This is the best time in 45 years to invest in the Permanent Portfolio

[Wonk]

Hello All,

It's been years since I dropped by this forum but I felt the urge to do so in case anyone needed a pep talk. Consider this...

-The permanent portfolio rises steadily in all market environments with one exception: tight money. We're in the tightest money environment since 1980-1982.
-Tight money environments don't last forever.
-A cashless permanent portfolio is drawn down about 24% at present. This is the largest drawdown in 45 years!
-The average length of time for the largest 10 drawdowns in portfolio history is 8.6 months. We're going on 10 months currently.
-The average length of time to be underwater in this portfolio (before a full recovery) is 16 months. The longest was 23 months.
-The average return of the permanent portfolio the year after a loss is over 20%.
-If you go to portfolio visualizer, plug in the assets and look at the 45 year chart, it's back to it's trend--possibly even slightly below trend or undervalued in real terms.

I'm not saying the portfolio has hit bottom. Maybe there's more to go, maybe not. But I'd say with a high degree of certainty that we're a LOT closer to the cycle bottom than any other time in history. Anyone with cash sitting on the sidelines and a time horizon longer than a year needs to be plowing money back into this portfolio rather than listening to talking heads blather about which way everything will go. Block out the noise and tune into the signal.

This is a gift from the financial gods. Don't waste it.

[yankees60]

Hello All,

It's been years since I dropped by this forum but I felt the urge to do so in case anyone needed a pep talk. Consider this...

-The permanent portfolio rises steadily in all market environments with one exception: tight money. We're in the tightest money environment since 1980-1982.
-Tight money environments don't last forever.
-A cashless permanent portfolio is drawn down about 24% at present. This is the largest drawdown in 45 years!
-The average length of time for the largest 10 drawdowns in portfolio history is 8.6 months. We're going on 10 months currently.
-The average length of time to be underwater in this portfolio (before a full recovery) is 16 months. The longest was 23 months.
-The average return of the permanent portfolio the year after a loss is over 20%.
-If you go to portfolio visualizer, plug in the assets and look at the 45 year chart, it's back to it's trend--possibly even slightly below trend or undervalued in real terms.

I'm not saying the portfolio has hit bottom. Maybe there's more to go, maybe not. But I'd say with a high degree of certainty that we're a LOT closer to the cycle bottom than any other time in history. Anyone with cash sitting on the sidelines and a time horizon longer than a year needs to be plowing money back into this portfolio rather than listening to talking heads blather about which way everything will go. Block out the noise and tune into the signal.

This is a gift from the financial gods. Don't waste it.

Welcome back, Wonk!

Thanks for all the above!

[dualstow]

[LIKE]

[Smith1776]

PP fo' life.

[dualstow]

PP fo' life.

I was about to joke that you have that tattooed on your arm a la "Thug Life." Please don't get a tattoo.

[ppnewbie]

Great post!

[Smith1776]

As much as I agree with the OP, the start date sensitivity of the PP is so low that I don't think it's ever a bad time to invest in it.

[ochotona]

I also think it's a good time also to be starting with the HBPP.

[Kbg]

Whoa, Och is back. Good to see you.

[johnnywitt]

Hear, hear!

[gospodin_i]

I came here for some confirmation bias and I got it

[Vil]

I do not know if its only me, but I really do not share your optimism about the best time. Its too early in the year, but I suspect it can be quite the same as the previous one, well, not that negative, but still kind of flat-ish overall...

[joypog]

but still kind of flat-ish overall...

Isn't that kind of the point of the HBPP?

[mathjak107]

but still kind of flat-ish overall...

Isn't that kind of the point of the HBPP?

not really , the point is to stay a head of inflation with perhaps a bit of extra growth .

flat is not good , especially if retired and taking inflation adjusted draws .

it’s the best way to fail

[xmj]

I, for one, welcome my new volatility overlords.

Best time to plant a tree was eighty years ago. Second best time is now.

The Permanent Portfolio is a special case of a constant-ratio rebalanced portfolio and as such I don't care too much about the near-term direction of any component - I care more about the components being less correlated - this will yield rebalancing premiums from all the volatility harvesting we do by bringing ratios back to 25%. And in that respect, 2023 should do much better than 2022.

[ochotona]

I subscribe to Better Buy and Hold - they provide "currentized" portfolios through the use of subset resampling.

When I limit the asset classes to the HBPPs classes, here is what I get:

US large cap 38.3%
LT Treasuries 27.7%
Gold 26.3%
Cash 7.7%

But the most important finding is that ADDING MORE ASSET CLASSES DOESN"T YIELD ANY IMPROVEMENTS. Personally, I'm trying to maximize SWR, not CAGR. And there are more "growthy" classes offered... small caps, EM. Adding EM yielded a really small improvement. So the HBPP four really are a quad-fecta... they're a complete set. I find that very interesting.

[Wonk]

No guarantees on 2023 yet, but if you were to invest in a cashless permanent portfolio when I wrote the original post (10.21.22), it would be up 14% as of yesterday's close. Again, no guarantees. But everything is performing just fine as it always has. Let's revisit again at the end of the year.

[dockinGA]

but still kind of flat-ish overall...

Isn't that kind of the point of the HBPP?

not really , the point is to stay a head of inflation with perhaps a bit of extra growth .

flat is not good , especially if retired and taking inflation adjusted draws .

it’s the best way to fail

Just wanted to comment on this constructive comment from mathjak.

Wouldn't the best way to fail be something along the lines of losing money, as opposed to breaking even with inflation?

[smurff]

It's always a great time to invest in the HBPP!

[xmj]

Something to note about four-fund portfolios consisting of mostly uncorrelated assets is that as long as you rebalance consistently -- monthly is generally found to be the optimal frequency -- you'll outperform vs a buy-and-hold investor just from harvesting volatility.

Rebalancing premiums are quite something, so this even holds if three of the assets are down simultaneously (I'm assuming cash doesn't "go down" nominally).

[ppnewbie]

@xmj - any reference material you have on monthly rebalancing would be appreciated, because I’ve heard several different approaches to rebalancing including never rebalancing.

[Ugly_Bird]

@xmj - any reference material you have on monthly rebalancing would be appreciated, because I’ve heard several different approaches to rebalancing including never rebalancing.

From this forum a while ago...

viewtopic.php?f=1&t=1601&p=19157&hilit= ... ing#p19097

[ppnewbie]

Since this thread first started, my GB has surged higher.

[yankees60]

Since this thread first started, my GB has surged higher.

"Surged" needs more specifics in terms of percentage.

The Golden Butterfly is the Permanent Portfolio plus a value index fund.

I made my only investments now 21 years ago in January 2003. All investments since have gone into cash.

When I made my allocations I invested heavily in both the Vanguard Value fund and the Vanguard Small Cap Value fund. I also invested some in the Vanguard Growth fund. But I depleted that investment over the years by giving away all those shares to charities.

Seems like I would have been much better off over these last 21 years by having done the exact opposite. Having the bulk in Growth and giving away the Value funds.

[ppnewbie]

7.7 percent higher than previous all time high.