve the same level took a way above average return  of 2% on gold .

that is why i say while you think you are not betting on outcomes you certainly are . you need to count on much stronger gains in assets in order to get to the same level .

I believe that would be true of any portfolio with more than one asset.

[Xan]

interesting enough today my model and the pp are up .44% as of this minute .  so as an example gold is up  today and gld is  up 2% . both treasury's and stock are up about .50% . 

all my model needed to get  to this level is less than a 1% rise in stocks when combined with the intermediate term bonds  . to achieve the same level took a way above average return  of 2% on gold .

that is why i say while you think you are not betting on outcomes you certainly are . you need to count on much stronger gains in assets in order to get to the same level .

a) who says we have to get to the same level?

b) If gold is up 2%, stocks and treasuries each up .5%, then the PP is up .75%.  So it's almost twice as high as your model.  Therefore it's twice as good (according to the Mathjak personality which revels in daily performance)

[mathjak107]

interesting enough today my model and the pp are up .44% as of this minute .  so as an example gold is up  today and gld is  up 2% . both treasury's and stock are up about .50% . 

all my model needed to get  to this level is less than a 1% rise in stocks when combined with the intermediate term bonds  . to achieve the same level took a way above average return  of 2% on gold .

that is why i say while you think you are not betting on outcomes you certainly are . you need to count on much stronger gains in assets in order to get to the same level .

I believe that would be true of any portfolio with more than one asset.

depends . if the assets pull harder in opposite directions then it could be true with fewer assets . but there is no comparison to equity's and short and intermediate term bonds to stocks , gold and long term treasury's and the inertia you need to overcome to  go forward .


a down day for bonds with intermediate treshurys can have 3x less effect then a down day with a total bond fund .  hense stocks n long term treasury's need a lot more in gains on stocks to move  forward .

[Xan]

interesting enough today my model and the pp are up .44% as of this minute .  so as an example gold is up  today and gld is  up 2% . both treasury's and stock are up about .50% . 

all my model needed to get  to this level is less than a 1% rise in stocks when combined with the intermediate term bonds  . to achieve the same level took a way above average return  of 2% on gold .

that is why i say while you think you are not betting on outcomes you certainly are . you need to count on much stronger gains in assets in order to get to the same level .

I believe that would be true of any portfolio with more than one asset.

depends . if the assets pull harder in opposite directions then it could be true with fewer assets . but there is no comparison to equity's and short and intermediate term bonds to stocks , gold and long term treasury's and the inertia you need to go forward .

If your assets always pull in the same direction then is it really more than one asset?

It's all very well and good when your one asset is gaining, but what about when it's losing?

[buddtholomew]

I don't believe the PP is the best option, but I do appreciate the overall structure enough to invest in the philosophy. I purchased GLD at 162, in the 140's and again at 107. I can TLH the entire GLD position and offset unrealized gains in the SP500 if I so choose.

I am more confident in the portfolio performing adequately than I am that equities will not decline a significant amount in the near term. 140K new jobs created in September, 60K less than forecast. If we do enter a recession I don't want to sell equities to cover expenses. It's not something that I feel comfortable doing and what initially piqued my interest in the PP (lower drawdowns).

Now, I do have a 70/30 BH portfolio that I am comfortable re-balancing from fixed income to equities. Can you perhaps understand that these two unique approaches can serve investors with similar situations.

[mathjak107]

anyone who cares about declines in the short term should not be in long term assets  then .  in fact right now as of last night the pp ytd was down more than the other models i have been posting so here is no gurantee the pp in the short term won't be down more . we just don't know .

[mathjak107]

I believe that would be true of any portfolio with more than one asset.

depends . if the assets pull harder in opposite directions then it could be true with fewer assets . but there is no comparison to equity's and short and intermediate term bonds to stocks , gold and long term treasury's and the inertia you need to go forward .

If your assets always pull in the same direction then is it really more than one asset?

It's all very well and good when your one asset is gaining, but what about when it's losing?

i already said  that the only other assets are short term and intermediate term bonds so they do not inflict much damage evn when down . a bad day is like .50%  but more typically a down day is .25% . 

against stocks moves it is usually like peeing in the ocean . .. 

[Xan]

anyone who cares about declines in th short term should not be in long term assets  then .  in fact right now as of last night the pp ytd was down more than the other models i have been posting so here is no gurantee the pp in the short term won't be down more . we just don't know .

Historically the PP has been an excellent choice for horizons of around four years up through a full multi-decade working career.  It's a great way to invest in long-term assets without the volatility that implies.  It means I can throw everything in my portfolio (almost) regardless of when I might need the money.

[mathjak107]

depends what you need . you may come up way short  if multi decades . the difference between a growth model if you are fairly young and the pp  could be hundreds of thousands difference  by retirement and depending on time frame has been .

there are no free lunches or guarantees  . if you don't need as much as you can muster then the pp lets you have that lower volatility . but if your nest egg balance is important then low volatility  may not work out well .

that is why you need to really have a long term plan no matter what you use .  i know my long term accumulation stage  plan was based all on no better then average market returns .  anything better would be an upside surprise .  now that i am retired my plan is based on worst case returns  and i  allocate to get my volatility  TO THE LOWEST LEVEL I CAN WHILE MAINTAING A HIGH SUCCESS RATE TO AT LEAST EVERYTHING THROWN AT US FROM THE PAST .

LIKE BUILDING A HOUSE AFTER HURRICANE SANDY , IF I BUILD TO AT LEAST STAND UP TO SANDY  I KNOW AT THE LEAST ANYTHING IN THE PAST WILL NOT BE AN ISSUE .

but that does not mean an unexpected  storm bigger than sandy won't get me . it just means odds are good that would be a remote possibility since sandy was a first time .

[rickb]

well did you no long term gold was the worst place to put money and a t-bill did better the last 40 years .?

You keep saying this as if the relevant comparison is 100% gold vs. 100% t-bills.  Gold is VOLATILE.  T-bills are not.  Mixing gold with other volatile investments (like, say, stocks) and rebalancing ends up way ahead of mixing t-bills with other volatile investments. 

Long term, gold, t-bills, stocks, and long term bonds ALL increase at or above the rate of inflation.  In the short term three of them are volatile (more or less equally volatile).  By mixing them you dramatically reduce the overall volatility and end up ahead of the average combined CAGR, which (over a long timeframe) is somewhat better than inflation.  Historically (over 40+ years) the actual number has been right about inflation + 4.5%. This compares to an average combined CAGR of about inflation + 3% (assuming the long term expected CAGR of t-bills and gold is inflation+0%, stocks inflation+8% and long term bonds inflation+4%).

In comparison, your 50/50 stock/bonds approach mixes two assets of highly unequal volatility.  Over the long term, both increase at or above the rate of inflation but the overall volatility is reduced far less so you'll end up closer to the average combined CAGR.  If the expected CAGR of stocks is inflation + 8% and (medium term) bonds inflation + 2%, you'll end up at about inflation + 5%.

We could fine tune these numbers, but the point is the expected return of the PP vs. a 50/50 stock/bond portfolio is not that different.

What IS different is the PP will be far less volatile.  And with the PP you have a bag of gold that can save your ass in some unlikely scenarios that would otherwise be completely devastating.