If you're worried about a PP Bubble...

[moda0306]

Some people, including myself, have expressed concern about a situation where stocks, gold, & LT treasuries all drop at the same time... mostly due to the fact that we're on a pretty solid surge of all 3.

I looked to see if this had happened in the past, and it's not all that rare.  In '82, '86 and '93, all of the 3 risky assets moved pretty significantly to the positive, with no real negative results in following years.

'81 was a real fluke where the fed raising of ST rates created a bit of a "perfect storm," but even then the PP barely lost.

The thing is, as much as you can try to think up a situation where the PP loses, in one year, much less over time, it's extremely difficult.  It's kind of like trying to push two positive ends of a magnet together.

[moda0306]

I thought of the perfect analogy for the PP as opposed to a rollercoaster stock portfolio (or at least implementing the philosophy to some degree)... It's like properly timing stop lights, while watching all the other sheeple blow by you at the outset, only to know they're going to end up having to slam on their brakes at the next red light, and it'll be green just in time for you to be puttering through and fly past them... all without having to put one ounce of stress on your vehicle.

[MediumTex]

Once the PP investors begins to completely internalize the PP strategy a few interesting things start to happen.

First, it becomes possible to turn off CNBC and other media outlets.  After having them turned off for a while, the PP investor begins to realize that much of what he formerly thought of as financial news is just pure entertainment and meaningless speculation.

Second, the PP investor begins to feel, perhaps for the first time in his life, a sense of real independence--independence from the need to properly guess about the future, independence from the need to figure out which pundit to listen to, and independence from the effects of the foolishness of others (especially politicians and central bankers).

Finally, and this happens at different points for different people, the PP investor wakes up one day and realizes that he has changed, and in the same way that adults look back on their childhoods and wonder how they could have been so afraid of things that as adults seem so harmless, the PP investor is able to view the markets with true detachment and wonder at how frightened he was by them at an earlier point in time.

HB really left a gift in the form of the PP.  I know that very few will ever enjoy this gift because the herd mentality will always make the PP seem painfully out of step with the market narrative-of-the-week.  For those who do make the plunge, though, and allow themselves to develop a mature and well-rounded unerstanding of the PP (both in theory and in practice), the reward is a peace of mind that really must be experienced to be appreciated.

[Coffee]

I'm not feeling that, yet.

I bought in, between the middle of October and the first week of November.

My SHY is down - .93%.  My TLT, down - 8.14%.  SGOL + 1.55 and VTI + 3.69.  
My overall portfolio is around  -.77%. ... and has been - .55% to - 1.5%, pretty much the whole time.

Too soon to be judging?

I really have my doubts about the winners being able to carry the losers, over the long, long run.  Just doesn't seem to make sense, considering that 1/4 of your portfolio has to go up 100% in order to regain a 50% loss. and the portfolio seems to be set up to pretty much always have at least one loser.

But y'all seem quite a bit smarter than I am, so I'm here to learn.

[MediumTex]

I'm not feeling that, yet.

I boughtin, between the middle of October and the first week of November.

My SHY is down - .93%.  My TLT, down - 8.14%.  SGOL + 1.55 and VTI + 3.69.  
My o
verall portfolio is around  -.77%. ... and has been - .55% to - 1.5%, pretty much the whole time.

Too soon to be judging?

I really have my doubts about the winners being able to carry the losers, over the long, long run.  Just doesn't seem to make sense, considering that 1/4 of your portfolio has to go up 100% in order to regain a 50% loss. and the portfolio seems to be set up to pretty much always have at least one loser.

But y'all seem quite a bit smarter than I am, so I'm here to learn.

I hope you aren't judging that the PP doesn't work after 8 or 9 weeks.

The winners have been carrying the losers for almost 40 years.  Why are you concerned that something is about to change?

I understand that it's different when you have skin in the game, but that is what I mean when I say it's important to develop a good feel for the PP both in theory and in practice.

Taking the plunge is the hard part.  Now that you are in I wouldn't sweat 1% fluctuations in the value of the total portfolio.

[craigr]

The portfolio is up around +15% YTD. Depending on when you bought in it may be down, or may even be higher than this. Stocks were losers the first half and LT bonds were doing great. But the end of the year the positions have swapped. So there is this continuum where an investor drops in during the short term where it may be up or down. But over the long run it has generally been up.

[Coffee]

Because I am a hair trigger and have the unintended Ninja death-touch when it comes to buying investments.

Y'all are screwed, now that I'm in.

[MediumTex]

Because I am a hair trigger and have the unintended Ninja death-touch when it comes to buying investments.

Y'all are screwed, now that I'm in.

If you can find the fortitude to stick with the PP, you will find that your sense of the death-touch will go away in time. 

That's what I mean about the PP changing an investor's outlook from fear to detachment. 

It's hard to describe, but you will know the feeling when you have it.

[Coffee]

Thanks, Guys.