Permanent Portfolio Book - Kindle Edition Now Shipping!

[kev_in_tw]

Thanks for making the investment.  I hope that it has been an engaging 27% so far.

If I'm reading it past midnight it definitely is.

[MediumTex]

I found that table:  8.8.  The 3 lines have exactly the same numbers.  I noticed because it was a very interesting topic (T-bills vs 1-3 year treasuries in good times & bad), and I wanted to see the results that I guess should have been there.

The numbers are correct. Rounded to nearest tenth. The point is that there was no difference under high inflation really between t-bills and ST bonds. But you can potentially get better returns by holding the ST bonds. Again, potentially….

Interesting, rather surprising that the numbers would come out that close.   How did you define "under high inflation"?  I just took a look at 1 vs 3 year treasury rates (http://www.treasury.gov/resource-center ... ation.aspx) and it looks like 3 year bonds will win primarily when interest rates are dropping.  When interest rates are stable or going up, the spread between them tightens and (presumably) the value of the 3 year bonds loses a bit.  So (based on back testing) it looks like in the "high inflation" case, where presumably interest rates are going up and 3 year bonds would be at their biggest disadvantage, 3 year bonds don't lose to T-bills.   Good to know.

It sounds like what you are describing is a situation where the whole yield curve is simply rising or falling without significant steepening or flattening accompanying the rise or fall in interest rates.  If the whole yield curve is falling, longer dated treasuries will perform better than short dated treasuries, and if the whole yield curve is rising the opposite will occur.

Be aware, though, that when comparing 12 month or less t-bills and 2-3 year treasury notes (I'm just using 2-3 year notes as an example; the same would be true farther out on the yield curve), there is also the risk of an inverted yield curve during periods of economic uncertainty or anticipation of economic contraction that would create a very different dynamic.

When the yield curve inverts, shorter dated bills and notes will pay higher yields than longer dated notes and bonds.

For example, if interest rates are falling across the whole yield curve or if the yield curve just remains stable, longer dated treasuries should provide better returns than t-bills.  If, however, the yield curve inverts, you could see your t-bills increasing in value (simply because you are rolling them into higher yielding -t-bills) while your 2-3 year notes are declining in value.  This is what happened in the early 1980s--the yield curve was inverted and t-bills were paying 17%, while 30 year treasury bonds were paying 14%. 

Here is what the yield curve would look like in normal economic times (the shape, not the actual rates).  This is the U.S. treasury yield curve from December 31, 1999:



However, 8 months later the bond market had gotten spooked and the future was looking murky.  Here is what the yield curve looked like on August 31, 2000:



In a market like the one above, you would probably much rather have 12 month or less t-bills rather than 2-3 treasury notes, because the t-bills would be paying higher yields AND they would have zero interest rate risk, while the 2-3 year notes would be paying both a lower coupon rate AND be subject to more interest rate risk.

In other words, the extra risk that a PP investor takes by going a little farther out on the yield curve with his cash has several dimensions to it.

I hope that all makes sense.

[sophie]

Thanks MT.  Makes sense.

Despite the theoretical disadvantage, Table 8.8 says that even in the worst case scenario of high inflation, 3 year bonds won't lose to T-bills - meaning that they will reliably beat T-bills over time (adding about half percentage point to CAGR of the whole portfolio).  I guess that, plus the strange-looking numbers, is what made me think there were typos in the table.  If it's correct though, then the only advantage of T-bills is the auto-rollover.

[MediumTex]

Thanks MT.  Makes sense.

Despite the theoretical disadvantage, Table 8.8 says that even in the worst case scenario of high inflation, 3 year bonds won't lose to T-bills - meaning that they will reliably beat T-bills over time (adding about half percentage point to CAGR of the whole portfolio).  I guess that, plus the strange-looking numbers, is what made me think there were typos in the table.   If it's correct though, then the only advantage of T-bills is the auto-rollover.

Table 8.8 is just addressing what actually happened during a period of high inflation in the 1970s during which the yield curve was very flat.  What I was suggesting in my post above is that in future periods of high inflation the yield curve could be flat again, it could be steep, or it could be inverted, and each bond market configuration would lead to different results for someone using 3 year bonds vs. t-bills (in some cases t-bills might do better, and in some cases 3 year bonds might do better).

[MediumTex]

Any Amazon book reviews that anyone could take the time to write would be much appreciated.

[Lone Wolf]

Any Amazon book reviews that anyone could take the time to write would be much appreciated.

Done.  You've got a well-deserved 5-star from me in Amazon's queue.  You'll know it when you see it, for I was the only reviewer with the courage to mention leather chaps.  (Twice.)

You gentlemen (and this includes you, Harry) have my deepest gratitude for all that you've done to promote and popularize this most excellent approach to investing.  I was one of many flailing for understanding after 2008 kicked my investment portfolio and my worldview down a flight of stairs.  I can't tell you how happy I am that I found my way here.

Thank you!

[dualstow]

Getting close to finishing up. Unless major things come up, I'll write my review in November.
It's been stop-and-start, so I may need to go back and review.

[MediumTex]

Thanks for that great review Lone Wolf.

Much appreciated.

***

Right now the book is at #83 in Amazon's Investing section.  In looking over the #81-#91 rankings I got a chuckle out of this pretty funny and ironic list of investing books:

81. Trading for a Living: Psychology, Trading Tactics, Money Management, by Alexander Elder

82. Active Portfolio Management: A Quantitative Approach for Producing Superior Returns and Controlling Risk, by Richard Grinold, Ronald Kahn

83. The Permanent Portfolio: Harry Browne's Long-Term Investment Strategy, by Craig Rowland, J. M. Lawson

84. Jim Cramer's Real Money: Sane Investing in an Insane World, by James J. Cramer

85. Strategic Stock Trading: Master Personal Finance Using Wallstreet Window Stock Investing Strategies, by Michael Swanson

86. Stan Weinstein's Secrets For Profiting in Bull and Bear Markets, by Stan Weinstein

87. Crash Proof 2.0: How to Profit From the Economic Collapse, by Peter D. Schiff (Kindle)

88. Technical Analysis For Dummies, by Barbara Rockefeller

89. Family Wealth--Keeping It in the Family: How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Capital, by James E. Hughes Jr.

90. Crash Proof 2.0: How to Profit From the Economic Collapse, by Peter D. Schiff (Paperback)

91. The Money Class: Learn to Create Your New American Dream, by Suze Orman

[Xan]

That "Family Wealth" actually looks like it might be interesting.  The rest...  Not so much.  (Apart from the PP book of course!)

[InfoOverload]

I read the kindle version of the book.  I thought you guys did a great job. Just to let you know some errors came up. New Zealand came up as New Zurichland a couple times.

Which I thought was kind of funny at the time. I guess you could call it New Zurichland.

[craigr]

We appreciate the nice reviews and taking the time to read the book. Thanks again!

[MediumTex]

I read the kindle version of the book.  I thought you guys did a great job. Just to let you know some errors came up. New Zealand came up as New Zurichland a couple times.

Which I thought was kind of funny at the time. I guess you could call it New Zurichland.

The first time I read your post I thought the error was "New Zuchiniland" and for a moment I pictured an Easter Island-like landscape, except the monuments were carved from pickles. 

We will see what we can do about getting that fixed.

Thanks for taking the time to read the book and thanks for the feedback.

[MachineGhost]

86. Stan Weinstein's Secrets For Profiting in Bull and Bear Markets, by Stan Weinstein

That is a really old book!  I believe it was one of the first books of the late 80's to present a market timing strategy (moving average crossover, I think) to the masses.

[craigr]

I read the kindle version of the book.  I thought you guys did a great job. Just to let you know some errors came up. New Zealand came up as New Zurichland a couple times.

Which I thought was kind of funny at the time. I guess you could call it New Zurichland.

That's Amazon that did that when they converted to the Kindle. I asked the publisher about it and they said a correction was issued, but I don't know what the process is for it to take effect. They did that with the "Z's" for some reason. They all got replaced with Zurich. Very strange....

[MediumTex]

An article about the book was on www.forexpros.com today.

It is somewhat amazing that the authors can fill over 300 pages writing about Browne’s 25-25-25-25 asset allocation strategy, but they manage—and in a way that investors searching for a way to grow their wealth can learn from.

http://www.forexpros.com/analysis/rowla ... lio-141328