Yearning for Equity Pullbacks...Not What you Think.

[buddtholomew]

I am surprised to find myself yearning for days when equities have a strong pullback. For some reason or another, I need to validate that my holdings in LT Treasuries and Gold are justified. Also, for the first time, my portfolio has posted a negative overall return on a day when US Domestic equities have rallied. This is tough to digest, but easily explained when analyzing the components of the portfolio (50/50 US/Intl, US SC, REIT, Precious Metals, INT SC, EM, Bonds, TIPS and healthy dose of PRPFX and VUSTX (LTT)) for an overall 60/40 AA. I have only recognized one positive day since 1/3/11.

Am I too diversified to see consitent positive gains in the portfolio? Is that even possible?

[MediumTex]

I don't know the assumptions on which your portfolio's design was based.

Without knowing what the assumptions are, I don't have any way of saying whether it is performing as it should under a given set of conditions.

With the PP, the assumptions on which it is based are simple: there are four economic conditions and we have no idea what the future holds.  Thus, unless we discover a way to tell the future or come up with a fifth economic condition, I don't have to wonder whether any of the assumptions on which the PP are based have been invalidated.

No portfolio goes straight up.  Some volatility is part of any investment strategy (even 100% cash will be subject to currency fluctuations).

[rantsalot]

The Permanent Portfolio can show a loss on a day when equities are up if both gold and LT treasuries are down.  This happens from time to time but it's nothing to fret about.  Occasionally you'll see the reverse, too: Equities are down and gold and LT treasuries are soaring.  On those days, you'll feel like a genius.

Maybe Tex can explain why gold and LT treasuries can be down in the same day.  The markets are expecting both inflation and deflation simultaneously, a situation where Spock would say, "That does not compute, Captain."


rantsalot

[Gumby]

Maybe Tex can explain why gold and LT treasuries can be down in the same day.  The markets are expecting both inflation and deflation simultaneously, a situation where Spock would say, "That does not compute, Captain."

It's useless to try to explain short term movements. Sometimes people just move everything to cash for the weekend. Who knows?

@buddtholomew, your portfolio is full of all sorts of things that have nothing to do with the Permanent Portfolio. It's not even clear if you own anything that is actually in the Permanent Portfolio! Even your LT Bonds are in the wrong fund.

Perhaps this conversation should be moved to the Variable Portfolio forum.

[LNGTERMER]

Maybe Tex can explain why gold and LT treasuries can be down in the same day.  The markets are expecting both inflation and deflation simultaneously, a situation where Spock would say, "That does not compute, Captain."

Maybe MT can indeed explain it elegantly regarding the fundamentals, but you need to keep in mind that Gold is negatively correlated to both the dollar and the treasuries. The degree of relative correlation of either to Gold is out of phase with respect to each other. This means Gold can act inversely to one at some days while going in same direction of the other.

[buddtholomew]

Maybe Tex can explain why gold and LT treasuries can be down in the same day.  The markets are expecting both inflation and deflation simultaneously, a situation where Spock would say, "That does not compute, Captain."

It's useless to try to explain short term movements. Sometimes people just move everything to cash for the weekend. Who knows?

@buddtholomew, your portfolio is full of all sorts of things that have nothing to do with the Permanent Portfolio. It's not even clear if you own anything that is actually in the Permanent Portfolio! Even your LT Bonds are in the wrong fund.

Perhaps this conversation should be moved to the Variable Portfolio forum.

Don't make the assumption that investors have 100% of their assets allocated to the Permanent Portfolio. My taxable account is 90% PRPFX and 10% LTT in the form of VUSTX. I decided to invest in VUSTX instead of EDV or TLT for tax efficiency and preference respectively. This question belongs in this forum where it was originally posted.

I realize no one knows, but this forum would not exist if everyone had your perspective on questions of this nature Gumby.

[Gumby]

Don't make the assumption that investors have 100% of their assets allocated to the Permanent Portfolio.

My apologies, but you posted this discussion in the "Permanent Portfolio" discussion topic within this forum. Why would anyone assume that you weren't only talking about the PP?

My taxable account is 90% PRPFX and 10% LTT in the form of VUSTX. I decided to invest in VUSTX instead of EDV or TLT for tax efficiency and preference respectively. This question belongs in this forum where it was originally posted.

There are 8 forum topics within this site. If you are talking about PRPFX then you've posted to the wrong discussion topic. See the Permanent Portfolio Mutual Fund forum for discussions about PRPFX. Honestly, I'm not the only one who was confused by your allocation. You weren't very clear.

I realize no one knows, but this forum would not exist if everyone had your perspective on questions of this nature Gumby.

Perhaps you misunderstood me. I suppose I wasn't very clear. Nobody really knows what makes the markets move on any given day. When the media tells you that "X" was the reason that the markets went up or down, they are usually trying to discern overly simple answers from billions of extremely complex and chaotic interactions and emotions. The analysis is completely wrong most of the time. So, I don't think anyone can be expected to explain why your portfolio has been dropping over a period of 96 hours.

[buddtholomew]

Gumby, thank you for re-assessing your original commentary to my response. Upon further evaluation, I do agree that this thread should be moved to the Permanent Portfolio Mutual Fund forum. The original post was crafted in haste and requires additional thought on my behalf. Thank you to all that have provided their feedback so far.

Budd

[MediumTex]

I will move to PRPFX forum.