Gold / Stock / Bonds at highs or near highs?

General Discussion on the Permanent Portfolio Strategy

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mathjak107
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Re: Gold / Stock / Bonds at highs or near highs?

Post by mathjak107 » Mon Oct 07, 2019 3:05 am

yes , the issue is the behavior that is recommended to be used is ironic ... the irony is that it is an all weather portfolio designed never to have a bad time so to speak .. but human nature being what it is tends to do what feels good many times and not what is the best logically or financially .

so the brains start taking a portfolio that is supposed to eliminate timing and turns it exactly in to that by trying to time the time frame to enter by waiting for that day it dips low enough that may never come .
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Re: Gold / Stock / Bonds at highs or near highs?

Post by pugchief » Mon Oct 07, 2019 1:36 pm

ochotona wrote:
Sun Oct 06, 2019 11:26 am
sophie wrote:
Sun Oct 06, 2019 10:18 am
Another strategy: wait until the PP as a whole goes through a negative performing couple of months and then buy in.
This is a great idea.
I disagree. I think this is a terrible idea. What if the next time the PP has sustained negative returns is 10 years from now? You think waiting 10 years for that event is better than just jumping in or DCA?
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Re: Gold / Stock / Bonds at highs or near highs?

Post by Cortopassi » Mon Oct 07, 2019 3:02 pm

pugchief wrote:
Mon Oct 07, 2019 1:36 pm
ochotona wrote:
Sun Oct 06, 2019 11:26 am
sophie wrote:
Sun Oct 06, 2019 10:18 am
Another strategy: wait until the PP as a whole goes through a negative performing couple of months and then buy in.
This is a great idea.
I disagree. I think this is a terrible idea. What if the next time the PP has sustained negative returns is 10 years from now? You think waiting 10 years for that event is better than just jumping in or DCA?
It has not gone negative this year, for example. At least for me.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by mathjak107 » Mon Oct 07, 2019 5:44 pm

exactly my point.....
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Re: Gold / Stock / Bonds at highs or near highs?

Post by Tortoise » Mon Oct 07, 2019 6:45 pm

Trying to market-time one's transition into the PP is like deciding to go on one last bender before finally going sober.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Mon Oct 07, 2019 9:27 pm

Thank you for YOUR well thought out response! It alleviated a lot of my concerns!

Vinny
Pet Hog wrote:
Thu Sep 19, 2019 2:05 pm
vnatale wrote:
Wed Sep 18, 2019 8:24 pm
For those of you who have FULLY embraced the Permanent Portfolio and made your investment all at once can you reveal where each of the three volatile investments stood at the time of your investment? In other words, how close was each to its market high or low at the time of your investment.
I completed buying all the components of my PP in May 2013. Within about three months I was down 7%. Ouch. I guess I bought at some highs. (I'm now at almost 4% real annualized over the six years.) So I understand your concerns and everything you say sounds reasonable and well thought out.

Sure, I think we're due for some dramatic market turbulence in the next couple of years, but there seems to be so much doom and gloom in the personal finance world these days that perhaps it's already factored in (i.e., if everyone thinks we're going to crash it's unlikely to happen). If I were to make some bold predictions, I think treasury yields could go to zero or negative, gold could double, and stocks could halve. In that case, the PP would do very well and a rebalance or two would happen into then-very-affordable stocks. If we muddle through the next few years, then the PP will probably function as usual.

My experience has been that there wasn't a time during the last six years when it was possible to say, "now is a great time to invest in the PP!" -- it's always been seemingly overvalued/scary. But I'm very content with my holdings and I expect to do OK going forward. I'm not going to cash out my PP today; flip that logic on its head and I would have to be happy to buy into it today. With the three volatile assets seemingly overvalued, I suspect that you prefer to hold 100% cash. Given the two choices, I'll stick with the PP. Who knows what will happen. Not me!
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Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Mon Oct 07, 2019 9:31 pm

Thank you for this response.

I'm basically a binary person, which means in just about everything I do I'm either all in or all out. Therefore, in embracing the Permanent Portfolio that would mean FULLY implementing it in ALL ways, and not making a gradual transition to it.

Vinny
sophie wrote:
Sat Sep 21, 2019 7:08 am
At any given time, at least one of the PP assets will be at an "all time high". That's called "getting returns on your investments". It kind of makes me laugh, because the phrase "all time high" suggests an exceptional situation, not something that's expected - it's why you're buying that asset in the first place, isn't it?

The problem is you can't predict where each asset will go, except you can be pretty confident that at least one asset will go down. There's no pre-defined ceiling on any of the assets. Did anyone at the start of this year predict the transient bump in bonds, with the 30 year dropping to a 2% yield? I bet not. We all thought bonds were at their bottom. Similarly, no one thought gold would be going up. Might it go up further? Sure, why not? The current shock in the money market system might well trigger something like that, and if it doesn't, something else could. A week ago we didn't have any idea that a crisis was about to hit money markets.

So what if gold and bonds do go down? If they are, it means stocks are rising, probably a lot. Cash also provides a good ballast. In 2013 there was a big drop in gold, but with the PP's structure the portfolio was (as usual) quite stable. My own PP was actually flat for the year, plus I got to tax loss harvest.

If you're a bit skittish about buying in, then transferring in gradually over time might be easier than holding your nose and jumping all in. It does help to set things up in a way that will let you tax loss harvest when appropriate.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Mon Oct 07, 2019 9:34 pm

Thank you for your response. This one also helps allay my "highs" concerns.

Vinny
zosoo7 wrote:
Sun Sep 22, 2019 11:52 pm
I understand your hesitation. I am in a similar situation with my non-retirement accounts and decided to move forward and go all in on PP last week. I personally feel the PP can be entered into at any time because the underlying belief is to remove speculation, and the 4 assets classes theoretically give you protection against drastic losses.

While purely anecdotal and historical, I moved all my retirement accounts into the PP ~ 1 year ago. At the time, it was against all logic to put 25% of my savings into long term treasuries, I mean interest rates could only go up causing bond prices to drop, right? At the time, TLT was trading for $119 a share, and now look at it (~ $141). It's an example of why I like the PP so much, it accepts the irrationality of the market and prevents you from having to worry about it. So I agree it's unsettling seeing stocks, gold, and long term treasuries "high" right now, but the truth is nobody knows what's going to happen next.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by vnatale » Mon Oct 07, 2019 9:46 pm

Well over 15 years ago I was (good) brainwashed into the belief of NO market timing!

Therefore as I stated earlier tonight, when I finally go Permanent Portfolio I will be going into it fully with no transitioning into it over a period of time. To the contrary, once I start implementing I want to do it ALL in as short a time period as possible.

Vinny
Tortoise wrote:
Mon Oct 07, 2019 6:45 pm
Trying to market-time one's transition into the PP is like deciding to go on one last bender before finally going sober.
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Re: Gold / Stock / Bonds at highs or near highs?

Post by sophie » Tue Oct 08, 2019 8:44 am

pugchief wrote:
Mon Oct 07, 2019 1:36 pm
ochotona wrote:
Sun Oct 06, 2019 11:26 am
sophie wrote:
Sun Oct 06, 2019 10:18 am
Another strategy: wait until the PP as a whole goes through a negative performing couple of months and then buy in.
This is a great idea.
I disagree. I think this is a terrible idea. What if the next time the PP has sustained negative returns is 10 years from now? You think waiting 10 years for that event is better than just jumping in or DCA?
Remember this is for people who are hesitant about jumping into the PP. There is a cost to going in gradually from cash too, don't forget.

For the record I bought in all at once in 2012. Gold, stocks and bonds all looked like they were overvalued at the time (relative to the recent past), and cash was yielding nothing. It felt like a crazy thing to do, because no asset class looked attractive. We all thought interest rates were at rock bottom and we still had that post-2009 deep suspicion of stocks. Gold seemed like the safest bet. Look how that turned out!
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Re: Gold / Stock / Bonds at highs or near highs?

Post by Tyler » Tue Oct 08, 2019 10:32 am

I recently added a new chart to the site, and I think it might be helpful for this discussion.

Image

The dark line represents every inflation-adjusted annual return for the PP since 1970. Each light gray line represents the annual returns for one of the four underlying assets in the PP.

To me the big takeaway is that trying to time the portfolio by watching the individual assets is not only a losing proposition but also misses the point of how the PP works. By owning several unpredictable, volatile assets, the PP is specifically designed to be far less volatile than stocks, bonds, or gold on their own. You can sorta think of it as noise cancellation applied to portfolio theory, and buying into each asset separately just won't have the same effect as committing to the full program.

So if you're going to DCA, I would recommend purchasing every asset in the right proportion with each new contribution. And if you buy in at once, make an effort to not look at the returns of the individual assets. Focus on the portfolio as a whole (that has been remarkably consistent for nearly 50 years) and you'll be fine.
PortfolioCharts.com : Find a portfolio to love
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Re: Gold / Stock / Bonds at highs or near highs?

Post by mathjak107 » Tue Oct 08, 2019 12:42 pm

tyler , with 40 of those 50 years actually in a down trend in rates i think the high correlations we see when rates rise may play out very differently ...

those speed bumps the last 50 years were really just that as rates continued lower and lower right up until today . in my opinion i dont think we actually have enough past data in decades of rising rates to really tell a thing about future consistency . i mean you can ski down the last 40 years it
is so sloped downward . in my opinion i think counting on the consistency of the past and the decades of the lowering of rates we saw , would be a bet in itself on low rates continuing for decades longer ... we just don't know how things will react or where they go but it seems to me by design the portfolio is heavily weighted towards low rates continuing .

Image
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