Question for Melveyr

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BearBones
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Question for Melveyr

Post by BearBones » Sun Feb 14, 2016 1:14 pm

melveyr wrote: I don't think the PP is a good strategy right now. The PP is only different from BH strategy because it advocates for a bond barbell and gold ownership; neither make sense to me now. Holding an intermediate term bond portfolio instead of the cash/ltt has a higher sharpe ratio and I am very confident it will continue to do so in the future. LTT treasuries act like a levered version of intermediate term bonds, so why would you want to delever that with cash that is earning 0%? The cost of implicit leverage in the LTT is higher 0%, so if you really wanted less leverage why not just use ITT? I posted about that in 2012 here

http://gyroscopicinvesting.com/forum/pe ... cal-logic/

and the intermediate term bond portfolio has continued to outperform since then (just go to ETF replay and test the sharpe ratio of 100% TLH vs the 50/50 blend of TLT and SHY).

A heavy gold weighting has really hurt the PP. I am always trying to learn more about how the monetary system works and I found that the main advocates for gold were using old models that have already been proven wrong. I am young and always trying to learn more (going for CFA level 3 this June), and it would be a shame to not incorporate new knowledge into how I make decisions. Gold ownership can still make sense, especially if you hold LTT, but the weighting in the PP is too high.
Always respected your thoughts, Ryan. Congrats on getting your CFA. Since you are no longer in favor of gold, I am curious what portfolio you would advise someone in the following 2 circumstances. Low tolerance for sustained drawdown in both scenarios.

1. Someone who is nearing retirement and has accumulated, say a million or two distributed evenly among taxable and tax deferred accounts. Age 60.
2. Someone without a lot of saving who recently entered the beginning of the most productive phase of career, say age 37.
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Re: Question for Melveyr

Post by Pointedstick » Sun Feb 14, 2016 1:18 pm

Let me add a third:

3. Someone with substantial savings preparing to retire very young following the MMM/ERE approach, with the requirement that the money sustain them another 50 years or more.
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Re: Question for Melveyr

Post by melveyr » Sun Feb 14, 2016 6:48 pm

My thoughts are quite mainstream and not terribly exciting! But I will try to explain it in a different way to hopefully make it interesting.

I do think that time horizon matters. I think that long term liabilities should be financed with longer term assets and shorter term liabilities should financed with shorter term assets.

I think that longer time horizons can warrant more equities for two reasons.
1) Stocks are a long duration asset because they are best thought of as a risky perpetuity. The united states doesn't offer perpetual bonds so we don't think about them often but the UK has issued them. They call them consols. With consols the bond never matures, it just pays you a fixed coupon forever. Imagine a LTT on steroids. A nice mathematical trick to calculate the duration of perpetuity is to simply invert the dividend yield. So a perpetual bond with a yield of 2% has a duration of 50. For a buy and hold investor equities are similar because the dividend payments persist indefinitely with no lump sum return of your principal. But with equities the payments are risky because they can be cut in times of stress or grow in times of prosperity.

2)Apart from the long duration element that makes it a natural pairing for a long term liability, most of us believe that capitalism produces booms that more than offset the busts given enough time. Longer term investors have the ability to ride out these storms.

Both of these put together means that all else equal, younger investors should have higher allocations to equities than older ones.

The next objective should be to gradually decrease your duration and exposure to the boom/bust cycle as you get older while still generating a decent return. Intermediate term bonds are an obvious choice because their duration of 5-7 years is much lower than equities (lowering your portfolios duration) and they are often the steepest part of the yield curve (generating a decent return). If you are DIYer I think that looking at CDs makes a lot of sense right now because you can get 100bps over treasuries without much more credit risk (and some direct CDs come with a put option which is a nice feature if rates rise).

Now, most PPers are aware that the achilles heel of a stock/bond portfolio is unexpected inflation, especially if it comes from a supply shock (like the oil crisis in the 70s). These supply shocks are usually temporary, and I think it is reasonable for younger investors to accept it and ride them out. The equities will likely do okay given enough time. As you get older and your portfolio shifts more towards bonds the risk becomes more serious, but I don't like the idea of relying solely on gold to handle this. I think the combination of a paid off home, exposure to foreign equities (protects if the inflation is only local in nature), more of your bonds in TIPS (these get a lot of flak here because they don't protect you from extreme tail risk, but I like them as PART of the solution), and if you are still nervous, yes a little bit of gold. But I wouldn't go above 10% of the portfolio and I wouldn't criticize a portfolio that totally skipped out on it.

Recommending specific portfolios for specific people makes me uncomfortable, but if someone who was 60 said they had a paid off home, and sixty percent of their liquid assets in 5 year CDs (now yielding more than a 20 year treasury!) and 40% in global equities I would say they have a great plan. If some of those bonds/CDs were in TIPS and they had a 10% allocation to gold I would also see that as a great plan.

I hope that helps, but I really think it depends so much on the person and their psychology. Different people worry about different things and I think the sleep factor is huge! I hope that answered your questions.
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Re: Question for Melveyr

Post by melveyr » Sun Feb 14, 2016 8:03 pm

Oh and regarding tax efficiency because you mentioned split between taxable/tax advantaged... Try to view your entire pool of assets as one portfolio but understand that some accounts are more suited to specific assets.

Roth: Stocks
401k: Bond funds
Traditional IRA: CDs (because 401ks don't offer them)
Taxable: Stocks / Gold

Don't let these tax strategies dictate the overall asset allocation, but once you have your allocation try to follow this as best as you can. Make withdrawals from your taxable account and adjust the others as you do it to keep your total AA in check because tax advantaged space is precious.

Desert, glad that you agree! I remember you were moving towards intermediates at well. CDs are an especially great opportunity right now because the rates haven't come down as quickly as treasury yields in the last month.
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Re: Question for Melveyr

Post by Austen Heller » Sun Feb 14, 2016 8:42 pm

Desert wrote: I recommend about 60% in CD's or intermediate treasuries, about 30 percent equities, and a 10% slice of gold. 
I have heard this 30:60:10 suggestion from you before, and I have filed it in my brain as 'the Desert portfolio'.  But do you offer your suggestion regardless of age?  In other words, should the non-gold 90% should be allocated among stocks:bonds according to age, such as:

age - stocks:bonds:gold
20  - 70:20:10
30  - 60:30:10
40  - 50:40:10
50  - 40:50:10
60  - 30:60:10
70  - 20:70:10

This would then be in essence an 'age-in-bonds' portfolio.
melveyr wrote: CDs are an especially great opportunity right now because the rates haven't come down as quickly as treasury yields in the last month.
I know we have gone over this a few times, but I still find that CDs are no bueno compared to treasuries, up until a difference in yields of about 1%.  The CDs carry FDIC risk, state taxation, and the hassle-factor of dealing with different banks to get the best rate.  If the difference in yield is greater than 1%, then I might re-evaluate, but for now, I still favor treasuries.
Last edited by Austen Heller on Sun Feb 14, 2016 8:46 pm, edited 1 time in total.
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Re: Question for Melveyr

Post by melveyr » Sun Feb 14, 2016 9:05 pm

The only other point I would add to that is that the state taxation of CDs is mitigated by placing them in a traditional IRA. Your taxable account should really be equity focused as long as you are managing all of your assets as one portfolio.
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Re: Question for Melveyr

Post by Austen Heller » Sun Feb 14, 2016 9:23 pm

Thanks for the fast responses guys.  I will say that the situation has changed rather quickly.  In December, the 5-year was auctioned at 1.785%, making the decision to buy the treasury a no-brainer.  But losing about 0.5% in just over a month has altered the equation.

Ah yes, the 3% 5-yr penfed CDs, a high triumph for any investor that saddled up to ride that unicorn.  I remember those times, the 10-yr was at 3%, the 30-yr was at 4%.  I snacked lightly upon the offering, but I wish I had gorged.
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Re: Question for Melveyr

Post by ochotona » Sun Feb 14, 2016 9:44 pm

I remember getting a CD for 13%
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Re: Question for Melveyr

Post by Dieter » Sun Feb 14, 2016 10:08 pm

Desert wrote: <snip quote>
Yeah, the 30/60/10 advice is general.  I'm not a big proponent of age-dependent guidelines though, because a lot of younger folks panic and sell at market bottoms even though their theoretical investing timeline is long.  But yes, I think the equity allocation could be higher than 30 percent for folks who know they can handle the risk.  I wouldn't go much over 50 percent though.  Not just because of volatility and drawdowns, but because of the possibility that equity returns will be smaller than fixed income returns over the critical timeline of that investor.  It sounds absurd, but that's what risk really is.  It isn't only draw-downs and volatility, it's watching wealth be destroyed, with no recovery (Japan-style, for example). 

But for an aggressive investor with a longer timeline, I like a 45/45/10 with some tilting to riskier equities.  I'm middle age/old, so I'll be sticking with my 30/60/10.
William Bernstein has much the same advice for younger folks. Have a fixed allocation. In his recent 16 page pamphlet / PDF, "If You Can: How Millennials Can Get Rich Slowly" (http://www.goodreads.com/book/show/21852252-if-you-can), he advocates saving 15% for 40 years, investing it in index funds: US Stocks, Intl Stocks, US Total Bond: 33/33/34.

As Desert says above, while younger investors COULD take more risk, many can't. 66% in stocks is much higher that folks around here generally advocate, but a lot less than the 90-10 in typical target date funds for this age group.
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Re: Question for Melveyr

Post by craigr » Sun Feb 14, 2016 10:24 pm

A risk with age dependent portfolios, aside from taking on too much risk as already noted, is they assume a smooth life glide path. Meaning that you start working at 22 out of school, work until retirement at age 65, and then begin your tour of Alaska on a cruise ship.

But variable allocations can cause problems if you get sick, injured, lose a job, life circumstances change, etc. Murphy's Law has a lot of these things happening during times in the market when it might not be best to sell assets to juggle things or you can't access those assets as they are locked up in high penalty retirement vehicles.

Speaking as someone who has looked at this issue forwards and backwards for my own personal reasons, I would strongly suggest:

1) People who are retired, or nearing retirement, never discount the emotional security of sitting on a pile of really safe cash that you could draw down for a year (or much more) in an emergency without panicking.
2) Don't take too much risk that can cause you sell assets at a loss, or with a capital gains bill, during market declines when you don't want to.
3) Don't eliminate gold from the portfolio. While 25% may be too much for some, I would never go lower than 10% myself as an insurance asset.
4) Tax management is important and making changes to a taxable portfolio is extremely expensive. Don't buy any asset you aren't willing to hold for many years without touching. This means keeping things very simple with broadly based index funds for stocks for instance that do not generate lots of taxable events and won't leave you with regrets in a few years.
5) Don't speculate with money you can't afford to lose. If you want to take a little more risk, then just buy some more stock index funds and don't get tricky.

Risks need to be very carefully managed for early retirement portfolios because taking a large loss is quite likely to be fatal to the nest egg during extended drawdown phases. Early retirees can live on lower risk returns with some adjustments, but taking a huge loss to a risky portfolio while having living expenses removed is really bad news.
Last edited by craigr on Sun Feb 14, 2016 11:17 pm, edited 1 time in total.
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Re: Question for Melveyr

Post by BearBones » Mon Feb 15, 2016 5:51 am

Appreciate your quick response, Melveyr. And the comments of others. As you are aware, Tyler has created PortfolioCharts and suggested the Golden Butterfly. I am thinking about the derivation below. Regardless, I assume you would replace the treasuries with intermediate and ditch the gold? And you would use TIPs instead of gold or REIT? If you do these things, there is a lot higher drawdowns and/or poorer CAGR in back testing. Just ignore b/c the past does not predict the future?

I'm also going to ask you elsewhere to explain more why you don't like gold. Nice to have your perspective. Thanks.

Image
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Re: Question for Melveyr

Post by BearBones » Mon Feb 15, 2016 6:04 am

Might as well ask here. Elsewhere you said, "I found that the main advocates for gold were using old models that have already been proven wrong." Can you elaborate a bit more?
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Re: Question for Melveyr

Post by barrett » Mon Feb 15, 2016 7:01 am

Hey melveyr,

You have written so eloquently (and concisely) in support of the PP on your site and I am curious what has caused you to change your mind about Harry Browne's ideas. Has something fundamentally shifted in the world, or were those just the writings of a younger version of your current self?

I think it's important to bring into this conversation that most of us on here (everyone, please correct me if I am wrong) are interested in a portfolio that is easy to maintain over a long period of time, doesn't get clobbered at any point, and can really perform when one of the big three assets is doing great.

Also, to me at least, the notion that boom cycles in the economy are longer than bust cycles strikes me as maybe not true. Historically, of course, that has been true here in the US. But we have the advantage of being able to look at Japan as an example of what can happen to a major economy as it matures. There were a lot of factors that went into 1982-1999 being great for stocks but some of them (for example, the great leap forward that computers helped bring about) may not be repeatable.

I guess I see that an economic boom, deflation or high inflation could all happen at some point in the next few years. Maybe I am just suffering from confirmation bias.

And FWIW, I fall into moda's category #1... basically gearing up for retirement with most of my earnings potential in the past. I am paraphrasing what he wrote but I think that puts me in with many on here who are either retired or at least closer to the end of their working lives than they are to the beginning.

Lastly, it's good to have you back even if you are not planning to stick around for long. Your input is greatly appreciated!
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Re: Question for Melveyr

Post by melveyr » Mon Feb 15, 2016 9:07 am

barrett wrote: Hey melveyr,

You have written so eloquently (and concisely) in support of the PP on your site and I am curious what has caused you to change your mind about Harry Browne's ideas. Has something fundamentally shifted in the world, or were those just the writings of a younger version of your current self?

I think it's important to bring into this conversation that most of us on here (everyone, please correct me if I am wrong) are interested in a portfolio that is easy to maintain over a long period of time, doesn't get clobbered at any point, and can really perform when one of the big three assets is doing great.

Also, to me at least, the notion that boom cycles in the economy are longer than bust cycles strikes me as maybe not true. Historically, of course, that has been true here in the US. But we have the advantage of being able to look at Japan as an example of what can happen to a major economy as it matures. There were a lot of factors that went into 1982-1999 being great for stocks but some of them (for example, the great leap forward that computers helped bring about) may not be repeatable.

I guess I see that an economic boom, deflation or high inflation could all happen at some point in the next few years. Maybe I am just suffering from confirmation bias.

And FWIW, I fall into moda's category #1... basically gearing up for retirement with most of my earnings potential in the past. I am paraphrasing what he wrote but I think that puts me in with many on here who are either retired or at least closer to the end of their working lives than they are to the beginning.

Lastly, it's good to have you back even if you are not planning to stick around for long. Your input is greatly appreciated!
Nothing hugely fundamental has changed. I think that Harry Browne's framework of real growth/real contraction and inflation/deflation is still relevant. Any economic event can be plotted on these two axes and changes in expectations about these factors drive the majority of asset class returns. Harry Browne was the first writer I know of to lay this out so clearly and I will always be grateful for that way of looking at things.

My only real departures are preferring bullet over barbell bond portfolios, and de-emphasizing gold's role in portfolios. I also want to make it clear that my new portfolio is more susceptible to inflation risk. The PP will outperform my portfolio if we have a big inflation, but I am accepting that as a risk that I am willing to take. Every portfolio has a weakness and you have to align that with what risks you are willing to take. The risk of the PP is that lately it has actually gone down when things look very rosy and had it's largest spikes when things get bad. It also is more correlated with gold than the other assets (true historically as well) so the 3 way split is not exactly balanced. I think that gold has the lowest theoretical underpinnings for long term returns, so I don't like that the PP is most correlated with that asset.

Most of my learnings are related to my own psychology as an investor. I am not trying to ring alarm bells about the PP. If you have been happy with it, then by all means keep going with it. I just have different risks that I am more comfortable taking than the risks that are within the PP.
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Re: Question for Melveyr

Post by Pointedstick » Mon Feb 15, 2016 9:18 am

melveyr wrote: Most of my learnings are related to my own psychology as an investor. I am not trying to ring alarm bells about the PP. If you have been happy with it, then by all means keep going with it. I just have different risks that I am more comfortable taking than the risks that are within the PP.
That's really the important part, I think. Certain assets give some people fits and starts. It makes sense to tweak the asset allocations according to whatever is most compatible with your world view and the mindset with which you approach things so you don't feel vindicated and panic-sell when your least favorite asset starts to fall.

I too have started to implement a slight prosperity till to my PP, taking advantage of the recent stock decline. I'm now for 40% stocks, 20% everything else, with. I still like having a big slug of gold and in fact feel more confident about it when I'm more stock-heavy, and I like the barbell better than the bullet because the large cash reserve likewise makes me feel comfortable.
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Re: Question for Melveyr

Post by melveyr » Mon Feb 15, 2016 9:20 am

BearBones wrote: Might as well ask here. Elsewhere you said, "I found that the main advocates for gold were using old models that have already been proven wrong." Can you elaborate a bit more?
Not so much here on this forum but many gold holders were betting on a big inflation coming because of charts like this:
Image

The idea was that banks lend in direct proportion to the amount of reserves that they have, and that once things returned to normal we would have an explosion of credit and spending that would push prices up. Many people equated monetary easing and QE with "money printing" which I have found to not be accurate, at least when trying to connect it with its effect on inflation. People were buying gold based on these theories, and pushing the price up. We have seen a slow bleed in gold as holders have slowly come to recognize that their understanding of the connection between Fed policy and inflation is not as direct as they thought.
Last edited by melveyr on Mon Feb 15, 2016 9:22 am, edited 1 time in total.
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Re: Question for Melveyr

Post by barrett » Mon Feb 15, 2016 9:26 am

Thanks for clarifying, melveyr. I am way older that you and hyper aware of that Harry Browne rule that reminds us that we can't count on generating the same wealth a 2nd or 3rd time around. So, I'll accept a lower return over time and hope that the PP can reduce sequence of returns risk. I learned a lot about how low my late-career risk tolerance is last year when the PP had a drawdown of nearly 8%.
melveyr wrote: Most of my learnings are related to my own psychology as an investor. I am not trying to ring alarm bells about the PP. If you have been happy with it, then by all means keep going with it. I just have different risks that I am more comfortable taking than the risks that are within the PP.
I'm glad you made this clear. There seems to be a significant cohort on here that is really focussed on the 2nd half of the investing curve.

It's good to have you stop by and chat. You have been missed on here.
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Re: Question for Melveyr

Post by buddtholomew » Mon Feb 15, 2016 9:48 am

melveyr wrote:
BearBones wrote: Might as well ask here. Elsewhere you said, "I found that the main advocates for gold were using old models that have already been proven wrong." Can you elaborate a bit more?
Not so much here on this forum but many gold holders were betting on a big inflation coming because of charts like this:
Image

The idea was that banks lend in direct proportion to the amount of reserves that they have, and that once things returned to normal we would have an explosion of credit and spending that would push prices up. Many people equated monetary easing and QE with "money printing" which I have found to not be accurate, at least when trying to connect it with its effect on inflation. People were buying gold based on these theories, and pushing the price up. We have seen a slow bleed in gold as holders have slowly come to recognize that their understanding of the connection between Fed policy and inflation is not as direct as they thought.
I don't recall HB commenting on the relationship between money supply and gold.
Gold responds to unexpected inflation is the theory not excess bank reserves stored at the FED.
The $ didn't reach those who could spend it and raise inflation.
Not sure the model is broken, perhaps misused but not broken.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: Question for Melveyr

Post by melveyr » Mon Feb 15, 2016 9:54 am

buddtholomew wrote:
I don't recall HB commenting on the relationship between money supply and gold.
Gold responds to unexpected inflation is the theory not excess bank reserves stored at the FED.
The $ didn't reach those who could spend it and raise inflation.
Not sure the model is broken, perhaps misused but not broken.
I wasn't saying that the PP or Harry Browne's analysis were flawed. I was saying that people (not necessarily on this forum) had been using flawed models to justify higher gold prices. My statement about flawed models was a short/medium-term explanation on why gold has been in the dumps lately and could continue to drop as people abandon their old worldviews.
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Re: Question for Melveyr

Post by barrett » Mon Feb 15, 2016 9:59 am

buddtholomew wrote:
melveyr wrote: The idea was that banks lend in direct proportion to the amount of reserves that they have, and that once things returned to normal we would have an explosion of credit and spending that would push prices up. Many people equated monetary easing and QE with "money printing" which I have found to not be accurate, at least when trying to connect it with its effect on inflation. People were buying gold based on these theories, and pushing the price up. We have seen a slow bleed in gold as holders have slowly come to recognize that their understanding of the connection between Fed policy and inflation is not as direct as they thought.
I don't recall HB commenting on the relationship between money supply and gold.
Gold responds to unexpected inflation is the theory not excess bank reserves stored at the FED.
The $ didn't reach those who could spend it and raise inflation.
Not sure the model is broken, perhaps misused but not broken.
What he was very clear on is that he considered the USD to be the world's number one currency, and that when it came under threat that the best place to turn was number two (gold). For the most part I agree with what melveyr is saying but there is a little voice in my head (might just be Libertarian666!) saying that the inflation may still be coming.
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Re: Question for Melveyr

Post by Libertarian666 » Mon Feb 15, 2016 10:21 am

barrett wrote:
buddtholomew wrote:
melveyr wrote: The idea was that banks lend in direct proportion to the amount of reserves that they have, and that once things returned to normal we would have an explosion of credit and spending that would push prices up. Many people equated monetary easing and QE with "money printing" which I have found to not be accurate, at least when trying to connect it with its effect on inflation. People were buying gold based on these theories, and pushing the price up. We have seen a slow bleed in gold as holders have slowly come to recognize that their understanding of the connection between Fed policy and inflation is not as direct as they thought.
I don't recall HB commenting on the relationship between money supply and gold.
Gold responds to unexpected inflation is the theory not excess bank reserves stored at the FED.
The $ didn't reach those who could spend it and raise inflation.
Not sure the model is broken, perhaps misused but not broken.
What he was very clear on is that he considered the USD to be the world's number one currency, and that when it came under threat that the best place to turn was number two (gold). For the most part I agree with what melveyr is saying but there is a little voice in my head (might just be Libertarian666!) saying that the inflation may still be coming.
If price inflation isn't coming, it will be the first time in history that hasn't happened after destroying the link between currency and any actual object like gold.

More money has been lost on the notion that "this time it's different" than on any other mistaken notion.
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Re: Question for Melveyr

Post by Reub » Mon Feb 15, 2016 10:22 am

Ryan,  I just wanted to welcome you back and say that you've been missed!
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Re: Question for Melveyr

Post by BearBones » Mon Feb 15, 2016 10:54 am

melveyr wrote: Not so much here on this forum but many gold holders were betting on a big inflation coming because of charts like this...

The idea was that banks lend in direct proportion to the amount of reserves that they have, and that once things returned to normal we would have an explosion of credit and spending that would push prices up. Many people equated monetary easing and QE with "money printing" which I have found to not be accurate, at least when trying to connect it with its effect on inflation. People were buying gold based on these theories, and pushing the price up. We have seen a slow bleed in gold as holders have slowly come to recognize that their understanding of the connection between Fed policy and inflation is not as direct as they thought.
Thanks for clarifying. So it's not as much that gold may not be useful in inflation, but rather our ability to predict inflation is flawed. And the PP is too weighted toward gold for your tastes. I get that.

Yes, I vaguely remember the discussion several years back in which some, like MT, argued that all the "money printing" in the world (QE) would not necessarily translate into inflation if the macroeconomic fundamentals were not in place to cause the money to go into circulation. Seems that they were right. So far at least.

One more question:
So it seems that you have shifted from gold to TIPs for an inflation hedge. Do you think that is better than just a smaller allocation to gold? If so, can you elaborate?
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Re: Question for Melveyr

Post by melveyr » Mon Feb 15, 2016 12:23 pm

BearBones wrote:
One more question:
So it seems that you have shifted from gold to TIPs for an inflation hedge. Do you think that is better than just a smaller allocation to gold? If so, can you elaborate?
If I wanted to inflation proof a retirement plan that was about to enter the withdrawal phase the first step would be home ownership, then having the majority of fixed income in TIPs, then making some of the equity exposure international, and then if I was still worried a small allocation to gold. Gold is still the only tool for hedging the extreme inflation risks, but I think it should be used after exhausting the other options.

Please keep in mind that I am personally more comfortable having a portfolio that consists of traditional asset classes, so that makes my portfolio more susceptible to the extreme inflation tail risks. A gold heavy portfolio is likely to be the best portfolio in an extreme inflation. I just don't like having a large amount of capital tied up in something that is such a small part of the global portfolio. The gold market is around $6 trillion in size whereas the size of the global equity and bond markets is closer to $300 trillion.

I am really not trying to give advice. Please just interpret this as what I am doing, not what you should. Every portfolio that generates decent returns takes risks and you have to make sure that it is aligned with your psychology. The PP is not aligned with mine so I stopped using it.
Last edited by melveyr on Mon Feb 15, 2016 12:25 pm, edited 1 time in total.
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melveyr
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Re: Question for Melveyr

Post by melveyr » Mon Feb 15, 2016 1:12 pm

Well, as I said before I am certainly not ringing the alarm bell on the portfolio. The performance since starting the blog has been decent considering the risk level. The sharpe ratio has beaten the vanguard 60/40 Balanced fund (VBINX). I just want to go with a more traditional approach with my assets going forward because I don't like the tracking error that the PP has with traditional portfolios. I always found myself comparing it with the BH approaches and it bothered me when it would underperform. This is a psychological thing. I also like that running a three fund portfolio makes managing my 401k very easy because no matter what company I switch to they are 90% likely to have funds that will work for me.

I still find the PP to be a very interesting portfolio and understanding how it works has given me a macro toolkit that I never would have had without it. The charts on my site will continue to update and I look forward to tracking its performance for many years.
Last edited by melveyr on Mon Feb 15, 2016 1:22 pm, edited 1 time in total.
everything comes from somewhere and everything goes somewhere
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