HB Actually Did Disavow Growth Stocks In The PP

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johnnywitt
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HB Actually Did Disavow Growth Stocks In The PP

Post by johnnywitt » Sun Nov 15, 2020 4:20 pm

I'm sorry that I missed Harry's disavowal of Growth Stocks. It was because it was in one of his last "Moneytalk" Shows entitled "John & Harry Cover the Silver Story" Part I available on YT on "The Harry Browne Archives".
I never watched this episode because I didn't plan on investing in silver. I learned that you might want to watch all his shows even on subjects like Foreign Banking and such because he oftentimes answers questions from listeners and that's what this was. He said he now recommends an S&P 500 Index Fund for the Stock Portion of the PP. He also, of course, said this in his last book as well. Although he also mentioned that you could mix and match some Growth with the S&P Funds.
I personally think that HB would have been an advocate for a Total Market Fund in lieu of an S&P 500 Fund these days.
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Re: HB Actually Did Disavow Growth Stocks In The PP

Post by Smith1776 » Sun Nov 15, 2020 9:30 pm

Indeed, Browne's thinking evolved and simplified over time. We can debate endlessly about what constitutes the "optimal" stock allocation. However, in the end, I think as long as your equity is widely diversified and with low costs it's not likely to matter much in the long run.
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Re: HB Actually Did Disavow Growth Stocks In The PP

Post by pmward » Mon Nov 16, 2020 8:22 am

I also don't think HB would want his opinions to turn into dogma. I think he would want people to think for themselves. His thoughts and opinions evolved over the years, which goes to show they were not some rigid set of rules that cannot change based on new information. We all have the ability to backtest and make decisions for ourselves these days. I personally think this is a good thing. I don't think "because Harry said so" is a good reason to make a financial decision in and of itself.
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Re: HB Actually Did Disavow Growth Stocks In The PP

Post by johnnywitt » Fri Nov 20, 2020 5:45 pm

pmward wrote:
Mon Nov 16, 2020 8:22 am
I also don't think HB would want his opinions to turn into dogma. I think he would want people to think for themselves. His thoughts and opinions evolved over the years, which goes to show they were not some rigid set of rules that cannot change based on new information. We all have the ability to backtest and make decisions for ourselves these days. I personally think this is a good thing. I don't think "because Harry said so" is a good reason to make a financial decision in and of itself.
Well, here we go again, but Harry did mention that you need to "be dumb about managing your PP", so you didn't try to outsmart the allocations. I think that's the jist of it- the percentage dedicated to maintaining your allocations and the permanence of those. Doesn't matter a great deal whether your equity allocation is in growth or value or blend: it's the percentage in equities that matters the most.
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Re: HB Actually Did Disavow Growth Stocks In The PP

Post by pmward » Sat Nov 21, 2020 8:15 am

johnnywitt wrote:
Fri Nov 20, 2020 5:45 pm
Well, here we go again, but Harry did mention that you need to "be dumb about managing your PP", so you didn't try to outsmart the allocations. I think that's the jist of it- the percentage dedicated to maintaining your allocations and the permanence of those. Doesn't matter a great deal whether your equity allocation is in growth or value or blend: it's the percentage in equities that matters the most.
I don't think it's even that. Harry put forth many iterations on the PP with different percentages in his earlier years. He eventually settled on 25x4, mainly because of it being easy, user friendly, and frankly good enough. I personally look at the PP in principal not in dogma. In other words, I think something like Tyler's GB is still a PP in principal, even though it has 40% stocks. "25%" is not a magic number. I think if someone learns and understand the principals HB compiled and shared with us, they are fully capable of making an intelligent allocation all on their own.

That doesn't even have to be a "dumb" static allocation, one could look at Dalio's risk parity for instance as an actively managed quant variation on the PP theme. The underlying principals are still there though. I myself have moved on to a more active quant based variation, but the underlying principals in my strategy are still there. I still have accounted for the 4 market environments, even though I'm not allocated to all 4 in a static manner. Now, by the time I go to retire I plan to convert a good chunk of that over to a static allocation to reduce the maintenance required. But for now being a 38 year old in accumulations with a high income and 50-60% average gross savings rate, I really have nothing to lose and everything to gain in trying to chase a bit of alpha. Worst case scenario is I have to work an extra year or two longer than planned. Best case scenario is I can retire a couple years earlier than planned and upgrade my retirement planned cost of living (debt-free retirement on the beach in southern CA within 10 years is my BHAG, can't accomplish that stretch goal with static 4x25). But I have done this in a way that still hedges me adequately against prosperity, inflation, deflation, and "tight money" (or in Dalio's modified 4 states, all combinations of increasing or decreasing growth and increasing or decreasing inflation). So I guess what I'm getting at here with this tangent is that even if someone doesn't hold THE PP (aka 4x25), that another variation thereof using the PP principals isn't necessarily worse. It also may be better off for that specific individual to break from the 4x25. My implementation is far from "dumb", it's definitely way more complex, but based on the extensive research I've done I'm happy with where I am at.

The biggest issue most will bump into in creating a custom variation will be the pull of fear or greed of different assets, causing someone to want to avoid some and overweight others based on nothing more than emotion alone. For these people, the "dumb" route indeed is probably for the best. This also is probably 85-90% of people out there. For this reason, I can understand why HB stuck to his guns publicly on the 4x25 thing. I'm curious what he would have said privately to somebody he believed had the knowledge and understanding to think through these things objectively.
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Re: HB Actually Did Disavow Growth Stocks In The PP

Post by Kriegsspiel » Sat Nov 21, 2020 10:11 am

pmward wrote:
Sat Nov 21, 2020 8:15 am
Best case scenario is I can retire a couple years earlier than planned and upgrade my retirement planned cost of living (debt-free retirement on the beach in southern CA within 10 years is my BHAG, can't accomplish that stretch goal with static 4x25).
BogleHead Accumulation Goal?

On the topic, I find it easiest to just have a vanilla PP that I don't alter, and a VP that I feel free to do whatever I think is smart with.
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Re: HB Actually Did Disavow Growth Stocks In The PP

Post by johnnywitt » Sat Nov 21, 2020 10:52 am

To answer what HB would have said privately is pretty easy actually- Harry would've said VP.

Now the as to the PP the resounding question is: what would Harry have done with the LTT component of the PP???
Would he have advocated that, at least temporarily, someone substitute STT or just all T Bills for the LTT's.
You still maintain at least some protection against deflation that way and you don't get killed if we have rapidly rising interest rates due to inflation.

I, personally, still think that you stick with the PP because Harry was probably right in that it will protect you in all economical environments.
When one, or more, component is getting killed, at least one will save the day, with the exception of a recession. YMMV.

I really wonder what Craig or Tex, or Tyler thinks now, where any sane & sober individual has to be having some serious misgivings about the LTT component at this point.

We still could go into a Japanese type long term multi decade deflationary event. In which case, you would want the LTT despite the revulsion.
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Re: HB Actually Did Disavow Growth Stocks In The PP

Post by pmward » Sat Nov 21, 2020 1:50 pm

johnnywitt wrote:
Sat Nov 21, 2020 10:52 am
To answer what HB would have said privately is pretty easy actually- Harry would've said VP.

Now the as to the PP the resounding question is: what would Harry have done with the LTT component of the PP???
Would he have advocated that, at least temporarily, someone substitute STT or just all T Bills for the LTT's.
You still maintain at least some protection against deflation that way and you don't get killed if we have rapidly rising interest rates due to inflation.

I, personally, still think that you stick with the PP because Harry was probably right in that it will protect you in all economical environments.
When one, or more, component is getting killed, at least one will save the day, with the exception of a recession. YMMV.

I really wonder what Craig or Tex, or Tyler thinks now, where any sane & sober individual has to be having some serious misgivings about the LTT component at this point.

We still could go into a Japanese type long term multi decade deflationary event. In which case, you would want the LTT despite the revulsion.
Tyler has already weighed in, go look up his blog post on bond convexity. I also believe Craig popped in here not too long ago and said he was still on the 4x25 train. Personally, I think the PP will work fine just as it always has. In the last 20 years the PP has weathered 2 stock bear markets, 1 gold bear market, and a decade long cash bear market (negative real yields). Bonds are the only asset that hasn't been tested in the last 20 years. I see no reason why this one single asset class would break the whole freaking thing, when it can weather all the others just fine.

Also, I wouldn't be so quick to put words in Harry's mouth for what he would say in a private conversation to someone he knew had the knowledge, understanding, and skills to think for themselves. We don't really know. Either way, I don't think anyone should dogmatize any individuals words. Very few people here even hold a vanilla PP with no modifications. I do believe everyone's goals, risk tolerance, etc is a bit different, and that's totally ok.
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Re: HB Actually Did Disavow Growth Stocks In The PP

Post by johnnywitt » Mon Nov 23, 2020 5:32 pm

pmward wrote:
Sat Nov 21, 2020 1:50 pm
johnnywitt wrote:
Sat Nov 21, 2020 10:52 am
To answer what HB would have said privately is pretty easy actually- Harry would've said VP.

Now the as to the PP the resounding question is: what would Harry have done with the LTT component of the PP???
Would he have advocated that, at least temporarily, someone substitute STT or just all T Bills for the LTT's.
You still maintain at least some protection against deflation that way and you don't get killed if we have rapidly rising interest rates due to inflation.

I, personally, still think that you stick with the PP because Harry was probably right in that it will protect you in all economical environments.
When one, or more, component is getting killed, at least one will save the day, with the exception of a recession. YMMV.

I really wonder what Craig or Tex, or Tyler thinks now, where any sane & sober individual has to be having some serious misgivings about the LTT component at this point.

We still could go into a Japanese type long term multi decade deflationary event. In which case, you would want the LTT despite the revulsion.
Tyler has already weighed in, go look up his blog post on bond convexity. I also believe Craig popped in here not too long ago and said he was still on the 4x25 train. Personally, I think the PP will work fine just as it always has. In the last 20 years the PP has weathered 2 stock bear markets, 1 gold bear market, and a decade long cash bear market (negative real yields). Bonds are the only asset that hasn't been tested in the last 20 years. I see no reason why this one single asset class would break the whole freaking thing, when it can weather all the others just fine.

Also, I wouldn't be so quick to put words in Harry's mouth for what he would say in a private conversation to someone he knew had the knowledge, understanding, and skills to think for themselves. We don't really know. Either way, I don't think anyone should dogmatize any individuals words. Very few people here even hold a vanilla PP with no modifications. I do believe everyone's goals, risk tolerance, etc is a bit different, and that's totally ok.
Dogmatize? Look you're either in the PP, or you're not. If your holding STT instead of T-Bills, or VTI instead of VOO then that pretty well falls under semantics. Once again Harry would say that the VP is where an individual who "had the knowledge, understanding, and skills to think for themselves" should operate. YMMV (and quite clearly does).
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