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

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

Post by Wonk » Fri Oct 21, 2022 8:26 am

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

Post by vnatale » Fri Oct 21, 2022 9:00 am

Wonk wrote:
Fri Oct 21, 2022 8:26 am

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!
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by dualstow » Fri Oct 21, 2022 11:30 am

[LIKE]
Presidential ambition is a disease which can only be cured by embalming fluid.
- Estes Kefauver (and not Mo Udall)
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by Smith1776 » Fri Oct 21, 2022 12:25 pm

PP fo' life.
⅓ Stocks | ⅓ Bonds | ⅓ Commodities
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by dualstow » Fri Oct 21, 2022 3:23 pm

Smith1776 wrote:
Fri Oct 21, 2022 12:25 pm
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. O0
Presidential ambition is a disease which can only be cured by embalming fluid.
- Estes Kefauver (and not Mo Udall)
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by ppnewbie » Sun Oct 23, 2022 2:26 am

Great post!
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by Smith1776 » Sun Oct 23, 2022 2:39 am

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

Post by ochotona » Sun Oct 23, 2022 11:36 am

I also think it's a good time also to be starting with the HBPP.
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by Kbg » Sun Oct 23, 2022 7:19 pm

Whoa, Och is back. Good to see you.
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by johnnywitt » Wed Jan 11, 2023 3:10 pm

Hear, hear!
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by gospodin_i » Mon Mar 06, 2023 3:12 pm

I came here for some confirmation bias and I got it ;D
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by Vil » Tue Mar 07, 2023 6:44 am

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

Post by joypog » Tue Mar 07, 2023 8:32 am

Vil wrote:
Tue Mar 07, 2023 6:44 am
but still kind of flat-ish overall...
Isn't that kind of the point of the HBPP? >:D
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by mathjak107 » Tue Mar 07, 2023 1:42 pm

joypog wrote:
Tue Mar 07, 2023 8:32 am
Vil wrote:
Tue Mar 07, 2023 6:44 am
but still kind of flat-ish overall...
Isn't that kind of the point of the HBPP? >:D
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
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by xmj » Thu Mar 09, 2023 10:04 am

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

Post by ochotona » Tue Mar 21, 2023 2:22 pm

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

Post by Wonk » Fri Mar 31, 2023 12:24 pm

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

Post by dockinGA » Tue Apr 11, 2023 4:47 pm

mathjak107 wrote:
Tue Mar 07, 2023 1:42 pm
joypog wrote:
Tue Mar 07, 2023 8:32 am
Vil wrote:
Tue Mar 07, 2023 6:44 am
but still kind of flat-ish overall...
Isn't that kind of the point of the HBPP? >:D
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?
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by smurff » Sun Apr 23, 2023 8:11 pm

It's always a great time to invest in the HBPP!
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by xmj » Mon Apr 24, 2023 4:43 am

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).
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by ppnewbie » Fri Apr 28, 2023 7:45 am

@xmj - any reference material you have on monthly rebalancing would be appreciated, because I’ve heard several different approaches to rebalancing including never rebalancing.
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by Ugly_Bird » Fri Apr 28, 2023 7:12 pm

ppnewbie wrote:
Fri Apr 28, 2023 7:45 am
@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
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by ppnewbie » Sat Feb 10, 2024 12:40 am

Since this thread first started, my GB has surged higher.
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by vnatale » Sat Feb 10, 2024 8:52 am

ppnewbie wrote:
Sat Feb 10, 2024 12:40 am

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.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by ppnewbie » Sat Feb 10, 2024 9:23 am

7.7 percent higher than previous all time high.
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