General Discussion on the Permanent Portfolio Strategy
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barrett
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by barrett » Sat Jul 09, 2016 7:17 am
sophie wrote:Some wise soul in another thread observed that portfolios in general are in drawdown about 70% of the time. That's a lot of enduring, but if you don't stick with your chosen portfolio through those drawdowns, you won't be around for the times when it's doing well. By the time you realize a portfolio is doing well, it's mostly or all the way through its growth spurt, and you'd be buying into it just in time to watch it turn around and head back down, or stagnate. So unfortunately it doesn't work to treat investing like a football game. It's more like getting through the Tour de France, with the finish line about 30 years away.
Hey Sophie,
Does "in drawdown" just mean that the portfolio is not at an all-time high at any point, or is it something more complex than that? With the PP at an all-time high, I'd like some perspective. Does my intuition tell me that it should go down from here because that's what's really most likely to happen?
Also, thanks for the Tour de France reference. The riders are just starting the ascent of The Tourmalet and I had forgotten to fire up my online Guardian feed!
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sophie
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by sophie » Sat Jul 09, 2016 7:43 am
Anything that makes you feel like the portfolio isn't going anywhere, and that maybe you should have invested in something else that's doing well at the time.
The PP seems to operate in spurts, I guess because that's how stock market scares happen. It drags the rest of the time. Most annoying
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Kbg
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by Kbg » Sat Jul 09, 2016 12:18 pm
I don't know if I'm the 70% poster Sophie mentioned but I did write a 70% time in DD post a couple of days back. DD is anytime you are not reaching a new high. A good example was last year...almost the entire year was in DD. If you take the Nasdaq 100 it was in DD for what 15-16 years in a row?
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Reub
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by Reub » Sat Jul 09, 2016 12:41 pm
So what is the half year overall perfomance for the vanilla U.S. PP for 2016? And ytd?
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iwealth
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by iwealth » Sat Jul 09, 2016 1:35 pm
Reub wrote:So what is the half year overall perfomance for the vanilla U.S. PP for 2016? And ytd?
All using start date 1/4/16. For fun, I included the 6/27/16 date as that was the bottom of the 3-day Brexit "correction".
VTI/GLD/TLT/SHY:
6/27/16: 11.2%
6/30/16: 12.5%
7/8/16: 15.2%
Replacing VTI with USMV (low volatility equities) USMV/GLD/TLT/SHY:
6/27/16: 13.7%
6/30/16: 14.7%
7/8/16: 17.5%
The Golden Butterfly using VV/VBR/GLD/TLT/SHY:
6/27/16: 9.3%
6/30/16: 11.7%
7/8/16: 14.1%
Replacing LC blend with LC value using VTV/VBR/GLD/TLT/SHY:
6/27/16: 9.7%
6/30/16: 12.1%
7/8/16: 14.4%
Double USMV so essentially USMV/USMV/GLD/TLT/SHY:
6/27/16: 12.6%
6/30/16: 14.4%
7/8/16: 16.9%
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Reub
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by Reub » Sat Jul 09, 2016 2:10 pm
iwealth wrote:Reub wrote:So what is the half year overall perfomance for the vanilla U.S. PP for 2016? And ytd?
All using start date 1/4/16. For fun, I included the 6/27/16 date as that was the bottom of the 3-day Brexit "correction".
VTI/GLD/TLT/SHY:
6/27/16: 11.2%
6/30/16: 12.5%
7/8/16: 15.2%
Replacing VTI with USMV (low volatility equities) USMV/GLD/TLT/SHY:
6/27/16: 13.7%
6/30/16: 14.7%
7/8/16: 17.5%
The Golden Butterfly using VV/VBR/GLD/TLT/SHY:
6/27/16: 9.3%
6/30/16: 11.7%
7/8/16: 14.1%
Replacing LC blend with LC value using VTV/VBR/GLD/TLT/SHY:
6/27/16: 9.7%
6/30/16: 12.1%
7/8/16: 14.4%
Double USMV so essentially USMV/USMV/GLD/TLT/SHY:
6/27/16: 12.6%
6/30/16: 14.4%
7/8/16: 16.9%
Wow, that is nice! Thanks!
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edsanville
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by edsanville » Sat Jul 09, 2016 2:57 pm
I'm no "nubile investor," but I'm proud to say I didn't doubt the PP for a moment. I've been fully invested in it since May, 2012.
My VP contains bitcoins, and those have been doing very well this year, as well.
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barrett
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by barrett » Sat Jul 09, 2016 3:40 pm
edsanville wrote:I'm no "nubile investor," but I'm proud to say I didn't doubt the PP for a moment. I've been fully invested in it since May, 2012.
edsanville, where in tarnation have you been? You posted some data on rebalancing bands way back that I'd I'd love to see again. From my recollection you essentially showed that bands ranging from 26/24 all the way up to 40/10 had more or less the same results (taxes and transaction fees not included). Do you still have those numbers? Anyway, good to have you back, nubile or otherwise.
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buddtholomew
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by buddtholomew » Sat Jul 09, 2016 3:49 pm
My PP is maturing and attractive. There I said it!
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Reub
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by Reub » Sat Jul 09, 2016 4:40 pm
barrett wrote:edsanville wrote:I'm no "nubile investor," but I'm proud to say I didn't doubt the PP for a moment. I've been fully invested in it since May, 2012.
edsanville, where in tarnation have you been? You posted some data on rebalancing bands way back that I'd I'd love to see again. From my recollection you essentially showed that bands ranging from 26/24 all the way up to 40/10 had more or less the same results (taxes and transaction fees not included). Do you still have those numbers? Anyway, good to have you back, nubile or otherwise.
Barrett, in honor of edsanville's return I am posting a link to his rebalancing chart. It sure does seem that no matter where one rebalances the returns hold up:
http://www.gyroscopicinvesting.com/foru ... 097#p19097
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barrett
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by barrett » Sat Jul 09, 2016 7:13 pm
Reub wrote:barrett wrote:edsanville wrote:I'm no "nubile investor," but I'm proud to say I didn't doubt the PP for a moment. I've been fully invested in it since May, 2012.
edsanville, where in tarnation have you been? You posted some data on rebalancing bands way back that I'd I'd love to see again. From my recollection you essentially showed that bands ranging from 26/24 all the way up to 40/10 had more or less the same results (taxes and transaction fees not included). Do you still have those numbers? Anyway, good to have you back, nubile or otherwise.
Barrett, in honor of edsanville's return I am posting a link to his rebalancing chart. It sure does seem that no matter where one rebalances the returns hold up:
http://www.gyroscopicinvesting.com/foru ... 097#p19097
Thanks for digging that up, Reub. That chart was a real eye opener for me. I'm probably oversimplifying things but the takeaway seems to be, "rebalance whenever you feel like doing so."
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MachineGhost
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by MachineGhost » Sat Jul 09, 2016 8:22 pm
barrett wrote:Thanks for digging that up, Reub. That chart was a real eye opener for me. I'm probably oversimplifying things but the takeaway seems to be, "rebalance whenever you feel like doing so."
It's from 2011. If you want to try out different rebalancing bands, use Peak2Trough backtester back to 4/1968 which came out much later. I do believe 40/10 is optimal.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
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Kbg
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by Kbg » Sun Jul 10, 2016 9:40 am
On doesn't know in advance which will be better. All one can know is that in a flat/choppy market narrower bands will work better and in a trending market wider bands will do better.
The main point of rebalancing is to maintain a consistent risk profile.
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iwealth
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by iwealth » Sun Jul 10, 2016 10:22 am
Kbg wrote:The main point of rebalancing is to maintain a consistent risk profile.
Agreed, wide bands leave you with potential exposure to a very unbalanced risk profile during an extreme market event. Not sure I'd feel comfortable holding onto a 38/12/38/12 portfolio just because a backtest tells me doing so resulted in a slight increase in CAGR over the past 40 years.
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MachineGhost
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by MachineGhost » Mon Jul 11, 2016 12:35 am
iwealth wrote:Kbg wrote:The main point of rebalancing is to maintain a consistent risk profile.
Agreed, wide bands leave you with potential exposure to a very unbalanced risk profile during an extreme market event. Not sure I'd feel comfortable holding onto a 38/12/38/12 portfolio just because a backtest tells me doing so resulted in a slight increase in CAGR over the past 40 years.
IIRC, the risk decreases as well. The rebalancing bands is a form of market timing so the default 35/15 may have been good in 1987, but since bonds have zoomed from 6-7 duration to 22 in the resulting years...
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
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dragoncar
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by dragoncar » Tue Jul 12, 2016 11:54 am
and so it begins
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buddtholomew
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by buddtholomew » Tue Jul 12, 2016 12:41 pm
dragoncar wrote:and so it begins
Yup.
Sure wish gold had followed suit and risen with equities.
Wishful thinking.
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dualstow
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by dualstow » Tue Jul 12, 2016 6:50 pm
I can hear my late grandmother's voice in my head. "It goes up every day you vant?"
{ She didn't really talk like that in real life, but that's what I hear right now. }
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buddtholomew
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by buddtholomew » Tue Jul 12, 2016 6:52 pm
dualstow wrote:I can hear my late grandmother's voice in my head. "It goes up every day you vant?"
{ She didn't really talk like that in real life, but that's what I hear right now. }
So true!
Makes me sick to think that I am that sick
Been called a mashugana or putz, perhaps a shmok more than once
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dualstow
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by dualstow » Tue Jul 12, 2016 7:05 pm
buddtholomew wrote:
Makes me sick to think that I am that sick
Been called a mashugana or putz, perhaps a shmok more than once
I think you've written a poem!
Almost rhymes.
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MachineGhost
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by MachineGhost » Tue Jul 12, 2016 11:49 pm
buddtholomew wrote:So true!
Makes me sick to think that I am that sick
Been called a mashugana or putz, perhaps a shmok more than once
Schmuck, no?
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
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buddtholomew
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by buddtholomew » Wed Jul 13, 2016 11:39 am
MachineGhost wrote:buddtholomew wrote:So true!
Makes me sick to think that I am that sick
Been called a mashugana or putz, perhaps a shmok more than once
Schmuck, no?
That too. Probably the most often besides schmendrick (sp?)
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dragoncar
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by dragoncar » Wed Jul 13, 2016 3:31 pm
And so it unbegins
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buddtholomew
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by buddtholomew » Wed Jul 13, 2016 3:37 pm
Hehe...
Against every fiber in my body I went ahead and exchanged TLT for EDV/Cash in an IRA today.
I'm sure I paid a premium, but maintained the 5.6 year duration. The IRA was 100% LTT's and I wanted to balance with stocks and/or gold at a later time.
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iwealth
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by iwealth » Wed Jul 13, 2016 4:14 pm
buddtholomew wrote:Hehe...
Against every fiber in my body I went ahead and exchanged TLT for EDV/Cash in an IRA today.
I'm sure I paid a premium, but maintained the 5.6 year duration. The IRA was 100% LTT's and I wanted to balance with stocks and/or gold at a later time.
EDV is so monstrously volatile, hope you can handle watching it! Total return will be nearly identical to the TLT but it'll
feel like a wilder ride.