The tech-dumbell portfolio

[Libertarian666]

I didn't aim my portfolio at the current financial climate. If I'd known what was going to happen, I'd have my own private jet by now.
But for a disaster portfolio, it seems to be pretty successful so far.
And it's about as simple as you can get:

2/3rd actual physical gold (geographically diverse)
1/6th US T-Bills
1/6th Swiss Franc annuity

Comments?

[ppnewbie]

The only thing I don’t see about this portfolio is a risk on component. Maybe the take away is that you don’t actually need risk! Although if you need to drawdown funds during a bull market it might not be the best portfolio.

[dualstow]

What is the approximate date of inception and performance since then?
I can't imagine not owning stock but I've been fascinated by your portfolio since I first found about about it.

[Libertarian666]

What is the approximate date of inception and performance since then?
I can't imagine not owning stock but I've been fascinated by your portfolio since I first found about about it.

I don't have records that would make that easy to calculate.
However, the earliest records I have (10/1/1997) show me at 100% gold valued at 343/oz. If the portfolio stayed that way, it would amount to about 7% CAGR for that time period.

Of course the portfolio hasn't been static that whole time. I bought some Swiss Franc annuities when they were still available to US residents, and have been getting 1.5% or so guaranteed interest. That was laughably low then but not so much now.

I sold a bunch and re-bought it at 1750-1800 for "tax gain harvesting". I've been selling some of that and some that still has my original basis from the 1970's and 1980's, balancing out profits and losses. So my overall tax basis right now is about at the present price, which means I can cash some in whenever I want at around these prices or lower without generating any taxable income.

[dualstow]

Does your other half own stocks?

[Libertarian666]

Does your other half own stocks?

No, I’m the portfolio manager. She’s the chief medical officer.

[Kriegsspiel]

That's your current allocation?

[Libertarian666]

Actually it's not exactly that. It is 1/3 cash and 2/3 gold but the cash isn't all T-bills: I forgot about the Swiss Francs.

So right now it's about:
1/6th Swiss Francs
1/6th T-bills
2/3rds gold.

[fireplan]

2/3rd actual physical gold (geographically diverse)
1/3rd US T-Bills

Comments?

No doubt there are periods when this portfolio will do quite well, and the next 10-20 years could very well be one of them, but...

If you plug this into portfoliocharts.com, this portfolio is impressive in the fact that it comes out dead last or second to last in every metric! Gold makes a great diversifier to balance the gyroscope, but gold can also have decades of negative performance, so a portfolio with 2/3rds gold and no equities or LTTs is highly unbalanced and thus very risky on a long term basis.

For me, as an early retiree, I find the perpetual withdrawal rate (PWR) of a portfolio to be the best measure of the risk vs reward of that portfolio, as it encapsulates the long term CAGR, volatility, length and depth of drawdowns, all into a single metric that directly corresponds to expected lifetime income from the investment.

A portfolio of 2/3rds gold and 1/3rd US T-Bills has a historical PWR (out to 40 years) of only 0.3%, meaning you would need a $10 million portfolio just to harvest $30k a year from it. In comparison, a total stock market portfolio, which sounds very risky in comparison, has a 3.6% PWR at 40 years, which makes it 12x less risky by this metric.

[Libertarian666]

2/3rd actual physical gold (geographically diverse)
1/3rd US T-Bills

Comments?

No doubt there are periods when this portfolio will do quite well, and the next 10-20 years could very well be one of them, but...

If you plug this into portfoliocharts.com, this portfolio is impressive in the fact that it comes out dead last or second to last in every metric! Gold makes a great diversifier to balance the gyroscope, but gold can also have decades of negative performance, so a portfolio with 2/3rds gold and no equities or LTTs is highly unbalanced and thus very risky on a long term basis.

For me, as an early retiree, I find the perpetual withdrawal rate (PWR) of a portfolio to be the best measure of the risk vs reward of that portfolio, as it encapsulates the long term CAGR, volatility, length and depth of drawdowns, all into a single metric that directly corresponds to expected lifetime income from the investment.

A portfolio of 2/3rds gold and 1/3rd US T-Bills has a historical PWR (out to 40 years) of only 0.3%, meaning you would need a $10 million portfolio just to harvest $30k a year from it. In comparison, a total stock market portfolio, which sounds very risky in comparison, has a 3.6% PWR at 40 years, which makes it 12x less risky by this metric.

Note that I'm not recommending this to anyone else: I believe most people should use the Permanent Portfolio.

However, it has been useful in the sense that it is a counterweight to the normal economy.

That is, it doesn't do particularly well in good economic times, but tends to do much better than a normal portfolio in terrible times, when you really need your portfolio to do better.

I'm also fortunate in having gotten into it near a low in the gold price, which was completely by chance. That also makes it perform much better.

As for total stock market portfolio performance, that is based on less than one century in one country. That is hardly enough data to be confident in future results.

[ppnewbie]

Technolvelist - You may be on the cusp of being an overnight genius. Have fun at Davos!

[Libertarian666]

Technolvelist - You may be on the cusp of being an overnight genius. Have fun at Davos!

If so, it has taken me only 50 years to be an overnight genius. Better late than never!

[yankees60]

Technolvelist - You may be on the cusp of being an overnight genius. Have fun at Davos!

If so, it has taken me only 50 years to be an overnight genius. Better late than never!

Doesn't it always take a minimum of 3 years to accomplish something "overnight"??!!

Vinny

[Libertarian666]

Technolvelist - You may be on the cusp of being an overnight genius. Have fun at Davos!

If so, it has taken me only 50 years to be an overnight genius. Better late than never!

Doesn't it always take a minimum of 3 years to accomplish something "overnight"??!!

Vinny

Yes, generally that's the minimum time.

[ppnewbie]

I'm hoping my kids think I'm a genius when I pass on my hoard to them in 40 years. Right now everyone thinks I'm cookoo.

[Libertarian666]

I'm hoping my kids think I'm a genius when I pass on my hoard to them in 40 years. Right now everyone thinks I'm cookoo.

That's normal.

[Libertarian666]

It has occurred to me that my portfolio has a hidden "risk" component.

Namely, the only situation I'm aware of where someone of modest means can become very wealthy without taking inordinate risks is when there is a currency reset and they have a significant gold holding.

(I put "risk" in quotes because this is only an upside risk.)

[shekels]

It has occurred to me that my portfolio has a hidden "risk" component.

Namely, the only situation I'm aware of where someone of modest means can become very wealthy without taking inordinate risks is when there is a currency reset and they have a significant gold holding.

(I put "risk" in quotes because this is only an upside risk.)

Fed reserve notes be dammed.

So in this case Gold is similar to a floating currency.

[WhiteElephant]

Interesting, I like the simplicity!

What is the reason you didn't include a small stock allocation at all? Can a portfolio like this act as a sort of counterweight/inverse correlation to your career?

I can imagine that for a disaster portfolio you'd want to own some stocks as it's very likely to be worth at least something. A bit like gold I guess

[Libertarian666]

Interesting, I like the simplicity!

What is the reason you didn't include a small stock allocation at all? Can a portfolio like this act as a sort of counterweight/inverse correlation to your career?

I can imagine that for a disaster portfolio you'd want to own some stocks as it's very likely to be worth at least something. A bit like gold I guess

Yes, my theory is that in normal prosperity I can make good money in my profession, so my portfolio performance isn't as important. When things are crazy is when I care more about my portfolio performance.
I don't think a small stock allocation would make much difference overall, and I don't trust the accounting of public companies anyway.

And there is also the "lottery ticket" aspect of my portfolio. It does take more than "a dollar and a dream", but the expected return is better than that approach.

[mathjak107]

I didn't aim my portfolio at the current financial climate. If I'd known what was going to happen, I'd have my own private jet by now.
But for a disaster portfolio, it seems to be pretty successful so far.
And it's about as simple as you can get:

2/3rd actual physical gold (geographically diverse)
1/3rd US T-Bills

Comments?

There used to be a portfolio called the armadillo ..it was 90% treasuries and 10% gold..it was a book I think by Richard band

[dualstow]

tech, a few months ago I believe you were considering getting back into an HBPP.
I guess this is a weird time for people to make portfolio changes. Still, if I had cheaply-bought gold that I could sell at 1645 an ounce and buy stocks, I’d probably do some of that.

{I think what I’m really trying to say is that I hope the whole economy doesn’t collapse}

[Libertarian666]

tech, a few months ago I believe you were considering getting back into an HBPP.
I guess this is a weird time for people to make portfolio changes. Still, if I had cheaply-bought gold that I could sell at 1645 an ounce and buy stocks, I’d probably do some of that.

{I think what I’m really trying to say is that I hope the whole economy doesn’t collapse}

I'm not interested in getting into the stock market. I also hope the whole economy doesn't collapse but I'm not reducing my hedge against that until and unless I see the light at the end of the tunnel.

And am sure it isn't an oncoming train.

[Smith1776]

Libertarian666's portfolio, with its zero stock allocation, reminds me of the old martial arts master that beats the big villain with just his fists -- no weapons at all.

Hiyah!!!

[Hal]

Libertarian666's portfolio, with its zero stock allocation, reminds me of the old martial arts master that beats the big villain with just his fists -- no weapons at all.

Hiyah!!!

Is this how you picture Libertarian666 ?