The GOLD scream room

[buddtholomew]

We all had to know, using history as the guide, that this smash yesterday would cause some volatility, but by the end of the day the market was going to be green.

And that is as good a reason as any for gold to go down. That we are still decently above $1300 is positive. Not that we can't go lower. This market bubble has taken 9 years to inflate. Not going to pop in two days.

Corto, I am comfortable with equity volatility as I expect stocks to gyrate wildly. What concerns me is how the portfolio performed as a whole when the SHTF scenario played out. Flight to quality was there, but gold failed again. Worse than losing money is thinking you are protected when in fact you are not.

I don’t want the stock market to tumble so that PP investors are ultimately rewarded. Even with the recent sell off my 70/30 allocation YTD is handily beating the PP.

[stuper1]

Budd, do you ever look at historical PP returns? As with any portfolio, the PP has times when it has drawdowns. The difference to most portfolios is that the drawdowns are smaller and less time is required to recover from them. Gold/bonds don't necessarily help the PP on the very day that stocks drop. Often it takes some time before the lack of correlation kicks in.

Sure, gold returns have stunk for the past several years. However, from 2000-2010, gold saved the day. These things aren't simple. Gold essentially has no correlation to stocks. Therefore, on a day that stocks go down, gold can go up or down also, essentially at random. Over longer periods of time, however, that lack of correlation can help the overall portfolio. You won't get that with a BH portfolio, especially if you use a total bond market fund, which has a lot of corporate bonds that are correlated to stocks except not as volatile.

[Cortopassi]

I wouldn't consider Friday and Monday a SHTF scenario just yet. Flight to safety is what, bonds? Ok, TLT went up a bit yesterday, and back down today. Dollar? Didn't do much during the selloff. What does that leave?

To me that leaves talking heads positioning this as an even bigger buy the dip, this is a sale mantra. No one is thinking about gold...yet.

Gold YTD is still positive, while no other asset is. Sure, it's not positive by the same % others are negative, but it is providing a buffer.

I don't believe your 70/30 is beating gold YTD.

[buddtholomew]

You guys make good points.
Problem for me is I have only been invested in the PP since 2011 so I don’t have any recollection of golds performance from 2000-2010.
All I have to go on is perhaps a small gain after loss harvesting GLD in 2016, offsetting equity gains and reinvesting in IAU.

Corto, check VWILX/VEIEX which is 55% of my portfolio and handily beating gold YTD AND the PP (even after the selloff).

I just don’t think the portfolio is that remarkable.
I want to love it but it continues to let me down.

[Libertarian666]

Why, because of gold? Haha...down another 1.25% now.
Keep dreaming buddy.
Explain how I quadrupled my portfolio since 2008/9 using BH 70/30 allocation.

You need an explanation of how you have had good results with a stock-heavy allocation starting from the bottom of the biggest stock market drop since the 1930's?

If that's really true, I think you need to find a financial advisor who can explain the facts of life to you.

I’m asking you to explain Mr. I bought 1 gold coin at 300.
Read! And you call yourself a technical writer HAHA.

Ok, here's the explanation.

Anyone who put a lot of money into the stock market at the bottom of the severe decline in 2009 has done very well.
So you are right that if you have cash to buy at the bottom, you will do fine.
How will you know when the bottom is in, and will you actually buy then?

For those who don't know when the bottom is in, the PP does a better job of smoothing out volatility than the BH portfolios do.

(I say this as someone who doesn't run a PP, so I don't have a dog in this hunt.)

[Libertarian666]

You guys make good points.
Problem for me is I have only been invested in the PP since 2011 so I don’t have any recollection of golds performance from 2000-2010.
All I have to go on is perhaps a small gain after loss harvesting GLD in 2016, offsetting equity gains and reinvesting in IAU.

Corto, check VWILX/VEIEX which is 55% of my portfolio and handily beating gold YTD AND the PP (even after the selloff).

I just don’t think the portfolio is that remarkable.
I want to love it but it continues to let me down.

You bought gold in the year of the all-time top and are disappointed?

I think you need a longer perspective. It's not like the previous results aren't available.

[Cortopassi]

You guys make good points.
Problem for me is I have only been invested in the PP since 2011 so I don’t have any recollection of golds performance from 2000-2010.
All I have to go on is perhaps a small gain after loss harvesting GLD in 2016, offsetting equity gains and reinvesting in IAU.

Corto, check VWILX/VEIEX which is 55% of my portfolio and handily beating gold YTD AND the PP (even after the selloff).

I just don’t think the portfolio is that remarkable.
I want to love it but it continues to let me down.

I guess I always thought a 70/30 is 70% in broad market equities and 30% in long term bonds? Both the funds you list are international.

[buddtholomew]

You guys make good points.
Problem for me is I have only been invested in the PP since 2011 so I don’t have any recollection of golds performance from 2000-2010.
All I have to go on is perhaps a small gain after loss harvesting GLD in 2016, offsetting equity gains and reinvesting in IAU.

Corto, check VWILX/VEIEX which is 55% of my portfolio and handily beating gold YTD AND the PP (even after the selloff).

I just don’t think the portfolio is that remarkable.
I want to love it but it continues to let me down.

I guess I always thought a 70/30 is 70% in broad market equities and 30% in long term bonds? Both the funds you list are international.

70/30 stocks/bonds
Usually the bonds are intermediate term.

[Ugly_Bird]

You guys make good points.
70/30 stocks/bonds
Usually the bonds are intermediate term.

It is funny to read this argument.
Check out Tyler's charts and compare them for PP and BH in the long term.
After all both are reasonably comparable. PP may help you sleep just a little bit better.

[dualstow]

If I had bought gold in 2000 and not 2010, I’d like gold more. Budd, I expect you would as well.

For the pp as a whole, I’ve still got patience.

[stuper1]

I'm sure those international stock funds do nothing but go up forever, and never go down.

[eufo]

I'm sure those international stock funds do nothing but go up forever, and never go down.

Emerging markets, man... that stuff NEVER goes down... *roll eyes*

[buddtholomew]

I'm sure those international stock funds do nothing but go up forever, and never go down.

I EXPECT equities (US and International) to rise and fall the magnitude we have seen over the last couple of days.
What is difficult for me to digest is a portfolio that rises significantly less than an equity centric allocation and ALSO decline with the vigor we witnessed on Friday and Monday. Long-term treasuries have already declined > 5% YTD outpacing stocks and Gold is barely positive.

I guess I have to wait 20 years + to see a payoff in my gold investment.

[buddtholomew]

I'm sure those international stock funds do nothing but go up forever, and never go down.

Emerging markets, man... that stuff NEVER goes down... *roll eyes*

All I did was support the claim that my 70/30 BH allocation is ahead of my PP YTD even after a 700 and 1200 point decline.

[Mr Vacuum]

I understand the frustration but I just don’t think anyone ever promised it would work that way on a daily basis. The whole premise is low correlation and in the case of gold, like stuper said, zero correlation, not negative. The benefits unfold slowwwwly, but in return you never have to touch it and if you don’t check for a few years your money will mostly still be there. We know it won’t grow like stocks and we have to expect it to tank hard some days/weeks/months. Don’t forget 1980.

[stuper1]

Exactly, don't forget the historical results. We haven't seen anything with the PP that is outside the bounds of historical results. Over the medium- to long-term, however, the results are pretty good. Maybe not as good as a stock-heavy portfolio, but definitely less volatile and more consistent, which can be very important if, say, you happen to lose your job at the same time as the stock market goes into a dive.

[buddtholomew]

Thanks all, definitely frustrated but you are correct nothing outside the PP norm.

Just once make me feel good about holding 25% in Gold. Show me why...

[stuper1]

I thought you said earlier that you only have 7.5% in gold. That seems like a very modest allocation. I myself feel that 25% gold is too much. I'm aiming for about 15%, with about 2/3 of that in physical as black-swan insurance and 1/3 paper gold for re-balancing.

[dualstow]

Thanks all, definitely frustrated but you are correct nothing outside the PP norm.

Just once make me feel good about holding 25% in Gold. Show me why...

Might not make you feel good, exactly, B, but read this over your morning coffee. Or Muscle Milk, whatever.

http://www.efficientfrontier.com/ef/adhoc/gold.htm

[eufo]

I'm sure those international stock funds do nothing but go up forever, and never go down.

Emerging markets, man... that stuff NEVER goes down... *roll eyes*

All I did was support the claim that my 70/30 BH allocation is ahead of my PP YTD even after a 700 and 1200 point decline.

I wasn't aiming anything at you. Do what you want with your money.

[barrett]

Thanks all, definitely frustrated but you are correct nothing outside the PP norm.

Just once make me feel good about holding 25% in Gold. Show me why...

Might not make you feel good, exactly, B, but read this over your morning coffee. Or Muscle Milk, whatever.

http://www.efficientfrontier.com/ef/adhoc/gold.htm

Or this one from portfoliocharts.com:

https://portfoliocharts.com/2016/01/25/ ... at-a-time/

[Libertarian666]

Thanks all, definitely frustrated but you are correct nothing outside the PP norm.

Just once make me feel good about holding 25% in Gold. Show me why...

Here you go: http://www.efficientfrontier.com/ef/0adhoc/harry.htm.

[Mr Vacuum]

Thanks all, definitely frustrated but you are correct nothing outside the PP norm.

Just once make me feel good about holding 25% in Gold. Show me why...

Somehow gold has saved some other people’s asses two decades out of the last five. That’s not bad! Does it feel good even then? I wouldn’t know but I have my doubts.

The rest of the time has to really suck to average out to higher volatility and lower returns than stocks.

Can’t say I’m a big fan of gold and bonds essentially synchronizing since I bought in 2014, but that’s what we have scream rooms for.

[ochotona]

Miners at 52 week lows

[Libertarian666]

Miners at 52 week lows

Harry Browne explained a long time ago that gold mining companies and gold have almost nothing in common as investments.

The best description of a gold mine is still Mark Twain's: "A hole in the ground surrounded by liars".