PP or GB vs. TIPS ladder
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PP or GB vs. TIPS ladder
It's interesting to me that with all of the frenzied discussion of TIPS ladders in the financial press and on websites like Bogleheads the past couple of years (siince ~2% real yields became available) there's been zero discussion of how safe withdrawal rates from these ladders compare to risk-parity approaches like the PP and GB.
I think part of the problem is that when many folks read "risk-parity" they think only of Ray Dalio and/or Tony Robbins. But it seems to me that the numbers speak for themselves:
30 year TIPS ladder (based on today's quotes at Tipsladder.com): 4.53% SWR
Permanent Portfolio: 5.4% SWR, 3.6% PWR
Golden Butterfly: 6.0% SWR, 4.6% PWR (these numbers are from the Portfolio Charts site)
Not to say I don't see the appeal of TIPS but going all-in on an investment that someone (I think it was J.W. Lawson, co-author of the PP book with Craig Rowland) amounts to "buying fire insurance from the arsonist-in-chief" makes me nervous.
Thoughts?
I think part of the problem is that when many folks read "risk-parity" they think only of Ray Dalio and/or Tony Robbins. But it seems to me that the numbers speak for themselves:
30 year TIPS ladder (based on today's quotes at Tipsladder.com): 4.53% SWR
Permanent Portfolio: 5.4% SWR, 3.6% PWR
Golden Butterfly: 6.0% SWR, 4.6% PWR (these numbers are from the Portfolio Charts site)
Not to say I don't see the appeal of TIPS but going all-in on an investment that someone (I think it was J.W. Lawson, co-author of the PP book with Craig Rowland) amounts to "buying fire insurance from the arsonist-in-chief" makes me nervous.
Thoughts?
Re: PP or GB vs. TIPS ladder
A lot of stock gets put into that quote. It's never moved me. It requires a certain mindset to believe it, which I do not have. It's somewhat bordering on conspiracy belief as it'd require too many people to be involved over several different administrations. I believe it was Lee Harvey Oswald all on his own with no assistance from anyone.Kevin K. wrote: ↑Mon Nov 18, 2024 12:46 pm It's interesting to me that with all of the frenzied discussion of TIPS ladders in the financial press and on websites like Bogleheads the past couple of years (siince ~2% real yields became available) there's been zero discussion of how safe withdrawal rates from these ladders compare to risk-parity approaches like the PP and GB.
I think part of the problem is that when many folks read "risk-parity" they think only of Ray Dalio and/or Tony Robbins. But it seems to me that the numbers speak for themselves:
30 year TIPS ladder (based on today's quotes at Tipsladder.com): 4.53% SWR
Permanent Portfolio: 5.4% SWR, 3.6% PWR
Golden Butterfly: 6.0% SWR, 4.6% PWR (these numbers are from the Portfolio Charts site)
Not to say I don't see the appeal of TIPS but going all-in on an investment that someone (I think it was J.W. Lawson, co-author of the PP book with Craig Rowland) amounts to "buying fire insurance from the arsonist-in-chief" makes me nervous.
Thoughts?
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."
Re: PP or GB vs. TIPS ladder
My understanding is the reference is to buying your inflation protection (TIPS) from the same U.S. government entity in charge of managing interest rates and keeping track of inflation (CPI-U being the metric for TIPS inflation calculations).yankees60 wrote: ↑Mon Nov 18, 2024 3:04 pmA lot of stock gets put into that quote. It's never moved me. It requires a certain mindset to believe it, which I do not have. It's somewhat bordering on conspiracy belief as it'd require too many people to be involved over several different administrations. I believe it was Lee Harvey Oswald all on his own with no assistance from anyone.Kevin K. wrote: ↑Mon Nov 18, 2024 12:46 pm It's interesting to me that with all of the frenzied discussion of TIPS ladders in the financial press and on websites like Bogleheads the past couple of years (siince ~2% real yields became available) there's been zero discussion of how safe withdrawal rates from these ladders compare to risk-parity approaches like the PP and GB.
I think part of the problem is that when many folks read "risk-parity" they think only of Ray Dalio and/or Tony Robbins. But it seems to me that the numbers speak for themselves:
30 year TIPS ladder (based on today's quotes at Tipsladder.com): 4.53% SWR
Permanent Portfolio: 5.4% SWR, 3.6% PWR
Golden Butterfly: 6.0% SWR, 4.6% PWR (these numbers are from the Portfolio Charts site)
Not to say I don't see the appeal of TIPS but going all-in on an investment that someone (I think it was J.W. Lawson, co-author of the PP book with Craig Rowland) amounts to "buying fire insurance from the arsonist-in-chief" makes me nervous.
Thoughts?
With the PP or GB, while you have plenty invested in Treasuries, they're nominal not TIPS (which among other things means they're far more likely to save your bacon when the stock market tanks), while also getting additional inflation protection from cash and, over the long term, equities and gold as well. A TIPS portfolio (assuming it's most or all of your assets) means that you live and die by "full faith and credit of the U.S. government" being an ironclad guarantee.
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Re: PP or GB vs. TIPS ladder
Whats gov gonna do. Cut spending, raise taxes, or inflate. No free lunch for them if CPI=money supply. Thats whats egregious about the ibond rate. Capped at 10k and they still give you nothing.
Re: PP or GB vs. TIPS ladder
Have to agree with you 100% here. Not to mention that in addition to the absurd/insulting 10K purchase limit you have the "joys" of having to deal with Treasury Direct (glitchy website with dubious security, epic hassles frequently reported in dealing with things like death of a spouse or changing one's bank).boglerdude wrote: ↑Mon Nov 18, 2024 10:51 pm Whats gov gonna do. Cut spending, raise taxes, or inflate. No free lunch for them if CPI=money supply. Thats whats egregious about the ibond rate. Capped at 10k and they still give you nothing.
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Re: PP or GB vs. TIPS ladder
boglerdude wrote: ↑Mon Nov 18, 2024 10:51 pm Whats gov gonna do. Cut spending, raise taxes, or inflate. No free lunch for them if CPI=money supply. Thats whats egregious about the ibond rate. Capped at 10k and they still give you nothing.
I've been thinking about bonds a lot lately.https://www.imf.org/-/media/Websites/IMF/imported-full-text-pdf/external/pubs/ft/wp/2015/_wp1507.ashx wrote:Thu Jan 01, 2015 3:58 pmHigh public debt often produces the drama of default and restructuring. But debt is also reduced through financial repression, a tax on bondholders and savers via negative or below- market real interest rates. After WWII, capital controls and regulatory restrictions created a captive audience for government debt, limiting tax-base erosion. Financial repression is most successful in liquidating debt when accompanied by inflation. For the advanced economies, real interest rates were negative 1⁄2 of the time during 1945–1980. Average annual interest expense savings for a 12—country sample range from about 1 to 5 percent of GDP for the full 1945–1980 period. We suggest that, once again, financial repression may be part of the toolkit deployed to cope with the most recent surge in public debt in advanced economies.
Partly because I've been considering purchasing enough LTT to cover the principal and interest payments on my mortgage (Conversely, TIPS might be useful to cover property taxes, which will rise w/ inflation). Since my interest rate is well below the treasury yield, this seems strictly better than paying off the mortgage. It would remove the catastrophic risk where stock market implodes, I lose my job, and I'm unable to pay the mortgage. It would require me to devote a large portion of my portfolio to LTT though, and so I pause.
Benjamin Graham was a big advocate for bonds, but I wonder if it was because he was from a different era. It seems to me that when the dollar was backed by gold, one didn't have to worry so much about what the principal would be worth when it was returned to you.
Also, it seems like this is a good time for some financial repression as the baby boomers go to cash and bonds to reduce risk as their investing horizon narrows.
Re: PP or GB vs. TIPS ladder
If you model the Permanent Portfolio with IEF instead of TLT it is not a major difference, and your duration is cut in half.
Re: PP or GB vs. TIPS ladder
True but IEF has a very high ER and too long a duration (IMHO) to be considered a true intermediate Treasury fund. Annette Thau and other bond experts consider 5 years year to be the standard duration for ITT's. Meanwhile BND and a lot of actively-managed bond funds have stretched durations out to 6-7 years in recent years, reflecting a search for yield during the long stink of negative real interest rates prior to the 2022 bond market bloodbath.
VGIT and SCHR are true ITT ETFs with ~5 year duration and rock bottom ER's. I use a barbell of SCHR and VTIP myself. Heresy for sure but TIPS didn't exist when Browne invented the PP - and LTT's were worth the risk back then and then some, which is certainly not the case anymore.
Re: PP or GB vs. TIPS ladder
I think the appeal of TIPS is their simplicity and inflation protection, but the higher SWRs from PP and GB are hard to ignore, especially for anyone comfortable with a bit more risk.Kevin K. wrote: ↑Mon Nov 18, 2024 12:46 pm It's interesting to me that with all of the frenzied discussion of TIPS ladders in the financial press and on websites like Bogleheads the past couple of years (siince ~2% real yields became available) there's been zero discussion of how safe withdrawal rates from these ladders compare to risk-parity approaches like the PP and GB.
I think part of the problem is that when many folks read "risk-parity" they think only of Ray Dalio and/or Tony Robbins. But it seems to me that the numbers speak for themselves:
30 year TIPS ladder (based on today's quotes at Tipsladder.com): 4.53% SWR
Permanent Portfolio: 5.4% SWR, 3.6% PWR
Golden Butterfly: 6.0% SWR, 4.6% PWR (these numbers are from the Portfolio Charts site)
Not to say I don't see the appeal of TIPS but going all-in on an investment that someone (I think it was J.W. Lawson, co-author of the PP book with Craig Rowland) amounts to "buying fire insurance from the arsonist-in-chief" makes me nervous.
Thoughts?
Re: PP or GB vs. TIPS ladder
The growth of $10,000 from 1/1/2004 to present:
TIP: $20,000
Permanent Portfolio: $42,700
Golden Butterfly: $43,100
TIP is from stockcharts (perfchart), other sources AllocateSmartly.com but paywalled, sorry.
TIP: $20,000
Permanent Portfolio: $42,700
Golden Butterfly: $43,100
TIP is from stockcharts (perfchart), other sources AllocateSmartly.com but paywalled, sorry.
Re: PP or GB vs. TIPS ladder
What is your definition of "a bit more"? Mine would be not describe the different in risk between the three investments. TIPS are about the most riskless possible.eliasx999 wrote: ↑Fri Nov 22, 2024 3:26 amI think the appeal of TIPS is their simplicity and inflation protection, but the higher SWRs from PP and GB are hard to ignore, especially for anyone comfortable with a bit more risk.Kevin K. wrote: ↑Mon Nov 18, 2024 12:46 pm It's interesting to me that with all of the frenzied discussion of TIPS ladders in the financial press and on websites like Bogleheads the past couple of years (siince ~2% real yields became available) there's been zero discussion of how safe withdrawal rates from these ladders compare to risk-parity approaches like the PP and GB.
I think part of the problem is that when many folks read "risk-parity" they think only of Ray Dalio and/or Tony Robbins. But it seems to me that the numbers speak for themselves:
30 year TIPS ladder (based on today's quotes at Tipsladder.com): 4.53% SWR
Permanent Portfolio: 5.4% SWR, 3.6% PWR
Golden Butterfly: 6.0% SWR, 4.6% PWR (these numbers are from the Portfolio Charts site)
Not to say I don't see the appeal of TIPS but going all-in on an investment that someone (I think it was J.W. Lawson, co-author of the PP book with Craig Rowland) amounts to "buying fire insurance from the arsonist-in-chief" makes me nervous.
Thoughts?
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."
Re: PP or GB vs. TIPS ladder
What was the degree of volatility?
Also, not fair comparisons as TIPS are strictly to keep pace with inflation with anything else on top of that being a bonus. The others are aiming for some growth move than inflation.
Also, as I just wrote in my last post in this topic there is a considerable difference in risk between TIPS and the other two options listed here.
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."
Re: PP or GB vs. TIPS ladder
I don't have an easy way to compare volatility, sorry.
Re: PP or GB vs. TIPS ladder
I think if one is buying TIPS in the form of individual bonds (and not in fund or ETFs) with the intention of holding to maturity .. then would there not be zero volatility? Or, would the volatility be directly proportional to the amount of inflation during the life of the bond?
Seems that common sense would say that TIPS would have far less volatility than almost anything else?
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."
Re: PP or GB vs. TIPS ladder
Yes. But not if the intent is to hold to maturity.
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."
Re: PP or GB vs. TIPS ladder
That's why I'm grown to not use bond funds that don't have a fixed maturity date... it's psychologically difficult to own rolling bond funds. It's US Treasuries or Bulletshares or iShares iBonds ETFs for me.
Re: PP or GB vs. TIPS ladder
We share the same sentiments with me confining myself to only the U.S. Treasuries.
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."
Re: PP or GB vs. TIPS ladder
A TIPS ladder guarantees that you'll end with zero, with a GB/PP you risk ending up with much moreyankees60 wrote: ↑Fri Nov 22, 2024 10:42 amWhat is your definition of "a bit more"? Mine would be not describe the different in risk between the three investments. TIPS are about the most riskless possible.eliasx999 wrote: ↑Fri Nov 22, 2024 3:26 amI think the appeal of TIPS is their simplicity and inflation protection, but the higher SWRs from PP and GB are hard to ignore, especially for anyone comfortable with a bit more risk.Kevin K. wrote: ↑Mon Nov 18, 2024 12:46 pm It's interesting to me that with all of the frenzied discussion of TIPS ladders in the financial press and on websites like Bogleheads the past couple of years (siince ~2% real yields became available) there's been zero discussion of how safe withdrawal rates from these ladders compare to risk-parity approaches like the PP and GB.
I think part of the problem is that when many folks read "risk-parity" they think only of Ray Dalio and/or Tony Robbins. But it seems to me that the numbers speak for themselves:
30 year TIPS ladder (based on today's quotes at Tipsladder.com): 4.53% SWR
Permanent Portfolio: 5.4% SWR, 3.6% PWR
Golden Butterfly: 6.0% SWR, 4.6% PWR (these numbers are from the Portfolio Charts site)
Not to say I don't see the appeal of TIPS but going all-in on an investment that someone (I think it was J.W. Lawson, co-author of the PP book with Craig Rowland) amounts to "buying fire insurance from the arsonist-in-chief" makes me nervous.
Thoughts?

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Re: PP or GB vs. TIPS ladder
personally i prefer leveraged risk parity portfolios
one in particular i own is the carolina reaper
it’s based around a 60/40
it has beaten 60/40 thru the covid shutdown when equities tumbled as well as thru the rising rate debacle on bonds .
the sharpe ratio has blown the pp away over the same time frames
it’s
20% upro 3x stocks
13% tyd 3x bonds
67%. dbmf managed futures

one in particular i own is the carolina reaper
it’s based around a 60/40
it has beaten 60/40 thru the covid shutdown when equities tumbled as well as thru the rising rate debacle on bonds .
the sharpe ratio has blown the pp away over the same time frames
it’s
20% upro 3x stocks
13% tyd 3x bonds
67%. dbmf managed futures

Re: PP or GB vs. TIPS ladder
I think in part it comes down to how large a percentage of your portfolio the TIPS ladder represents. If one goes "all -in" - which I would define as putting 70% or more of one's portfolio in the ladder, then you're relying completely on "full faith of the U.S. government" as being totally reliable. Whereas with the Golden Butterfly, for example, 40% of the portfolio is in Treasury bonds but the rest is highly diversified equities plus gold. But I also respect the argument that if the U.S. were to start defaulting on bonds the idea that other asset classes would necessarily offer safe haven is dubious.yankees60 wrote: ↑Fri Nov 22, 2024 10:42 amWhat is your definition of "a bit more"? Mine would be not describe the different in risk between the three investments. TIPS are about the most riskless possible.eliasx999 wrote: ↑Fri Nov 22, 2024 3:26 amI think the appeal of TIPS is their simplicity and inflation protection, but the higher SWRs from PP and GB are hard to ignore, especially for anyone comfortable with a bit more risk.Kevin K. wrote: ↑Mon Nov 18, 2024 12:46 pm It's interesting to me that with all of the frenzied discussion of TIPS ladders in the financial press and on websites like Bogleheads the past couple of years (siince ~2% real yields became available) there's been zero discussion of how safe withdrawal rates from these ladders compare to risk-parity approaches like the PP and GB.
I think part of the problem is that when many folks read "risk-parity" they think only of Ray Dalio and/or Tony Robbins. But it seems to me that the numbers speak for themselves:
30 year TIPS ladder (based on today's quotes at Tipsladder.com): 4.53% SWR
Permanent Portfolio: 5.4% SWR, 3.6% PWR
Golden Butterfly: 6.0% SWR, 4.6% PWR (these numbers are from the Portfolio Charts site)
Not to say I don't see the appeal of TIPS but going all-in on an investment that someone (I think it was J.W. Lawson, co-author of the PP book with Craig Rowland) amounts to "buying fire insurance from the arsonist-in-chief" makes me nervous.
Thoughts?
Another angle on this which has arisen in other discussions I've had is the question of just how much inflation-protected income does one need - taking into account that Social Security is effectively an inflation-adjusted annuity backed by the government. Of course this is only compltely relevant for those like myself who are already retired. SS already provides about two-thirds of my needed baseline income.
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Re: PP or GB vs. TIPS ladder
Kevin K. wrote: ↑Tue Dec 24, 2024 2:46 pm Another angle on this which has arisen in other discussions I've had is the question of just how much inflation-protected income does one need - taking into account that Social Security is effectively an inflation-adjusted annuity backed by the government. Of course this is only compltely relevant for those like myself who are already retired. SS already provides about two-thirds of my needed baseline income.
You can split up your expenses into fixed and inflating buckets. Food, fuel, property taxes, home maintenance would be inflating and would be matched with TIPS. Mortgage, car payment, etc can be matched with nominal bonds. Inflating expenses require more principal since TIPS yield less than nominal bonds.
This is a two birds with one stone approach. Most asset allocations call for some amount of fixed income. In this way, the fixed income side of your is portfolio also helps manage risk by ensuring adequate cash flow.
Re: PP or GB vs. TIPS ladder
Agreed except for one thing: short-term TIPS have done better than both short and intermediate term nominal Treasuries since they first became available, and that's true even if you leave out the 2022 bond bloodbath from this backtest:Jack Jones wrote: ↑Wed Dec 25, 2024 11:51 amKevin K. wrote: ↑Tue Dec 24, 2024 2:46 pm Another angle on this which has arisen in other discussions I've had is the question of just how much inflation-protected income does one need - taking into account that Social Security is effectively an inflation-adjusted annuity backed by the government. Of course this is only compltely relevant for those like myself who are already retired. SS already provides about two-thirds of my needed baseline income.
You can split up your expenses into fixed and inflating buckets. Food, fuel, property taxes, home maintenance would be inflating and would be matched with TIPS. Mortgage, car payment, etc can be matched with nominal bonds. Inflating expenses require more principal since TIPS yield less than nominal bonds.
This is a two birds with one stone approach. Most asset allocations call for some amount of fixed income. In this way, the fixed income side of your is portfolio also helps manage risk by ensuring adequate cash flow.
https://www.portfoliovisualizer.com/bac ... IUVSqlUC8c
I would argue that a barbell of VTIP and VGSH (not an original idea - I got it from Jonathan Clements) - is a worthy substitute for IT bond funds.
- mathjak107
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Re: PP or GB vs. TIPS ladder
social security is only about 28% of our total draw ability so it does not provide anywhere near the inflation protection we would want .
so i am more interested in making my portfolio less volatile without the use of bonds as i see inflation as being sticky and investors wanting higher rates on bonds .
right now except for what the carolina reaper requires in Tyd , except for sgov and my fidelity floating rate high income i own no more bonds .
i do like funds like QLENX and QDSNX to be added as a hedge instead of increasing cash instead of more bonds
so i am more interested in making my portfolio less volatile without the use of bonds as i see inflation as being sticky and investors wanting higher rates on bonds .
right now except for what the carolina reaper requires in Tyd , except for sgov and my fidelity floating rate high income i own no more bonds .
i do like funds like QLENX and QDSNX to be added as a hedge instead of increasing cash instead of more bonds