Gold will rise when Fed stops raising interest rates?

Discussion of the Gold portion of the Permanent Portfolio

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seajay
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Re: Gold will rise when Fed stops raising interest rates?

Post by seajay » Sat Nov 19, 2022 1:45 pm

Kbg wrote:
Mon Sep 19, 2022 10:25 am
There are extremely good financial and economic reasons not to invest in gold…we here are in a minority and perhaps a delusional one at that.
Gold is a lifestyle choice, with its own risks and risks-reduction factors.

Consider two, each with $1M wealth where one opts for 50/50 House/TSM and the other opts for thirds each House/TSM/Gold.

Neither has to find/pay rent, they have the imputed rent benefit, where the 50/50'er has a larger/more expensive home ($500K versus $333K). The 50/50'er draws 4% SWR from their $500K stock allocation, $20K/year disposable income. The thirds'er draws 3.33% SWR from their $666K stock/gold allocation, $20K/year disposable income. Both have the same disposable income.

PV (and others such as the Trinity Study) indicates that 4% SWR applied to $500K TSM (all stock)

PV
Safe Withdrawal Rate 4.03%
Perpetual Withdrawal Rate 2.40%
90.16% survived all withdrawals

Their withdrawal rate is a SWR, in a bad case ended 30 years with the portfolio value all having been spent.

The thirds'er draws 3.33% SWR from their $666K combined TSM/Gold 50/50 which PV indicates

PV
Safe Withdrawal Rate 4.89%
Perpetual Withdrawal Rate 3.38%
99.50% survived all withdrawals

Hmm! Their 3.33% SWR is a PWR, conceptually at least sustains forever (covers longevity).

Consider also if your son marries and you gift him a $1M value wedding gift either in the form of 50/50 house/TSM or thirds house/TSM/gold. A year later they have a child, and a few years after that they separate/divorce where the Court awards the entire home and child to the mother and half the stock portfolio value along with it, he's left with 25% ($250K). Contrasted with the thirds'er losing the entire home value, half of the stock value, but keeps all of the gold that you've secured for him in your own safe/storage ... he's still left with 50% ($500K). Of the two gift options many might prefer the thirds'er choice than the 50/50'er choice.

The PP of course dilutes down both the stock and gold allocations I used in the above. Opts instead for a equal split between 50/50 TSM/bonds and 50/50 gold/bonds. if anything I'd be more inclined to say that there are sound reasons not to invest in bonds.
Kbg
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Re: Gold will rise when Fed stops raising interest rates?

Post by Kbg » Mon Nov 28, 2022 3:00 pm

Are you the same seajay as on BH?
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