Permanent Portfolio concept continues to live on

General Discussion on the Permanent Portfolio Strategy

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I Shrugged
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Re: Permanent Portfolio concept continues to live on

Post by I Shrugged » Sun May 02, 2021 6:13 pm

jalan, your remorse is very typical of PP holders during stock bull runs. After writing that, I guess I can see where someone would say back to me, "Yeah, see my point?" But get back to us after the next crash. Which, whatever it turns out to be exactly, is going to be yuge.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Mon May 03, 2021 3:54 am

The proverbial next crash …..

More money has been given up or lost in preparation for all these next crashes than has been lost in crashes themselves …

My opinion is Tlt is going to do more damage then it helps…it will likely wipe out any traction the other assets manage to get ..

This ain’t the old investing environment anymore as the saying goes …one is making a risky bet on rates and inflation and a way oversized bet on a likely deflation.

I see no safety in the pp anymore ..I see it as a more volatile asset choice as asset classes move together at the same time in one direction or another behaving with the volatility at times of a 75% equities portfolio.

I think equities and some gold are a better choice for the times ahead . Any bonds should be short term to intermediate term with the bulk at the shorter end of things ….even high yield is not a bad choice in the mix.

Something along these lines I think is far less risky than the pp so I like something like this for going forward for a conservative investor

25% equities
15% hyg high yield sec yield 3.38%
15% shy short term treasuries sec yield .05
15%- total bond 30 day yield 1.91%
15% mortgage securities fund 30 day yield .71%
10-15% gold

Rest some cash if so inclined

Then have a bit of a second portfolio if one wants where you have a nice mix of all equities and then season to taste with any amount of money they see fit to gain more growth and or adjust your lifestyle goals ..

Perhaps 10 years worth of draw or even more in the conservative model and the rest still treated as long term money ..even a 65 year old has money they won’t eat with for decades so that is still long term money that can sit in equities.

I see far less risk and volatility then betting on falling rates from here and getting sand bagged in the pp
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Re: Permanent Portfolio concept continues to live on

Post by Hal » Mon May 03, 2021 6:12 am

mathjak107 wrote:
Mon May 03, 2021 3:54 am

I see no safety in the pp anymore ..I see it as a more volatile asset choice as asset classes move together at the same time in one direction or another behaving with the volatility at times of a 75% equities portfolio.

I think equities and some gold are a better choice for the times ahead . Any bonds should be short term to intermediate term with the bulk at the shorter end of things ….even high yield is not a bad choice in the mix.
Thats an interesting thought Mathjak.

Would you agree with BelangP's 30% Gold, 70% Equity allocation
https://www.youtube.com/watch?v=1uPHV-m3U8w

or perhaps a variation on Smithy's portfolio
25% Gold 25% Cash 50% VGBA
https://intl.assets.vgdynamic.info/intl ... x-etfs.pdf

And for something different (I'm biased :D ) -> https://youtu.be/Hr-PhsI8G4Q
Last edited by Hal on Mon May 03, 2021 6:27 am, edited 1 time in total.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Mon May 03, 2021 6:22 am

i dont like any allocation written in stone as one size fits all . would i be 70% equities in retirement ? NOPE
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Re: Permanent Portfolio concept continues to live on

Post by Hal » Mon May 03, 2021 6:39 am

mathjak107 wrote:
Mon May 03, 2021 6:22 am
i dont like any allocation written in stone as one size fits all . would i be 70% equities in retirement ? NOPE
Wow! You were quick on the reply ;)
Replied before I put in the last link.

Have to say I agree with you on not having 70% equities in retirement.
In our Self Managed retirement fund we are transitioning from the Goldsmith Portfolio to 25% each gold/cash and VDBA now we will be starting drawing down. Less volatility is our aim now. Some cash is always good when all the other asset classes take a dive.
Aussie GoldSmithPP - 25% PMGOLD, 75% VDCO
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Re: Permanent Portfolio concept continues to live on

Post by amdda01 » Mon May 03, 2021 6:50 am

mathjak107 wrote:
Mon May 03, 2021 3:54 am
The proverbial next crash …..

More money has been given up or lost in preparation for all these next crashes than has been lost in crashes themselves …

My opinion is Tlt is going to do more damage then it helps…it will likely wipe out any traction the other assets manage to get ..

This ain’t the old investing environment anymore as the saying goes …one is making a risky bet on rates and inflation and a way oversized bet on a likely deflation.

I see no safety in the pp anymore ..I see it as a more volatile asset choice as asset classes move together at the same time in one direction or another behaving with the volatility at times of a 75% equities portfolio.

I think equities and some gold are a better choice for the times ahead . Any bonds should be short term to intermediate term with the bulk at the shorter end of things ….even high yield is not a bad choice in the mix.

Something along these lines I think is far less risky than the pp so I like something like this for going forward for a conservative investor

25% equities
15% hyg high yield sec yield 3.38%
15% shy short term treasuries sec yield .05
15%- total bond 30 day yield 1.91%
15% mortgage securities fund 30 day yield .71%
10-15% gold

Rest some cash if so inclined

Then have a bit of a second portfolio if one wants where you have a nice mix of all equities and then season to taste with any amount of money they see fit to gain more growth and or adjust your lifestyle goals ..

Perhaps 10 years worth of draw or even more in the conservative model and the rest still treated as long term money ..even a 65 year old has money they won’t eat with for decades so that is still long term money that can sit in equities.

I see far less risk and volatility then betting on falling rates from here and getting sand bagged in the pp
MJ,

Is the above your recommendation for retirement - or accummulation?
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Mon May 03, 2021 7:59 am

i never recommend anything but 100% equities for accumulation ... so let me state that first . there has never been an accumulation period which spans decades that ever made sense for a long term investor to worry about mitigating short term temporary dips and hurting long term returns by using mitigating assets like bonds .

so financially that is always my recommendation .

but some dont have the stomach for it so mentally what they need to do is up to them .

but i do prefer to see them find away for 1% or so to take themselves out of the loop if they dont have the pucker factor and try let someone else be in the drivers seat before using a portfolio that knocks 30% or more off their balance over that long time frame . if you find one it is the outlier not the norm and certainly nothing i would want to bet on .

the model above is in my opinion for after you made the bulk of your money and are either retired or still want long term growth without the heavy bet on interest rates today but it certainly would not be a choice for my accumulation stage
Last edited by mathjak107 on Mon May 03, 2021 8:48 am, edited 4 times in total.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Mon May 03, 2021 8:08 am

Hal wrote:
Mon May 03, 2021 6:39 am
mathjak107 wrote:
Mon May 03, 2021 6:22 am
i dont like any allocation written in stone as one size fits all . would i be 70% equities in retirement ? NOPE
Wow! You were quick on the reply ;)
Replied before I put in the last link.

Have to say I agree with you on not having 70% equities in retirement.
In our Self Managed retirement fund we are transitioning from the Goldsmith Portfolio to 25% each gold/cash and VDBA now we will be starting drawing down. Less volatility is our aim now. Some cash is always good when all the other asset classes take a dive.
although as kitces points out cash buckets to draw from are really more a mirage and a mental thing then really doing anything
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Re: Permanent Portfolio concept continues to live on

Post by jalanlong » Mon May 03, 2021 12:51 pm

mathjak107 wrote:
Mon May 03, 2021 3:54 am
The proverbial next crash …..

More money has been given up or lost in preparation for all these next crashes than has been lost in crashes themselves …
I feel like most of these sort of decisions all come down to timing. If you go in on stocks now and there is a 30% crash in the next 12-18 months then you made a poor decision and it will cost you 4-5 years playing catch-up. If you go all in and we continue to have an up market for the next few years and finally get a 30% crash in 2025, then you are a genius and you make more than you would have lost in the crash. No way to know it other than to say historically those sorts of crashes only happen once every 7-10 years.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Mon May 03, 2021 2:07 pm

Well it has been a mistake then expecting a crash year after year .

Even 2008 was a non event for a long term investor …if you are not a long term investor then any investment is timing it … the shorter the time frame the greater pressure on the investment time frame .

Long term to me is at least ten years from retirement.

Everything in life has risks but we weigh the chance of the risk against the odds of being rewarded …. Markets always tend to be up 2/3’s of the time and down only 1/3 ..those are pretty good odds .

I would say betting on the proverbial crash and at this point long term bonds being the chosen asset class to be in would need to have deflation fears …odds are low we will see that . We will be wheeling around wagons of money before the fed allows deflation to take hold …


I think betting on long term bonds now is a bad idea …
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Re: Permanent Portfolio concept continues to live on

Post by vnatale » Mon May 03, 2021 3:11 pm

mathjak107 wrote:
Mon May 03, 2021 2:07 pm

Well it has been a mistake then expecting a crash year after year .

Even 2008 was a non event for a long term investor …if you are not a long term investor then any investment is timing it … the shorter the time frame the greater pressure on the investment time frame .

Long term to me is at least ten years from retirement.


Everything in life has risks but we weigh the chance of the risk against the odds of being rewarded …. Markets always tend to be up 2/3’s of the time and down only 1/3 ..those are pretty good odds .

I would say betting on the proverbial crash and at this point long term bonds being the chosen asset class to be in would need to have deflation fears …odds are low we will see that . We will be wheeling around wagons of money before the fed allows deflation to take hold …


I think betting on long term bonds now is a bad idea …


By your definitions a person could spend nearly half their investing life as a non-long-term investor?

Assume one lives to 85, is retiring at 65, and starts meaningful investing at 25...

The from 25 to 55 - 30 years - the person is a long-term investor. While from 55 to 85 - another 30 years - the person would not be a long-term investor.

Am I correctly interpreting you?
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Mon May 03, 2021 3:25 pm

Okay let me explain .

A typical accumulation stage pre retirement can run 25-40 years …I would only be 100% equities .

Now as we approach within ten years of retirement we enter what kitces calls the RED ZONE …

That is the most dangerous point in our lives …we have our investment fuel tanks full and any set back can really hurt .

So while we were still long term investors kitces recommends a more conservative stance for the 10 years prior to retirement and then for about 10 years in to retirement .

Once you clear the red zone go 100% equities again if you want or whatever level you choose ….

Even at 65 we have money we won’t eat with for decades and that is still long term money …but we do have to be careful at certain points in our lives then at others .

Avoiding to much damage while in the red zone is a good idea .

https://www.kitces.com/blog/managing-po ... -red-zone/
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Re: Permanent Portfolio concept continues to live on

Post by I Shrugged » Mon May 03, 2021 5:18 pm

Jak, you should start a forum dedicated to your ideas. Or take it to Bogleheads. I mean, the first hundred or so explanations were enough, for me anyway.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Mon May 03, 2021 5:22 pm

It is always the same stuff coming up over and over..someone always has the same questions.

That is just the nature of forums
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Re: Permanent Portfolio concept continues to live on

Post by doodle » Mon May 03, 2021 6:53 pm

I Shrugged wrote:
Mon May 03, 2021 5:18 pm
Jak, you should start a forum dedicated to your ideas. Or take it to Bogleheads. I mean, the first hundred or so explanations were enough, for me anyway.
If people are open to new ideas then rehashing topics can lead to further insights. Mathjak is completely convinced that the growth trends of the last 40 years will remain intact in the coming decades...and equities will continue to outperform. I think there is plenty of data to suggest that is simply not the case. The population growth trends of the last 100 years, complete disregard for environmental effects of mass consumerism, and more recently major debt expansion and PE multiple expansion has led to massive equity returns. This trend cannot go on forever. Present stock price gains are borrowed from future....and we have had plenty of borrowing of future gains at this point...

But demographics ultimately will impact future consumption habits...and those future products will continue to be produced more and more efficiently. All of this is deflationary . Every major world economy is currently in the 4th stage.
population-pyramid-stages-sm.png
population-pyramid-stages-sm.png (7.43 KiB) Viewed 342 times


Mathjak, is adamant that the Fed will not allow deflation. He refused to acknowledge that presently their ability to create that might be outside of their control....just as it has been for central bank of Japan. Once interest rates hit the zero bound they have very few tools left to employ to juice the economy....(of course, if the federal reserve act is amended and we get to the point where the Fed is sending checks to citizens then of course their current impotence needs to be reelvaulated....but we aren't there yet)
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Re: Permanent Portfolio concept continues to live on

Post by doodle » Mon May 03, 2021 7:02 pm

I'm not the norm currently, but more and more people are starting to realize this endless rat race debt fueled lifestyle sucks..and furthermore is gutting our planet..who knows when cultural habits start to shift. If more and more Americans came to realize the benefits to the quality of life they could gain from more minimalistic consumption habits we would have deflation that would be shocking. At some point people might realize that more and more consumption and growth past a certain point leads to less and less quality of life. If that happens, watch out.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Tue May 04, 2021 2:59 am

You certainly can bet on what you like …

But personally I like to go with what was, what is and what stands a reasonable chance of continuing and allocate my money in that order …eventually even a crash would still leave you with a bigger balance most likely then waiting for the proverbial crash ..which when it happens tends to recover well anyway .

Personally I see little point anymore in this environment in betting on the black swans . I am not saying being 100% equities in retirement but i think the pp is not such a great idea anymore as no assets are a safe haven and inflation and rising rates are the kryptonite to the pp .

I think holding long term bonds will totally up end ones portfolio and do way to much damage if we don’t get the outlier outcome.

I don’t want to speculate on rates at this point which is what I find the pp is certainly doing despite the neutral stance users think it is ..it is a heavy speculation on rates.

Gold is already betting on rates to a degree , i don’t want another asset class also betting on the same outcome with rates.
Interest rates have been trending down for forty years and are now hovering above zero. What goes down, must go up.

I think we have a far greater chance of rates going up then us being a Japan and I will allocate accordingly.

That is not to say one day I may shift if things look deflationary but I think you are risking to much waiting for the day we appear to be heading in that direction and the damage done will be hard to recover from even if long term bonds get their day in the sun.

As we all know those drops in assets take a whole lot more in gains to get back …stocks tend to retrace far faster then say gold which tends to have much longer cycles before retracing when it falls …rates are still unknown as we have only known falling rates for 40 years in the modern investing world.

But if you believe in the pp than by all means follow it but so far I am not convinced this is a safe haven …..

For the record I own no long term bonds at this point and I started to migrate some of ief over to the old model …..equites stay the same ….eventually I will move some gold back over too but I will keep about 10-15% of an allocation
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Re: Permanent Portfolio concept continues to live on

Post by Kriegsspiel » Tue May 04, 2021 4:40 am

doodle wrote:
Mon May 03, 2021 6:53 pm
Mathjak is completely convinced that the growth trends of the last 40 years will remain intact in the coming decades...and equities will continue to outperform. I think there is plenty of data to suggest that is simply not the case. The population growth trends of the last 100 years, complete disregard for environmental effects of mass consumerism, and more recently major debt expansion and PE multiple expansion has led to massive equity returns. This trend cannot go on forever. Present stock price gains are borrowed from future....and we have had plenty of borrowing of future gains at this point...
One of the interesting things that The Great Frontier (Webb) touched on was that prior to the discovery of the Americas, the Old World was essentially stagnant. In a full world like that, lending/debt didn't exist like it does in an expansionary world. When the Americas came online, the "money supply" needed to explode to accommodate all of the new productive capacity. We hadn't quite finished exploiting the new capacity when more virgin fields (oil, fertilizer, medicine) were brought online in the 20th century and gave us another huge bump.

So unless we get another line of expansion going (asteroid mining, nuclear fusion, etc), we should revert back to full-world economics. Static capacity means you have nothing to pull forward from the future.
But demographics ultimately will impact future consumption habits...and those future products will continue to be produced more and more efficiently. All of this is deflationary . Every major world economy is currently in the 4th stage.

population-pyramid-stages-sm.png
You should check out Zeihan's stuff, if you haven't already. Most of his "countries to watch" are close to the stage 2 pyramid you posted.
doodle wrote:
Mon May 03, 2021 7:02 pm
I'm not the norm currently, but more and more people are starting to realize this endless rat race debt fueled lifestyle sucks..and furthermore is gutting our planet..who knows when cultural habits start to shift.

If more and more Americans came to realize the benefits to the quality of life they could gain from more minimalistic consumption habits we would have deflation that would be shocking. At some point people might realize that more and more consumption and growth past a certain point leads to less and less quality of life. If that happens, watch out.
College debt is one of the bigger factors in debt-fueled lifestyles, and the cultural shift has already started. College enrollments have been dropping for years.

I know that's not what you meant, but even material consumption is down. For example, Matt Ridley says
Perhaps one of the least fashionable predictions I made nine years ago was that ‘the ecological footprint of human activity is probably shrinking’ and ‘we are getting more sustainable, not less, in the way we use the planet’. That is to say: our population and economy would grow, but we’d learn how to reduce what we take from the planet. And so it has proved. An MIT scientist, Andrew McAfee, recently documented this in a book called More from Less, showing how some nations are beginning to use less stuff: less metal, less water, less land. Not just in proportion to productivity: less stuff overall.

This does not quite fit with what the Extinction Rebellion lot are telling us. But the next time you hear Sir David Attenborough say: ‘Anyone who thinks that you can have infinite growth on a planet with finite resources is either a madman or an economist’, ask him this: ‘But what if economic growth means using less stuff, not more?’ For example, a normal drink can today contains 13 grams of aluminium, much of it recycled. In 1959, it contained 85 grams. Substituting the former for the latter is a contribution to economic growth, but it reduces the resources consumed per drink. link
Some food for thought. I think the next 100 years are gonna be wild.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Tue May 04, 2021 5:17 am

People like to defend the pp with all these anti stock charts or assumptions about time frames while ignoring the biggest .

A 40 year bull in bonds has given the pp a wind at its back that may not be duplicated with rates already near zero.

I would sooner bet on equities for the long term having gains then long term bonds continuing for decades in the negative interest rate sphere producing gains going forward
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Re: Permanent Portfolio concept continues to live on

Post by doodle » Tue May 04, 2021 8:22 am

Kriegs...thanks for references I will look more into some of those names. I definitely think that Buckminster Fullers concept of doing more with less (ephemerilization) is in full effect. Combined with moderating to shrinking demographics and the end of a long term debt cycle and the future is definitely going to be different from what we all have grown accustomed to over our lives.
mathjak107 wrote:
Tue May 04, 2021 5:17 am
People like to defend the pp with all these anti stock charts or assumptions about time frames while ignoring the biggest .

A 40 year bull in bonds has given the pp a wind at its back that may not be duplicated with rates already near zero.

I would sooner bet on equities for the long term having gains then long term bonds continuing for decades in the negative interest rate sphere producing gains going forward
The portfolio survived the long stagflationary rising rate environment of the 70s though....

Frankly, Im not so much interested in defending portfolio as much as I'm shocked that someone as adamant about their beliefs in its underperformance continues to adhere to it. Take the assets you have today and divide them among the investments you feel have the best opportunity going forward. It's pretty simple in that regard.
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Re: Permanent Portfolio concept continues to live on

Post by mathjak107 » Tue May 04, 2021 9:12 am

I would not go by anything that happened in the 1970s ..it is a different world today with rates near zero and stock valuations at all time highs ..we have high speed trading not related to economic conditions , we have more choices to bet against markets , Bitcoin and crypto too ,and a whole lot more investors .

the pp benefited from decades of falling rates for 40 years.

I pretty much am not using the pp anymore since I dumped long term bonds …I don’t have enough faith in it … the bond portion is migrating back to what it was as I don’t want so much interest rate sensitivity now.

It just isn’t a good fit for me and it all ready showed me that it can hit me with heavy losses in just weeks, even as markets are doing fine
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Re: Permanent Portfolio concept continues to live on

Post by dockinGA » Tue May 04, 2021 9:35 am

Mathjak, you need some new material. This constant talk of 'PP kryponite' is getting old. I'm a PP investor with a heavy dose of skepticism at the same time, so I don't mind reading about people trying to blow holes in it. I try to blow holes in it too. But I for one am tired of reading the same thing from you all day every day.

As for the PP, all I can say is that I started investing in it in 2014, and thought it was on it's last legs then, but still a reasonably safe investment for people more concerned with wealth protection instead of greedy, over-reaching growth. I guess my thoughts were and still are more negative about the general economic/investment system than the PP specifically. Anyway, I agonized for a couple of years over what investment strategy to choose and ultimately decided on the PP. I remember reading in several places that HB suggested a 3-6% annual growth above inflation. I went back just a few days ago and checked, and since 2014 I'm sitting on 4.7% real growth after inflation. If somebody had told me in 2014 I could have that from the PP I would've bitten their arm off to get it. I'm up 10% over the last year, even considering the downturn over the last few months. My monthly purchase/quarterly rebalance check just happened to coincide with March 23rd last year, so I bought tens of thousands of dollars of stocks (while holding my nose and convinced I was throwing money down a well) at the absolute bottom of the market. So far the PP has done exactly what it's designed to do. No guarantees that it will do so in the future, but we have no guarantees about anything, anytime, anywhere.

Based on your comments about deciding the PP is not for you due to the downturn over the last few months, I'm inclined to say that you obviously don't know 1/10th what you think you know about the future direction of markets. If you did, you wouldn't have jumped into the PP (or remained in the PP and regretted it, whatever the case may be) because you would've had the foresight to see that the portfolio was about to take a downturn.

I will now return to lurking the forums.....
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Re: Permanent Portfolio concept continues to live on

Post by I Shrugged » Tue May 04, 2021 11:19 am

Thank you.
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Re: Permanent Portfolio concept continues to live on

Post by Kevin K. » Tue May 04, 2021 11:54 am

Good discussion.

I don't think it's at all sacrilegeous to suggest that some things about the Permanent Portfolio may not in fact be permanent, while respecting Harry Browne's genius and applying some of his insights.

Obviously a contrarian portfolio with such massive tracking error relative to the market is only going to appeal to folks who can handle the tracking error long-term and who value stability of returns and low drawdowns during crises far more than going for a higher CAGR. You can use the tools on "Portfolio Charts" to come up with any number of allocations with 10-20% gold, high-quality bonds and diversified equities and come up with something a conservative retiree could live off of. None that I've tested beat the Golden Butterfly or Tyler's "Golden Wellesley" (80% Wellesley, 20% gold) for risk-adjusted return but you can make a compelling argument that both of those portfolios suffer from the same rear-view mirror perspective, in that their historical results are the product of a 40 year tailwind in bonds that has now come to an end along with a great run for the U.S. stock market driven mostly by growth stocks (or in Wellesley's case high dividend paying stocks, which are truly a relic of the past).

Here are three iterations of the GB just for fun that diversify the equity (in the first two cases) using 20% each in small cap value and international, while the third version is a modified Boglehead's Three Fund with just TSM and TI but with a slice of gold.

https://www.portfoliovisualizer.com/bac ... tion5_3=15

The bonds are all ITT's, which unlike TBM offers meaningful downside protection in a market crash. So I'm respecting Browne's recommendation to only own highest-quality bonds but jettisoning the LTT's for the hard-to-argue with (IMHO) reasons that mathjak mentions.

None of this stuff is theoretical for me. I'm a risk-averse early retiree with a very modest nest egg who was drawn to the PP after seeing my intricate slice-and-dice "conservative" (40% equity) portfolio lose ~23% during the '08 market crash. So I don't take it lightly that the most important savior of the PP both in '08 and last year were LTT's that no longer have that kind of insurance value.
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I Shrugged
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Re: Permanent Portfolio concept continues to live on

Post by I Shrugged » Tue May 04, 2021 2:25 pm

I agree with being skeptical about the PP. Just got tired of hearing the same thing a hundred different ways from mathjak.

Every time stocks are hitting glorious new highs, the PP loses appeal to some people. They do the what if math and conclude the PP was a mistake.
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