New PP Position- Is my Timing Bad?

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hrux
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New PP Position- Is my Timing Bad?

Post by hrux » Fri Apr 29, 2011 9:27 am

Hi,
This is another of those classic questions...Am I buying at the peak?  I have been hoping for a slight pull back in gold and stocks in order to establish a new PP position and can truly use some advise.  Should I be patient and wait or get in now?  Thanks,
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Re: New PP Position- Is my Timing Bad?

Post by MediumTex » Fri Apr 29, 2011 9:53 am

As I recall you spent months analyzing the PP here and on the BH board.

There is no point in waiting any longer.

If you have satisfied yourself that the PP is right for you, just get in now.

Just do it.

***

BTW, how is the allocation you told us about a while back working?  You said you were using the PP for part of your holdings back then.  Are you talking about expanding your PP holdings now?
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Re: New PP Position- Is my Timing Bad?

Post by longeyes » Fri Apr 29, 2011 10:02 am

I got into the PP in February after a long period of sitting, unhappily but "safely," in Treasury MMFs paying virtually zero.  I realized that what I was doing was a dead end--a false refuge--and that I had to embrace a strategy that keep me comfortable in terms of volatility but also afforded some purchasing power protection over the long term.  I'm not sorry I did.  It will always, if you think that way, be too late or too early; you do the best you can with the best you know.
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Re: New PP Position- Is my Timing Bad?

Post by Gumby » Fri Apr 29, 2011 10:07 am

If you look back at the past 40 years of returns of the Permanent Portfolio, you will notice that there was rarely a time when the Permanent Portfolio wasn't at its all time high. Understandably, that makes people very nervous.

To put it another way... in order to buy the PP, you must buy at least one or more asset at its all time high. Such as it is, all of us who have purchased the PP have risked purchasing at the peak. This is one of the hardest parts about jumping in, and its why so few people are able to bring themselves to do it.

But the part that nobody sees is that the potential upside of each asset is more powerful than its potential downside in a 4x25% portfolio.

The best advice I can give you is to listen to this five minute clip from Harry Browne:

https://web.archive.org/web/20160324133 ... DoBest.mp3
Last edited by Gumby on Fri Apr 29, 2011 10:15 am, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
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Re: New PP Position- Is my Timing Bad?

Post by dualstow » Fri Apr 29, 2011 10:24 am

hrux, I got in maybe six months ago with the same reservations. Felt like I was buying gold at the top. Gold has only gone up since I bought but am I happy? Mostly, I regret that I didn't buy more gold, and I wonder if *now* I'd be buying at the top. (My variable portfolio is all stock, and is still larger than my pp holdings). But I am HAPPY. The worst part of it all was anticipating buying but doing nothing.

Listen, you can't wait for a drop in a single asset -- Harry explicitly cautioned us against this tactic in both books and radio programs -- and it's downright crazy to wait for stocks AND gold to drop. Perhaps you could buy a modest piece of PRPFX. The worst that could happen would be a drop in all assets. Even if that happens for an entire year, you're still better off than with other strategies. Once you'll start, you'll feel better.
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Re: New PP Position- Is my Timing Bad?

Post by hrux » Fri Apr 29, 2011 10:53 am

MediumTex wrote: As I recall you spent months analyzing the PP here and on the BH board.

There is no point in waiting any longer.

If you have satisfied yourself that the PP is right for you, just get in now.

Just do it.

***

BTW, how is the allocation you told us about a while back working?  You said you were using the PP for part of your holdings back then.  Are you talking about expanding your PP holdings now?

FYI, Sorry should have clarified.  This position is for a family member however I am helping them with the management of their portfolio.  I have a small position and still have the allocation with the advisor that I mentioned to you earlier.  Regarding your question on this advisor portfolio I think it is too early to tell however I am leaning towards a PP, GTAA (Meb Faber) and Vanguard Wellington blend, possibly 1/3 each respectively.   
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Re: New PP Position- Is my Timing Bad?

Post by hrux » Fri Apr 29, 2011 10:54 am

All- I understand that one will always be buying one of the assets at or near its high however in this case gold is at its high and stocks are climbing which make me nervous....
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Re: New PP Position- Is my Timing Bad?

Post by moda0306 » Fri Apr 29, 2011 11:21 am

With assets like stocks and gold, and maybe even LTT's, I think one has to realize that when the fed is controlling the chess pieces either of those can be vastly overpriced (for somewhat opposite reasons (gold - skepticism of fed... stocks - belief in fed)) before resettling.  Gold still has yet to see the asinine gains (high doube-digit and even a triple digit gain) of the 1970's (granted we'd been taken off the gold standard that decade) and I think it could double again without resettling... it's just how gold is.... almost a literal guage of inflation, fear, uncertainty, distrust, etc in society. 

For that reason, I don't really worry about it.  I'll keep rebalancing out and no "bad" asset will never be far too much of my portfolio.

The points about certain PP assets ALWAYS being at their high are very pertinent... I didn't really think of that.  I also try to give myself the "gold 2001 test" where I honestly ask myself if I'd been able to justify buying gold after over a decade of truly abysmal performance... I don't think so.  I am always eerie of gold on its own because it tends to work outside the realm of not just cash flow and P/E ratios, but even all the traditional economic drivers of a commodity.  It works on its own wacky plane of an almost pure monetary metal.  I know this is its asset, though, and not something to be scared of within the PP. 
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Re: New PP Position- Is my Timing Bad?

Post by MediumTex » Fri Apr 29, 2011 11:36 am

hrux wrote: All- I understand that one will always be buying one of the assets at or near its high however in this case gold is at its high and stocks are climbing which make me nervous....
If stocks keep rising, they might reach the point they were at 10 years ago.

Don't overthink things.
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Re: New PP Position- Is my Timing Bad?

Post by Gumby » Fri Apr 29, 2011 6:56 pm

hrux wrote: All- I understand that one will always be buying one of the assets at or near its high however in this case gold is at its high and stocks are climbing which make me nervous....
Trying to time the assets will prove to be very unproductive. Many, many, many people have purchased the PP with more than one asset near its all time high. It has still worked out fine for those individuals.

HB and John Chandler (JC was one of the founders of the Permanent Portfolio) determined that 18 months was the longest stretch of time where the PP might likely underperform, and likely not more than -6% annualized (underperformance is typically bookended by two years of +20% annualized growth). And those were very extreme circumstances — they were times where other investments were doing far worse. In other words, if you are willing to accept at least a two-year horizon, it will not matter if you buy two assets near their all time highs. It just will not matter. The assets will rebalance and the ship will go on sailing.

In reality, it makes no sense to think of the PP assets individually. I know that's difficult to do, but you aren't doing yourself any favors by thinking about the high price of each asset. It would be like trying to bake a cake and waiting for the price of flour and sugar to come down. The Permanent Portfolio has always been an expensive cake. And it will probably always be an expensive cake.
Last edited by Gumby on Fri Apr 29, 2011 8:24 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
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Re: New PP Position- Is my Timing Bad?

Post by hrux » Mon May 16, 2011 9:58 pm

I am glad I waited and did not buy at the peak.  When not 1 but 2 asset classes are at a peak that is a sign for patience.  Plan to join the club tomorrow andp hoping for further weakness
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Re: New PP Position- Is my Timing Bad?

Post by AdamA » Mon May 16, 2011 11:08 pm

hrux wrote: I am glad I waited and did not buy at the peak.  When not 1 but 2 asset classes are at a peak that is a sign for patience. 
Which two asset classes are at their peak?
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