BelangP & PP

[Hal]

While listening to BelangP's latest post I noted a query in the comments if the PP was a "black swan" proof portfolio.
What are your thoughts?

My thought is that a black swan event (or black marble as he puts it) is by definition unknowable, therefore putting everything into one asset class (eg. gold) is not providing protection......

https://www.youtube.com/watch?v=eUwIuBk-APw

[dualstow]

Depends on the black swan, right?
pp is better than most portfolios, but who knows if there's an everything-proof portfolio.

[Xan]

Also it depends on the PP implementation. In some black swans, only physical gold will bail you out, with paper being no good. Then in some, banks close and your safe deposit box is forfeit. In others, (a "personal" black swan), a robber coerces you to open your home safe.

[johnnywitt]

A Black Swan proof portfolio doesn't exist any more than a magic unicorn that shits diamonds. There are, however, portfolios that are extremely prudent as Howard Marks always likes to say. I guess most on here tend to agree that the PP is one of those portfolios, but there are at least 3 others that backtest well

BelangP is a really good YT Channel. His might be another portfolio that's fairly bulletproof. He's adverse to holding ANY Cash or Treasuries in his portfolio.

[Hal]

A Black Swan proof portfolio doesn't exist any more than a magic unicorn that shits diamonds. There are, however, portfolios that are extremely prudent as Howard Marks always likes to say. I guess most on here tend to agree that the PP is one of those portfolios, but there are at least 3 others that backtest well

BelangP is a really good YT Channel. His might be another portfolio that's fairly bulletproof. He's adverse to holding ANY Cash or Treasuries in his portfolio.

Ha Ha, have to remember that Agree that BelangP is a good channel. How do you define a bulletproof portfolio? Low Ulcer Index? Eg. 100% cash may not be volatile, but is it a magic unicorn portfolio (patent pending) ?

[Kriegsspiel]

I'm having a hard time letting go of how wrongly-drawn that unicorn fart is.

[Mark Leavy]

Interesting Kriegs...
I noticed the tail in the wrong spot.

Maybe we both need therapy.

What kind of artist screws up butt cheeks?

[Smith1776]

Out of all the popularized portfolios in the market of investment ideas, I don't really know of one that is more "black swan proof" than the PP. The biggest challenge with the PP is just getting people to accept it and stick with it. Gold makes people nervous. Long treasury bonds make people nervous. People don't like to see such a small allocation to stocks.

To the extent in which proclivity towards adoption is part of the criteria for evaluating a portfolio the PP actually fails miserably. It's a niche portfolio that appeals to preppers, gold bugs, and those who are maybe a bit too well-versed in geopolitics. That crew happens to be my jam. (Love all you guys. )

I think a better "gateway drug" portfolio (NSA, I'm talking about investing, not drugs.) is a combination of the Desert Portfolio + Larry Portfolio.

- 30% globally diversified equity with factor tilting (size, value, momentum, quality)
- 10% gold
- 60% 5 year treasury bonds (globally diversified sovereigns with currency hedging)

This gives you many of the benefits of the PP but also allows you to get as much juice from the squeeze as possible in the small equity allocation. Once someone buys into this kind of esoteric approach, full adoption of the PP may not be far off.

[Hal]

Out of all the popularized portfolios in the market of investment ideas, I don't really know of one that is more "black swan proof" than the PP. The biggest challenge with the PP is just getting people to accept it and stick with it. Gold makes people nervous. Long treasury bonds make people nervous. People don't like to see such a small allocation to stocks.

To the extent in which proclivity towards adoption is part of the criteria for evaluating a portfolio the PP actually fails miserably. It's a niche portfolio that appeals to preppers, gold bugs, and those who are maybe a bit too well-versed in geopolitics. That crew happens to be my jam. (Love all you guys. )

I think a better "gateway drug" portfolio (NSA, I'm talking about investing, not drugs.) is a combination of the Desert Portfolio + Larry Portfolio.

- 30% globally diversified equity with factor tilting (size, value, momentum, quality)
- 10% gold
- 60% 5 year treasury bonds (globally diversified sovereigns with currency hedging)

This gives you many of the benefits of the PP but also allows you to get as much juice from the squeeze as possible in the small equity allocation. Once someone buys into this kind of esoteric approach, full adoption of the PP may not be far off.

Reminds me of Bernsteins quote

And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times. Theres nothing wrong with Harrys portfolio nothing at all but theres everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars.

http://www.efficientfrontier.com/ef/0adhoc/harry.htm

[yankees60]

Out of all the popularized portfolios in the market of investment ideas, I don't really know of one that is more "black swan proof" than the PP. The biggest challenge with the PP is just getting people to accept it and stick with it. Gold makes people nervous. Long treasury bonds make people nervous. People don't like to see such a small allocation to stocks.

To the extent in which proclivity towards adoption is part of the criteria for evaluating a portfolio the PP actually fails miserably. It's a niche portfolio that appeals to preppers, gold bugs, and those who are maybe a bit too well-versed in geopolitics. That crew happens to be my jam. (Love all you guys. )

I think a better "gateway drug" portfolio (NSA, I'm talking about investing, not drugs.) is a combination of the Desert Portfolio + Larry Portfolio.

- 30% globally diversified equity with factor tilting (size, value, momentum, quality)
- 10% gold
- 60% 5 year treasury bonds (globally diversified sovereigns with currency hedging)

This gives you many of the benefits of the PP but also allows you to get as much juice from the squeeze as possible in the small equity allocation. Once someone buys into this kind of esoteric approach, full adoption of the PP may not be far off.

Reminds me of Bernsteins quote

And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times. Theres nothing wrong with Harrys portfolio nothing at all but theres everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars.

http://www.efficientfrontier.com/ef/0adhoc/harry.htm

I think that quote must hold the record for being most quoted in this forum...I like that it ties together two giants (for me) in the personal finance field - Harry and Bernstein.

Vinny

[Smith1776]

Reminds me of Bernsteins quote

And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times. Theres nothing wrong with Harrys portfolio nothing at all but theres everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars.

http://www.efficientfrontier.com/ef/0adhoc/harry.htm

Too true. It's the same thing with high quality/low volatility stocks right now. They have been bid up to the moon. One could say the same thing about dividend stocks. It's the curse of popularity! Money flows into what has been doing well recently, and this of course is detrimental to future returns.

One of the reasons why I've consistently preached some degree of value tilting is because buying what's cheap is usually what's unpopular by definition. Popular investments get bid up and generally produce god awful returns going forward.

We can see that today with the growth-value spread being as wide as it has basically ever been. As a result, everyone is taking pot shots at value, but that's usually when the investment is most attractive. What's interesting is that despite the growth-value spread being so wide right now, the relative levels of profitability and differences in leverage are about in line with what they've been historically. Value is, well, undervalued.

The PP itself is like the portfolio equivalent of value. Unloved but trucking along.

[johnnywitt]

A Black Swan proof portfolio doesn't exist any more than a magic unicorn that shits diamonds. There are, however, portfolios that are extremely prudent as Howard Marks always likes to say. I guess most on here tend to agree that the PP is one of those portfolios, but there are at least 3 others that backtest well

BelangP is a really good YT Channel. His might be another portfolio that's fairly bulletproof. He's adverse to holding ANY Cash or Treasuries in his portfolio.

Ha Ha, have to remember that Agree that BelangP is a good channel. How do you define a bulletproof portfolio? Low Ulcer Index? Eg. 100% cash may not be volatile, but is it a magic unicorn portfolio (patent pending) ?

Hal, I think that a "bulletproof" portfolio as Tyler calls it, is any portfolio that backrests' well and passes the test of being prudent to the adherent of said portfolio: hence, it's sort of a unicorn in my view. One, at some juncture has to cast their lot into the tempest, either by willful action, or by inaction, which is an action.

[johnnywitt]

Out of all the popularized portfolios in the market of investment ideas, I don't really know of one that is more "black swan proof" than the PP. The biggest challenge with the PP is just getting people to accept it and stick with it. Gold makes people nervous. Long treasury bonds make people nervous. People don't like to see such a small allocation to stocks.

To the extent in which proclivity towards adoption is part of the criteria for evaluating a portfolio the PP actually fails miserably. It's a niche portfolio that appeals to preppers, gold bugs, and those who are maybe a bit too well-versed in geopolitics. That crew happens to be my jam. (Love all you guys. )

I think a better "gateway drug" portfolio (NSA, I'm talking about investing, not drugs.) is a combination of the Desert Portfolio + Larry Portfolio.

- 30% globally diversified equity with factor tilting (size, value, momentum, quality)
- 10% gold
- 60% 5 year treasury bonds (globally diversified sovereigns with currency hedging)

This gives you many of the benefits of the PP but also allows you to get as much juice from the squeeze as possible in the small equity allocation. Once someone buys into this kind of esoteric approach, full adoption of the PP may not be far off.

Wow Smith, that was a great post!