The GOLD scream room

[Ad Orientem]

FWIW, the "aha" moment for me was when I switched gears from stressing about the perfect wealth accumulation plan to solve all of my problems to building a sustainable life without so many problems to begin with. Do that, and eventually you'll look back and wonder why you ever wasted so much energy on things you can't control.

I reached that a few months ago. Would be nicer to have reached it with 10M in the bank, but there nonetheless!

Ahhh, 2% interest on 10M, 200k a year with no thinking. That would be priceless. And I don't care if you tell me inflation is eating away at it.

http://www.megamillions.com/

[Cortopassi]

FWIW, the "aha" moment for me was when I switched gears from stressing about the perfect wealth accumulation plan to solve all of my problems to building a sustainable life without so many problems to begin with. Do that, and eventually you'll look back and wonder why you ever wasted so much energy on things you can't control.

I reached that a few months ago. Would be nicer to have reached it with 10M in the bank, but there nonetheless!

Ahhh, 2% interest on 10M, 200k a year with no thinking. That would be priceless. And I don't care if you tell me inflation is eating away at it.

http://www.megamillions.com/

I have better odds asking Budd to write me a check.

[buddtholomew]

If I had Budd’s purported portfolio you can be darn sure I would have investigated my investment approach thoroughly. Personally I’ve highlighted the major salient features of the PP three or four times, suggested he look at a portfolio with a lot more cash in it and not to look at component returns.

There is nothing unusual about what is going on right now. I think we all should stop replying to his “bursts.”

Buds is not a troll...but I think feeding his bursts yields the same result.

Investigated my investment approach or held more cash?
Not sure what you mean - PP is base with extra cash and increased equities 30/20/15/35.

I also hold a VP that is 70/30 stocks/bonds so have no regrets over the last 10 years.

I was drawn to the PP for its simplicity and bought into the philosophy that it was designed for the money you “can’t afford to lose”...all I see when the going gets tough and equities stumble is Gold and LTT’s selling off. (year after year, not a one time event). Then it’s hold your nose and buy more to rebalance.

I hold > 25% in stocks to outrun the losses in Gold and LTT’s. Now that’s bizarre isn’t it? Having to increase your stock allocation to reduce losses in “conservative” assets.

I’m frustrated because the reduced equity allocation comes at too great of a cost and I continue to believe that someday investing in the PP will pay off.

[Kbg]

Budd,

If you did your homework you should know the following:

- PP always underperforms a more conventional port during bull markets
- The PP makes up some or all of the lag during equity bear markets
- When looked at as a whole portfolio, it is one of the least volatile simple portfolios around
- It is very tax efficient
- And finally the blatantly obvious, a full 50% of the port is in non return bearing assets.

I will repeat something I have mentioned 2 or 3 times previously, quit fixating on individual assets. Three of the four are highly volatile. Until the equity market enters a bear, don’t expect anything from the two assets you are currently complaining about. Currently the PP is down 2ish and 4-5 realish...why are you in the state you are. There is absolutely nothing unusual about what is going on right now.

Put this post in your favorites folder please and save us all the Buddbursts.

[buddtholomew]

Budd,

If you did your homework you should know the following:

- PP always underperforms a more conventional port during bull markets
- The PP makes up some or all of the lag during equity bear markets
- When looked at as a whole portfolio, it is one of the least volatile simple portfolios around
- It is very tax efficient
- And finally the blatantly obvious, a full 50% of the port is in non return bearing assets.

I will repeat something I have mentioned 2 or 3 times previously, quit fixating on individual assets. Three of the four are highly volatile. Until the equity market enters a bear, don’t expect anything from the two assets you are currently complaining about. Currently the PP is down 2ish and 4-5 realish...why are you in the state you are. There is absolutely nothing unusual about what is going on right now.

Put this post in your favorites folder please and save us all the Buddbursts.

The portfolio is a massive waste of time and energy...a la Bogle “full of sound and fury, signifying nothing”. It does not bring peace of mind but only angst.

“Nothing unusual”...what you mean to say is underperforming a 50/50 conservative allocation by 700 basis points.

We’ll see what happens in a bear market but I’m not holding my breath.

[stuper1]

I for one hope to hear many more Buddbursts to come. They are very therapeutic for comic relief.

[Kriegsspiel]

budd, your FOMO is making you angsty. You own a big slice of stocks outside your PP in addition to the ones inside it, just chill.

PS "700 basis points?" C'mon bro why are you trying to sound like a financial warlock. Just say 7%.

[boglerdude]

Arent we supposed to use market cap weight? Where's gold and commodities in the chart

https://thumbor.forbes.com/thumbor/960x ... tfolio.jpg

https://www.forbes.com/sites/phildemuth ... -investor/

Also https://ftalphaville.ft.com/2015/08/04/ ... portfolio/

[buddtholomew]

budd, your FOMO is making you angsty. You own a big slice of stocks outside your PP in addition to the ones inside it, just chill.

PS "700 basis points?" C'mon bro why are you trying to sound like a financial warlock. Just say 7%.

Haha, it just makes the math easier.

[sophie]

Oddly, I also kind of enjoy reading Buddbursts. A collection of those with our responses would make kinda of a fun little book.

I wouldn't consider either gold or 30 year bonds to be "conservative". They are both if anything more volatile than stocks. Call them "insurance assets" instead.

The reason you hold the PP is not because bonds and gold are such fantastic investments - I wouldn't hold either of those alone. Try this little exercise: go onto FIRECALC and run some simulations with a portfolio that is about 20x annual expenses. Plug in 100% stocks, or 75/25 stock/bond for investments and see what the success rate is. Then try a random portfolio with returns of 5%, inflation 0% (i.e. a 5% real return, lower than either the PP or GB historically), and standard deviation of 8% (which is a bit higher than the Golden Butterfly, and higher yet than the PP). When I did this, the success rate with this crummy real return, low-variance portfolio was higher than either of the stock portfolios. So much for the conventional wisdom that you need large stock allocations to succeed!

Add in the extra safety of the large cash component, and you have the closest you're going to get to a worry-free retirement. Of course, it kind of defeats the purpose if you're going to worry about your assets on a daily basis anyway. If you can't handle watching any asset drop 2% in value, maybe you should just stick with savings bonds, tips, and T bills. I can only imagine the Buddburst that would result if you held a ton of stocks during a 30-50% market correction, so that's not the answer either.

[dualstow]

Oddly, I also kind of enjoy reading Buddbursts.

At some point, Budd said, in so many words, I just need to vent. Fair enough. Now I kind of look forward to it on certain market days. It’s like we’re on the golf course together, Budd, and you’re saying, “My neighbor has screamy kids in the pool next door.” There’s nothing I can do about it, but I can listen.

Kbg, I think it’s funny that you entreated us not to respond to the outbursts, and then you yourself couldn’t help responding again to the very next one.

[Kbg]

Oddly, I also kind of enjoy reading Buddbursts.

At some point, Budd said, in so many words, I just need to vent. Fair enough. Now I kind of look forward to it on certain market days. It’s like we’re on the golf course together, Budd, and you’re saying, “My neighbor has screamy kids in the pool next door.” There’s nothing I can do about it, but I can listen.

Kbg, I think it’s funny that you entreated us not to respond to the outbursts, and then you yourself couldn’t help responding again to the very next one.

Budd can vent anytime he wants, I just find it surprising he does so on the same things repeatedly. Nothing personal Budd...please vent away if you need to. But if your mental comparison is US stocks vs. the PP you can plan on being frustrated 70%+ of the time.

Check this link out and spend some time looking at the PP from say 1990 to 2001 and REALLY look at 1996-1999 followed by 2000-2002 annual and monthly returns tabs. Of all the PP periods I believe the one highlighted is most like the current period. We shall see if we get a similar follow on.

https://www.portfoliovisualizer.com/bac ... sisResults

[buddtholomew]

Thanks all for not ousting the crazy guy
Going to spend some time reading through the comments and looking at historical returns as I have obviously internalized the portfolio incorrectly and I need to realign expectations.

I think my financial position changed over time and the PP served its purpose at 4x25. Feel more comfortable at 30/20/15/35 and possibly moving towards 5x20.

[Ugly_Bird]

The portfolio is a massive waste of time and energy...

Huh?
To me, only time and energy I waste on PP when reading your complains. :-)
Kidding aside, it is quite opposite for me, I personally didn't spend much time on energy on PP at all.
Only when had it set up and then rebalanced for the first (and so far the only) time.

[buddtholomew]

No Buddburst today

[dualstow]

No Buddburst today

Looks like gold and TLT are going down...not as fast as stocks.

There's a boglehead thread about John Bogle saying it makes sense to sell stocks down 5 or 10% if it helps one sleep. Hmm. This is in the context of his belief that we're not going to see great market returns in the years to come.

For those who are 4x25 this might be a great opportunity to do nothing. Have another pina colada.

[PP67]

FIW According to Bloomberg's Billionaire Index, The world’s wealthiest people have, in aggregate, lost 2 percent of their wealth so far this year...

[Cortopassi]

Well that was an interesting day.

If the pattern holds from recent history, tomorrow will be a spectacular up day for stocks, while bonds and gold will be trashed and the PP slope for the year will continue down.

But I have no better alternative for sure. About the only thing I am considering is going back to a higher % in cash since it is paying near 2% now at Ally. 25% in cash would have been a good buffer today.

Days like this certainly make me wonder about all the little tweaks I have made over the past couple years, which helped last year but are hurting this year.

[buddtholomew]

The PP (or any balanced portfolio for that matter) is not immune to rising interest rates and tighter money.

Corto, this time is different
I see further declines in stocks as an 800 point drop in the DOW will panic most investors to sell.
Rates are going higher hell or high water and will exacerbate the declines in stocks even further than expected.
My guess is that rates pull-back in late October, equities stabilize and gold begins its ascent.
Probably will happen the other way then...

[dualstow]

I see further declines in stocks as an 800 point drop in the DOW will panic most investors to sell.

I agree. Anything could happen, but I feel tomorrow will see another slaughter or else a partial recovery, leading the semi-panicked to say ok, I recouped some of Wednesday’s losses and to sell by 3:00pm EST, i.e. an afternoon slaughter.

[eufo]

Is it wrong I love the slaughter days? It hurts my portfolio too, but it's interesting at least.

[jhogue]

Sage advice from Alexander Hamilton, The Federalist, No. 12:

“The prosperity of commerce is now perceived and acknowledged, by all enlightened statesmen, to be the most useful as well as the most productive source of national wealth; and has accordingly become a primary object of their political cares. By multiplying the means of gratification, by promoting the introduction and circulation of the precious metals, (those darling objects of human avarice and enterprise), it serves to vivify and invigorate the channels of industry, and to make them flow with greater activity and copiousness. The assiduous merchant, the laborious husbandman, the active mechanic, and the industrious manufacturer, all orders of men look forward with eager expectation and growing alacrity to this pleasing reward of their toils.”



In other words, stop looking through the wrong end of the telescope. Buy gold for the long run.

[dualstow]

Is it wrong I love the slaughter days? It hurts my portfolio too, but it's interesting at least.

Atl least we don’t have to wonder anymore.

[Cortopassi]

As expected, no stock selloff follow through.

[Cortopassi]

What the hell?