Is the PP going to hold up?

General Discussion on the Permanent Portfolio Strategy

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clacy
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Re: Is the PP going to hold up?

Post by clacy » Sat Feb 10, 2018 9:36 am

My personal opinion is that gold is going to explode up soon. Of course timing is never easy and I'm talking over the next 5-7 years, I see gold out-performing stocks significantly.

In my business, I see costs skyrocketing.

-Construction costs on commercial projects are 20-25% higher than they were 4 years ago. There is a lot of building going on so contractors can bid high.

-Wages have been rising rapidly recently.

-Other input costs are rising, almost across the board.

To me that signals inflationary pressure. Inflation has been virtually non-existent for over a decade now. It's been relatively tame for 3 decades.
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sophie
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Re: Is the PP going to hold up?

Post by sophie » Sat Feb 10, 2018 12:23 pm

glennds, thanks for that! I figured there might be a delay but didn't realize it could take two months before gold and bonds start picking up the slack. I guess sellers are hanging on to the cash and waiting to see if the market will go back up. Classic sell-low-buy-high behavior, which is what we want to avoid.

If this is a market blip, this past week won't make any difference except if you took the opportunity to rebalance. Too soon to tell if that's what this is. The nice thing about the PP is that it doesn't matter if it's a blip or not - you're covered either way. The PP does need down markets to justify its existence though. As long as there is such a thing as down markets, I'll keep using the PP.
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buddtholomew
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Re: Is the PP going to hold up?

Post by buddtholomew » Sat Feb 10, 2018 12:41 pm

Here’s what I’m struggling with at the moment.
I want to buy stocks following the recent decline but the PP tells me to buy LTT’s to restore AA since I am very cash heavy at the moment.
Maybe I’ll buy a little of each and hope they done decline together.
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buddtholomew
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Re: Is the PP going to hold up?

Post by buddtholomew » Sat Feb 10, 2018 12:43 pm

dualstow wrote:
Mr Vacuum wrote:
dualstow wrote:
I'll be nibbling at stocks on a regular (weekly) schedule,
dualstow, I forget your plan. Is that nibble a long term increase plan or micro rebalancing or what?


Choice #1. It’s not so much rebalancing as a long term plan to continue to accumulate stocks, pp or not, while I’m still relatively young. It’s probably best to just lump sum early, but my lump sum is already invested.

Most importantly, this is the only way I can overcome paralysis. I can buy any of the four assets as long as it’s in small amounts.
Ditto.
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Re: Is the PP going to hold up?

Post by Mr Vacuum » Sat Feb 10, 2018 1:08 pm

dualstow wrote:
Mr Vacuum wrote:
dualstow wrote:
I'll be nibbling at stocks on a regular (weekly) schedule,
dualstow, I forget your plan. Is that nibble a long term increase plan or micro rebalancing or what?


Choice #1. It’s not so much rebalancing as a long term plan to continue to accumulate stocks, pp or not, while I’m still relatively young. It’s probably best to just lump sum early, but my lump sum is already invested.

Most importantly, this is the only way I can overcome paralysis. I can buy any of the four assets as long as it’s in small amounts.
Gotcha. I’m sure there have been threads here recommending the lump sum move, at least when going from cash to PP. Changing existing volatile portfolios seems more complex. I got a bit singed lump sum converting from all stocks to the PP in May 2014. I had studied the portfolio for some time and knew I wanted the additional safety. What could go wrong moving quickly to the safer portfolio? It turned out I missed a PP run up earlier in the year and a stocks run up later and ended up underperforming both for the year. Kids, that is why investors underperform the funds in which they invest.

My other horror story is trying to buy FLVCX at the bottom in 2008... small chunks but too much and too many times. Why THAT fund? I have no idea. It was dumb. But that one actually worked out because even though it kept going down into 2009, I held and it outperformed through the early recovery years. Whew.
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Re: Is the PP going to hold up?

Post by dualstow » Sat Feb 10, 2018 3:54 pm

Re: getting singed - I suppose it comes down to luck in the short term. I believe Craig went all in when he adopted the pp and it worked out well for him. If I had bought all my 30-year bonds when I bought the first tranche, I’d be better off today. Y’never know.
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Tyler
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Re: Is the PP going to hold up?

Post by Tyler » Sat Feb 10, 2018 5:51 pm

FYI -- This thread inspired a longer post about the benefits of investing firewalls, and naturally there's a good PP example. For full effect, be sure to read it while drinking coffee next to a warm fire. ;)

https://portfoliocharts.com/2018/02/10/ ... e-markets/
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
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Ugly_Bird
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Re: Is the PP going to hold up?

Post by Ugly_Bird » Sat Feb 10, 2018 7:58 pm

buddtholomew wrote:Here’s what I’m struggling with at the moment.
but the PP tells me to buy LTT’s to restore AA since I am very cash heavy at the moment.
Maybe I’ll buy a little of each and hope they done decline together.
Mine doesn't tell me do anything. Nothing is close to 15/35 or even 20/30 bands.
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ochotona
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Re: Is the PP going to hold up?

Post by ochotona » Sat Feb 10, 2018 9:17 pm

buddtholomew wrote:Here’s what I’m struggling with at the moment.
I want to buy stocks following the recent decline but the PP tells me to buy LTT’s to restore AA since I am very cash heavy at the moment.
Maybe I’ll buy a little of each and hope they done decline together.
Interest rates won't go up forever. It's a self-limiting process. Once they get high enough, they'll choke off the economy, and they they will fall as activity drops.
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buddtholomew
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Re: Is the PP going to hold up?

Post by buddtholomew » Sun Feb 11, 2018 9:16 am

ochotona wrote:
buddtholomew wrote:Here’s what I’m struggling with at the moment.
I want to buy stocks following the recent decline but the PP tells me to buy LTT’s to restore AA since I am very cash heavy at the moment.
Maybe I’ll buy a little of each and hope they done decline together.
Interest rates won't go up forever. It's a self-limiting process. Once they get high enough, they'll choke off the economy, and they they will fall as activity drops.
Ugly_bird, I have excess cash > 35% at the moment.
Right Ocho, I plan to buy both stocks and LTT’s.
Can’t pick the bottom in equities and forget about predicting the top in rates.
DS, like you I am buying in smaller increments.
Helps on both a psychological and emotional level.
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sophie
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Re: Is the PP going to hold up?

Post by sophie » Sun Feb 11, 2018 10:03 am

Buddtholomew, what are you struggling with exactly? Is it just buying anything in this climate that is unnerving? I can relate to that, but so far I can stick with PP therapy. I'd definitely look at alternatives if that got too difficult to implement.

What about switching to the Desert portfolio? It's tailor made for you. Enough stocks to let you enjoy the good times, just enough gold to cushion the losses in a 1970s style scenario, and the rest is extremely user-friendly short to intermediate bonds. And not much of the worst type of PP tracking error. If you did that, your rebalance would have you buying a bit of gold, a nice slug of attractively priced stocks, and 5 year bonds to be held to maturity instead of LTTs. If you even need to rebalance.
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jhogue
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Re: Is the PP going to hold up?

Post by jhogue » Sun Feb 11, 2018 10:39 am

If Buddtholomew did not exist, this forum would have to invent him.

Keeping a perpetual worrier around lets the rest of us see just how ridiculous it is to try to micro-manage the Permanent Portfolio

Thanks, Bud.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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buddtholomew
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Re: Is the PP going to hold up?

Post by buddtholomew » Sun Feb 11, 2018 10:54 am

I am the “Resident Worrier” O0

Sophie, let me try and lay out the details:

Stocks/Gold/LTT’s/Cash
25/21/16/38

I am cash heavy at 38% and am comfortable with the Gold allocation as it is 7.5% of total portfolio. That leaves Stocks and LTT’s with the SPY down approximately 10% from recent highs and treasuries down around 8%

1. Buy LTT’s to bring allocation closer to 20%.
2. Buy LTT’s and stocks with the recent correction although stocks are at 25%
3. Buy LTT’s in PP and stocks in retirement accounts.
3. Do nothing.

Overall portfolio is 53.5/39/7.5 with healthy slug of ITT.’s in Tax-deferred so closely resembles what you are outlining.
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Kriegsspiel
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Re: Is the PP going to hold up?

Post by Kriegsspiel » Sun Feb 11, 2018 11:20 am

bud used to have an avatar and a Resident Worrior tag, but he's really been lacking in his forum identity hygiene recently.
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Re: Is the PP going to hold up?

Post by Kriegsspiel » Sun Feb 11, 2018 11:26 am

If I were you, bud, I'd go with option 1.
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jhogue
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Re: Is the PP going to hold up?

Post by jhogue » Sun Feb 11, 2018 1:04 pm

Bud,

Don’t just do something, stand there!

I don’t see anything wrong with keeping a 38% cash position until the equity markets simmer down. It will dampen the volatility of your overall portfolio.

But, then again, maybe that is just me. I signed up for the PP because I wanted less drama, not more.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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ochotona
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Re: Is the PP going to hold up?

Post by ochotona » Sun Feb 11, 2018 8:30 pm

Budd:

Instead of just thinking "stocks or bonds", why not buy some short term corporate bond which matures in about 6-12 months? Kick the can forward 6-12 months, and earn way better than bank cash, it's riskier than Treasuries, but way less risky than stocks. don't buy high yield.

You might have less potential for buyer's remorse in 6-12 months... maybe stocks will be in a real bear market (or not), and maybe bond prices will have stopped falling (or not). Maybe also put in a limit order for gold at $1280.
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sophie
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Re: Is the PP going to hold up?

Post by sophie » Sun Feb 11, 2018 10:07 pm

So jhogue and ochotona basically vote same: Budd, hang on to your cash. Probably a good idea. That's a lot of stocks you have, especially after last week. I vote the same.

Maybe you want to switch your perspective from the PP and Some Other Portfolio which are somehow intertwined, to just one master portfolio with 7.5% gold, X% stocks, and the rest IT. What's your desired stock allocation?
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Re: Is the PP going to hold up?

Post by glennds » Mon Feb 12, 2018 9:59 am

Granted it's only been a day and the PP is a marathon, not a sprint BUT....

If Budd (or anyone) had held his nose taken Option #1 last week, it would be looking like a pretty good move today seeing as how long T bond is up 80bps as of a few minutes ago.

Who would have thought that would be remotely possible when the all the hysteria last week was reportedly due to inflation and interest rate concerns?
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ochotona
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Re: Is the PP going to hold up?

Post by ochotona » Mon Feb 12, 2018 10:59 am

Budd maybe buy Pacer ETF symbol PTLC and let it get you out of trouble automatically. Instead of SP500 index fund.
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buddtholomew
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Re: Is the PP going to hold up?

Post by buddtholomew » Mon Feb 12, 2018 11:12 am

Yikes, everyone is all over the map...
I’ll just stick to the plan and rebalance into LTT’s.
Thanks for all the input.
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ochotona
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Re: Is the PP going to hold up?

Post by ochotona » Mon Feb 12, 2018 12:17 pm

buddtholomew wrote:Yikes, everyone is all over the map...
I’ll just stick to the plan and rebalance into LTT’s.
Thanks for all the input.
Trying to guess how to make you happy is all over the map
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buddtholomew
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Re: Is the PP going to hold up?

Post by buddtholomew » Mon Feb 12, 2018 12:21 pm

ochotona wrote:
buddtholomew wrote:Yikes, everyone is all over the map...
I’ll just stick to the plan and rebalance into LTT’s.
Thanks for all the input.
Trying to guess how to make you happy is all over the map
Bad choice of words, sorry.
What I meant is there are a variety of opinions and rather than deviate from the plan will follow the plan.
Not trying to make drastic changes to the portfolio.

Got to stop typing while driving.
Appreciate all the help, thank you.
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Re: Is the PP going to hold up?

Post by dualstow » Mon Feb 12, 2018 8:12 pm

Tyler wrote:FYI -- This thread inspired a longer post about the benefits of investing firewalls, and naturally there's a good PP example. For full effect, be sure to read it while drinking coffee next to a warm fire. ;)

https://portfoliocharts.com/2018/02/10/ ... e-markets/
I missed this post earlier, although I had seen the p’charts post. Good stuff. And I was drinking coffee!
https://www.city-journal.org/journalism-advocacy-over-reporting
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Re: Is the PP going to hold up?

Post by KevinW » Tue Feb 13, 2018 12:29 am

bitcoininthevp wrote:
I propose a portfolio which is a traditional permanent portfolio mix with a bitcoin variable portfolio sidecar.

Hows:
  • 24% gold
    24% cash
    24% stocks
    24% long term bonds
    4% bitcoin
Turns out the back testing is amazing.

Ill need your help with the name.
How about the "Fifth Element Portfolio"?

~~~

Moments like these remind me why I like holding the PP. I hear chatter about a meltdown in the markets, and instead of feeling anxious, I have the same mindset as when I sit down to watch the latest episode of Sunny in Philadelphia. "What hilarious predicament did the clowns cook up this week?"

Just stay the course, let the portfolio whir along as designed, and enjoy life.
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