Why The Permanent Portfolio?

[frommi]

Is that really going to be accurate for a 100% gold portfolio? For most of the historical timeframe that the sim investigates (i.e. pre-1970s), gold was pegged to a currency, meaning that it was much less volatile. A 100% gold portfolio was more like a 100% cash portfolio.

Try starting year 1970. It can`t work. Without equities and/or LT-Bonds (with much greater interest than inflation rate) any retirement strategy is doomed, simply because there is no asset which produces cash. You can get lucky, thats it. But i don`t want to argue about that, because these discussions get nowwhere .

[Libertarian666]

Is that really going to be accurate for a 100% gold portfolio? For most of the historical timeframe that the sim investigates (i.e. pre-1970s), gold was pegged to a currency, meaning that it was much less volatile. A 100% gold portfolio was more like a 100% cash portfolio.

Yes, one that produced income (interest on deposits).

But again, we are in uncharted territory here. No one has ever seen what happens at the end of a 100% fiat currency regime covering the entire world. I'm guessing that it will be spectacular!

[Lone Wolf]

Great post, Ad!  The very opposite of staring at stock tickers and wondering "what the markets will do this afternoon".  I approve.

I actually tried the exercise of picking stocks from the screenshots you provided.  As a jokey, "suicide portfolio" style of choice, I was prepared to announce that Lone Wolf circa 1913 would have gone 100% all-in with National Biscuit.  Ha ha!  National Biscuit!  One more burned-out hulk in financial history's junkyard.

And then Google informed me that this is... Nabisco.    A Suicide Portfolio failure that spanned a century.

The moral of the story?  Just relax, diversify, and live your life.  Maybe start off with a nice trip to Dr. Strong's Saratoga Springs Health Resort. 

[Gumby]

for one thing, you need to be really convinced that your analysis is right

...and really unwilling to listen to any contrarian analysis.

[Libertarian666]

for one thing, you need to be really convinced that your analysis is right

...and really unwilling to consider any contrarian analysis.

I'm willing to listen to most people.
Not to you, though.

[Gumby]

for one thing, you need to be really convinced that your analysis is right

...and really unwilling to consider any contrarian analysis.

I'm willing to listen to most people.
Not to you, though.

Your loss (literally).

[Libertarian666]

...and really unwilling to consider any contrarian analysis.

I'm willing to listen to most people.
Not to you, though.

Your loss (literally).

I'm crying all the way to the bank.

[Gumby]

I'm crying all the way to the bank.

Odd that you would use a "bank" when you are convinced that the entire currency will fail. :/

But, in all seriousness. Shouldn't any due diligence require listening to opinions you don't want to hear? Otherwise, it sounds like your analysis consists of merely sticking your head in the sand.

You may not like someone, or their tone, but that doesn't make their analysis incorrect.

I mean, that's really the crux of the conversation here. Almost all of us have covered our bases for multiple outcomes, while you have chosen to bet it all on one single outcome.

If the future is unknowable, it stands to reason that you should hedge your own bets.

[Ad Orientem]

Great post, Ad!  The very opposite of staring at stock tickers and wondering "what the markets will do this afternoon".  I approve.

I actually tried the exercise of picking stocks from the screenshots you provided.  As a jokey, "suicide portfolio" style of choice, I was prepared to announce that Lone Wolf circa 1913 would have gone 100% all-in with National Biscuit.  Ha ha!  National Biscuit!  One more burned-out hulk in financial history's junkyard.

And then Google informed me that this is... Nabisco.    A Suicide Portfolio failure that spanned a century.

The moral of the story?  Just relax, diversify, and live your life.  Maybe start off with a nice trip to Dr. Strong's Saratoga Springs Health Resort. 

LOL!

There are actually a handful of investments from back then that have held up. General Motors was publicly traded and probably seen as a rather speculative investment. Which it became in 2008. But I don't think anyone investing in 1913 would have been too badly burned. General Electric was around back then and a good investment. Ditto the American Telephone and Telegraph Company.  And though not listed in New York (it was probably traded on the now defunct Atlanta stock exchange) Coca Cola would have been a great buy.

But these are little islands in a vast sea of financial ruin over the next several decades.

By the way, the screen shots are courtesy of the Library of Congress and you can peruse the entire paper by clicking on the page arrows at the top. You can also look at other issues by using those arrow. The advertisements are awesome! I particularly got a kick out of the add in the lower right of page 66. Binghamton New York is my hometown and the "Binghamton Cancertorium" was one of the brain childs of Dr Andral Kilmer who is a local legend.

The man was one of the truly great quacks of the latter 19th and early 20th century who marketed everything from Swamp Root to poisonous concoctions that were guaranteed cures for every illness or indisposition you could think of. His son got a college education at Cornell and turned his dad's business into a virtual empire of medical fraud. He (the son) would go on to diversify his investments to include stocks, bonds, lots of real estate (he owned a large chunk of downtown Binghamton) and race horses. One of his horses won the Kentucky Derby.

When he died in 1940 he left over $15 million to his widow.

[Libertarian666]

I'm crying all the way to the bank.

But, in all seriousness. Shouldn't any due diligence require listening to opinions you don't want to hear? Otherwise, it sounds like your analysis consists of merely sticking your head in the sand.

You may not like someone, or their tone, but that doesn't make their analysis incorrect.

I mean, that's really the crux of the conversation here. Most of us have covered our bases for multiple outcomes, while you have chosen to bet it all on one single outcome.

If the future is unknowable, it stands to reason that you should hedge your own bets.

If someone chooses to insult me, I take that as meaning a couple of things:
1. He's not very intelligent.
2. He doesn't have my best interests at heart.

Thus, it is logical for me to ignore his pronouncements, no matter how smart he thinks he is.

Now, if someone actually has new information, not just theoretical claptrap that I've already analyzed as worthless, it may be true that I am missing something by not listening to that person. But I would have to have some reason to believe that he actually had such information. I don't see any reason to believe that in this case.

[Reub]

I love the both of you, but I really wish we could be a little more civil in here!

[Gumby]

If someone chooses to insult me, I take that as meaning a couple of things:
1. He's not very intelligent.
2. He doesn't have my best interests at heart.

Thus, it is logical for me to ignore his pronouncements, no matter how smart he thinks he is.

Good, because I never intended to insult you. (And if you think I did, I'm sorry.)

Honestly, Libertarian666, can't you see we are all friends here? Nobody is trying to insult you. I apologize if you think I insulted you. It was never my intention. I apologize.

Now, if someone actually has new information, not just theoretical claptrap that I've already analyzed as worthless, it may be true that I am missing something by not listening to that person. But I would have to have some reason to believe that he actually had such information. I don't see any reason to believe that in this case.

Well, now I'm confused, because many, many people on this forum (MT, PointedStick, Moda, myself, TennPaGa, to name a few) have attempted to discuss straightforward mechanical/factual facts of Fed and Treasury operations with you (nothing "theoretical"), and you have no interest in taking part in those discussions whatsoever!

[Ad Orientem]

As the person who started this thread, and who would really prefer that it not be locked, I am politely asking that we refrain from Ad Hominem attacks on each other. If there are personality conflicts, and I am sensing some hostility here, let's all try to comport ourselves with civility and just move on. If you really don't like another member of the board, which I find kinda sad but things happen, just ignore him/her.

Thanks for your cooperation.

[Gumby]

As the person who started this thread, and who would really prefer that it not be locked, I am politely asking that we refrain from Ad Hominem attacks on each other. If there are personality conflicts, and I am sensing some hostility here, let's all try to comport ourselves with civility and just move on. If you really don't like another member of the board, which I find kinda sad but things happen, just ignore him/her.

Thanks for your cooperation.

I agree. And I also want to thank you, Ad, for starting the topic. What a great post!

[Libertarian666]

If someone chooses to insult me, I take that as meaning a couple of things:
1. He's not very intelligent.
2. He doesn't have my best interests at heart.

Thus, it is logical for me to ignore his pronouncements, no matter how smart he thinks he is.

Good, because I never intended to insult you. (And if you think I did, I'm sorry.)

Honestly, Libertarian666, can't you see we are all friends here? Nobody is trying to insult you. I apologize if you think I insulted you. It was never my intention.

Now, if someone actually has new information, not just theoretical claptrap that I've already analyzed as worthless, it may be true that I am missing something by not listening to that person. But I would have to have some reason to believe that he actually had such information. I don't see any reason to believe that in this case.

Well, now I'm confused, because many, many people on this forum (MT, PointedStick, Moda, myself, TennPaGa, to name a few) have attempted to discuss mechanical/factual facts of Fed and Treasury operations to you, and you have no interest in taking part in those discussions whatsoever!

I seem to recall being called a parrot by someone, but maybe that's just a senior moment. 

I don't mind hearing polite arguments against my positions, but not the same ones over and over again.

As for the discussion of "monetary realism", the reason I don't want to discuss it is that I've read the existing discussion, analyzed the ideas therein, and have come to the conclusion that it's nonsensical.

"How about a nice game of chess?"

[Gumby]

I seem to recall being called a parrot by someone, but maybe that's just a senior moment. 

It was meant as a figure of speech — not meant to be insulting. Poor choice of words. Again, I apologize. Let's bury the hatchet!

I don't mind hearing polite arguments against my positions, but not the same ones over and over again.

As for the discussion of "monetary realism", the reason I don't want to discuss it is that I've read the existing discussion, analyzed the ideas therein, and have come to the conclusion that it's nonsensical.

Fair enough. How about if the dollar does not see high inflation by the end of the year, you join in for a polite and civil "nonsensical" discussion on MR with all of us?

I promise, sincerely, to be cordial and respectful to everyone. You have my word.

"How about a nice game of chess?"

Would love to, but I know my limits!

[Lone Wolf]

By the way, the screen shots are courtesy of the Library of Congress and you can peruse the entire paper by clicking on the page arrows at the top. You can also look at other issues by using those arrow. The advertisements are awesome! I particularly got a kick out of the add in the lower right of page 66. Binghamton New York is my hometown and the "Binghamton Cancertorium" was one of the brain childs of Dr Andral Kilmer who is a local legend.

Great story!  While Dr. Kilmer's "Cancertorium" sounds like a fun place to hang out (with minimal risk of "confinement to bed" or "loss of blood"), I ultimately decided to chill at Dr. Strong's with all the money I made with my lucky bet on National Biscuit.

And the $15 million he left his widow in 1940 was quite a tidy sum!  That would be about a quarter of a billion dollars today!

[Libertarian666]

I seem to recall being called a parrot by someone, but maybe that's just a senior moment. 

It was meant as a figure of speech — not meant to be insulting. Poor choice of words. Again, I apologize. Let's bury the hatchet!

I don't mind hearing polite arguments against my positions, but not the same ones over and over again.

As for the discussion of "monetary realism", the reason I don't want to discuss it is that I've read the existing discussion, analyzed the ideas therein, and have come to the conclusion that it's nonsensical.

Fair enough. How about if the dollar does not see high inflation by the end of the year, you join in for a polite and civil "nonsensical" discussion on MR with all of us? I promise to be cordial and respectful to everyone.

"How about a nice game of chess?"

Would love to, but I know my limits!

Hatchet buried.
With respect to the dollar, I don't know the timing. I do know that money printing cannot continue forever without disastrous consequences, and that's sufficient for me. I'm ready for the results, whatever they may be.
The chess comment was a famous movie reference... 

[Ad Orientem]

Great story!  While Dr. Kilmer's "Cancertorium" sounds like a fun place to hang out (with minimal risk of "confinement to bed" or "loss of blood"), I ultimately decided to chill at Dr. Strong's with all the money I made with my lucky bet on National Biscuit.

And the $15 million he left his widow in 1940 was quite a tidy sum!  That would be about a quarter of a billion dollars today!

Forget Dr. Strong's. You should go to Europe! It's where the fashionable set are. And you can spend a week or two at Baden Baden and take the waters which are universally known to be curative of so many ailments. No need to worry about passports and such. Few people bother with them in 1913 except possibly as added ID in case they need to draw on funds while overseas. Speaking of which you can get a circular letter of credit from your banker (http://library.law.columbia.edu/CircularLetterOfCredit/). And I note that the great Atlantic greyhound the SS Lusitania sails next week. (http://chroniclingamerica.loc.gov/lccn/ ... -1/seq-17/#) She can get you to Europe in less than six days! First Class cabins start at about $150 but depending on how much of a killing your made on your biscuit stock you can really splurge and get an outside cabin with a porthole. The top of the line staterooms, generally only available to the ultra wealthy and costing over two thousand dollars, have such amenities as double bedrooms, parlor, private dining room, trunk room for luggage, a small cubbyhole for your personal servant to sleep in, and the ultimate in luxury... your own en-suite WC and bath.

Your servant(s) would of course dine and use the washroom in Second Class.

[Libertarian666]

Great story!  While Dr. Kilmer's "Cancertorium" sounds like a fun place to hang out (with minimal risk of "confinement to bed" or "loss of blood"), I ultimately decided to chill at Dr. Strong's with all the money I made with my lucky bet on National Biscuit.

And the $15 million he left his widow in 1940 was quite a tidy sum!  That would be about a quarter of a billion dollars today!

Forget Dr. Strong's. You should go to Europe! It's where the fashionable set are. And you can spend a week or two at Baden Baden and take the waters which are universally known to be curative of so many ailments. No need to worry about passports and such. Few people bother with them in 1913 except possibly as added ID in case they need to draw on funds while overseas. Speaking of which you can get a circular letter of credit from your banker (http://library.law.columbia.edu/CircularLetterOfCredit/). And I note that the great Atlantic greyhound the SS Lusitania sails next week. (http://chroniclingamerica.loc.gov/lccn/ ... -1/seq-17/#) She can get you to Europe in less than six days! First Class cabins start at about $150 but depending on how much of a killing your made on your biscuit stock you can really splurge and get an outside cabin with a porthole. The top of the line staterooms, generally only available to the ultra wealthy and costing over two thousand dollars, have such amenities as double bedrooms, parlor, private dining room, trunk room for luggage, a small cubbyhole for your personal servant to sleep in, and the ultimate in luxury... your own en-suite WC and bath.

Your servant(s) would of course dine and use the washroom in Second Class.

I would certainly hope they would have all the accoutrements for two thousand 1913 dollars. I imagine you could charter your own Transatlantic jet for that much money today!

[Pointedstick]

a small cubbyhole for your personal servant to sleep in

ROFL

[Libertarian666]

Great story!  While Dr. Kilmer's "Cancertorium" sounds like a fun place to hang out (with minimal risk of "confinement to bed" or "loss of blood"), I ultimately decided to chill at Dr. Strong's with all the money I made with my lucky bet on National Biscuit.

And the $15 million he left his widow in 1940 was quite a tidy sum!  That would be about a quarter of a billion dollars today!

Forget Dr. Strong's. You should go to Europe! It's where the fashionable set are. And you can spend a week or two at Baden Baden and take the waters which are universally known to be curative of so many ailments. No need to worry about passports and such. Few people bother with them in 1913 except possibly as added ID in case they need to draw on funds while overseas. Speaking of which you can get a circular letter of credit from your banker (http://library.law.columbia.edu/CircularLetterOfCredit/). And I note that the great Atlantic greyhound the SS Lusitania sails next week. (http://chroniclingamerica.loc.gov/lccn/ ... -1/seq-17/#) She can get you to Europe in less than six days! First Class cabins start at about $150 but depending on how much of a killing your made on your biscuit stock you can really splurge and get an outside cabin with a porthole. The top of the line staterooms, generally only available to the ultra wealthy and costing over two thousand dollars, have such amenities as double bedrooms, parlor, private dining room, trunk room for luggage, a small cubbyhole for your personal servant to sleep in, and the ultimate in luxury... your own en-suite WC and bath.

Your servant(s) would of course dine and use the washroom in Second Class.

I would certainly hope they would have all the accoutrements for two thousand 1913 dollars. I imagine you could charter your own Transatlantic jet for that much money today!

Looks like if you shopped around, you could do it for that much money (100 oz. of gold):

DFW - LHR via Large Corporate Jet 9.48 - Hours
$113760.00 - $199080.00

Or if you wanted to slum it in a light jet, you might be able to do it for $750 (1913) or less:

Light Jet 9.48 - Hours
$51192.00 - $72048.00

[Ad Orientem]

Adjusting for inflation (which is an inexact science when you go back that far), $2,000 in pre World War I dollars comes out to somewhere between $50-60,000 in today's money.

[Libertarian666]

Adjusting for inflation (which is an inexact science when you go back that far), $2,000 in pre World War I dollars comes out to somewhere between $50-60,000 in today's money.

No, $2000 in 1913 dollars (actually $2067, but who's counting) is 100 oz. of gold, or $141,600 today. 

[Ad Orientem]

Based on the value of gold this is correct. However the US Dollar is no longer on the gold standard and hasn't been since the early 1930's. As a free floating currency the value of pre-WWI dollars is estimated roughly 25x face value today. But there are quite a number of factors when calculating inflation. Austrians generally limit themselves to the value of gold.

The differences come down in part to economics and and since there is a vast gulf between Austrians and more or less every other school it's a debate that cannot be resolved definitively.

As for the accommodations, the Lusitania was one of the fastest express ocean liners of her day, and among the most luxurious. But in 1913, and indeed until after World War II, private bathroom facilities on passenger ships were a rarity. Perhaps 20% of the First Class staterooms on the Lusitania had them. Everybody else had to go down the hall.

The same was true of all but the most high end hotels.

When traveling at sea if you were in the first or second class (there were no bath facilities for the steerage) and wished to take a bath you would make an appointment with the ship's bath steward. He would then ensure that a hot bath was drawn and a steward(ess) was on hand to assist you at the appointed time. Of course in 1913 not that many people bathed every day. Water closet facilities and bathrooms were located on each passenger deck usually inboard. Mens and ladies facilities were distinguished from one another by a red or green light over the door.

All cabins had running water but again, except in the higher end of First Class, it was usually only cold water. Hot water was delivered every morning and when the dressing gong was sounded and also on request by your cabin steward for washing up or shaving.

For some added detail and photographs of the Lusitania...
http://ad-orientem.blogspot.com/2013/05 ... tania.html

The photos can be expanded by clicking on them.