Gyroscopic Investing

"a 90 year study shows a 10% annual return (on stocks), but a 110 year study shows a 7% annual return. That’s a pretty big difference, and certainly throws doubt on what exactly is the long-term average"

The world changes constantly, the system changes constantly, everything changes, assuming everything just keeps chugging along as it did the last 50 years is insanity, you need some firewalls in place. Denying that is nothing more than being naive.

There are no laws of nature that say everything has to go up forever (actually math says it can't..).

Reub wrote: Does Japan have the kind of welfare state/unskilled immigrant problems that are so pervasively growing here?

Japan has virtually zero immigration.

Reub wrote: Does Japan have the kind of welfare state/unskilled immigrant problems that are so pervasively growing here?

They actually have the opposite problem: an aging, shrinking population. That's inherently deflationary, and bearish for all Japanese assets.

Pointedstick wrote:

Reub wrote: Does Japan have the kind of welfare state/unskilled immigrant problems that are so pervasively growing here?

They actually have the opposite problem: an aging, shrinking population. That's inherently deflationary, and bearish for all Japanese assets.

That's not a problem.
Only in the world of finances, not in reality.

1 example, crime rates are 4(!) times lower in Japan compared to the US.

dutchtraffic wrote:

Pointedstick wrote:

Reub wrote: Does Japan have the kind of welfare state/unskilled immigrant problems that are so pervasively growing here?

They actually have the opposite problem: an aging, shrinking population. That's inherently deflationary, and bearish for all Japanese assets.

That's not a problem.
Only in the world of finances, not in reality.

1 example, crime rates are 4(!) times lower in Japan compared to the US.

True, but that's unrelated. Their crime rate was even lower before the US immigration boom that started in the 90s ...during which time crime has actually been falling precipitously here.

dutchtraffic wrote:

Pointedstick wrote:

Reub wrote: Does Japan have the kind of welfare state/unskilled immigrant problems that are so pervasively growing here?

They actually have the opposite problem: an aging, shrinking population. That's inherently deflationary, and bearish for all Japanese assets.

That's not a problem.
Only in the world of finances, not in reality.

Agreed. Only economists think that wholesale replacement of populations without regard to the people that built the country is good for the economy. I predict Japan will be around well after the U.S. has cracked up into tiny pieces myself. I was in Japan twice over the last year. Japan ain't going anywhere. If that's what a depressed economy looks like, the U.S. needs more of it. Japan has their act together in a way most economists will never understand.

But back to the OP. The article is clickbait. The guy just likes rotating assets around and I'm sure charges for the honor of it.

The four assets of the portfolio will always have at least one that is a total dog. Stocks have been on a tear, but gold has been falling/neutral. It's just obvious that the portfolio will lag the stock market then.

So what is his solution? Don't know, but I suspect it's buy more stock? At the height of the market no less? Or is it flip assets and market time? Is that a better idea?

none of the above. conventional portfolio's have been successful as long term investments for  more than 100 years. even for the gun shy 40/60-50/50 and 60/40 have worked just fine .

it is only when investors inflict their own wounds that there are issues  when they do the wrong thing..

sometimes allocation discussions remind me of the old adage about driving.

anyone who goes faster than me is an unsafe reckless moron  and anyone who goes slower than me is a jerk .

the fact is everyone has a different method of achieving financial freedom or their retirement nest egg.

for anyone to say anyone  else's method is risky or wrong  is foolish. if it meets their goals then it is perfect for them .


folks have been successful for decades with all sorts of allocations . the key in all cases  to their success was  just staying the course  .you have those that can't stay the course with the pp as well as others who can't with more aggressive models.

I have to say that the linked article is so poor in its grasp of the PP as also its arguments and reasoning that I feel rather embarrassed for the author. While I haven't read most of the comments on this thread I am going to guess that my assessment is probably a bit late to the party. It's been ages since I have commented on Seeking Alpha. Tempted as I am to post something biting, I'm just too tired to bother with it.

I'm a bit late to this party too, but I took a look at the article.  It is indeed very, very confused - I think they are looking at PRPFX's returns, not those of the 25x4 PP, for starters.  For another ... does anyone know what they mean by "secular stagnation"??

One, two, or even three down years does not make an investing strategy "dead".  Why would the same logic not have applied to stock index funds, which were basically flat for a 10 year period not too long ago?

And I think it's a pretty hard row to hoe to claim that gold is "dead" as an investment.

Enough said!

because diversified  conventional portfolio's  didn't do to badly once the other traditional asset classes were added in like bonds and reits as well as other market segments.

the s&p 500 are only large caps . midcaps did pretty well . my fidelity low priced stock fund averaged 12% over the last 15 years.  I had and still do have fidelity bLue chip growth which did not to bad either.
even Wellesley income , a very conservative mix averaged over 7%
.

so over all there were good but not great gains over that time frame  for conventional diversified portfolio's.

so when looking at the pp they are judging it in its entirety as a portfolio  as compared to what conventional diversified portfolio's did  not just one fund that was an s&p 500 fund or a total market fund which is basically still an s&p 500 fund..

I kind of lobbed that article out there to see what everyone thought of it without actually saying what I thought of it myself!  In a nutshell, it doesn't make me want to change my overall investing plan.  Very few things do these days... and I read a lot about different approaches to investing.

I personally keep my age as a percentage of my portfolio in the PP.  Now that I just turned 50, that means I have 50% of my portfolio in the PP, and the other 50% is a VP that is more or less a highly diversified Boglehead portfolio with a sprinkling of individual stock bets around the edges. 

Oh, and since I'm at least 10 years away from needing withdrawals, I also took the cash portion of the PP and put it over on the VP side.  I know, I know -- sacrilege!  HB is turning over in his grave!  But I have a long timeline so I don't mind the extra risk and volatility if it means I have a better potential of carving out higher returns than I would by letting that money sit in cash.  Once I retire and start withdrawing those funds, I will of course restore the cash portion of the portfolio.  And if I live to see 100, then I will at long last have a 100% PP! 

Just thought some of you might like to know... not that anyone asked. 

From the article:

The fact that the PP has underperformed in the last three years, providing YTD returns of -1.5%, 1 year returns of -7.6%, and 3-year annualized returns of 0.5%, tells us that the permanent portfolio is no longer permanent.

It bears noting that his numbers are factually incorrect.  Using the same funds he uses on ETF replay, the 1-year return is 1.1% and the 3-year annualized return is 3.2%.  That tells us that the active financial adviser who wrote the article either does not understand the portfolio he is talking about, is bad at math, or is dishonest.

for comparison to another conservative model Wellesley has a 1 yr of 2.35 and 3 yr 7.07

the insight  growth and income model I just  shifted from has a 1 yr of 4.15%

the piece the author is missing is the pp never fell in 2008 so it didn't need  to gain a lot in the  recovery.

see I told you when you understand both sides well  you can argue for and against .

a good comparison would be 2008  to present.

I don't have those numbers though but the way you guys work those spread sheets I am sure we can get them.

mathjak107 wrote: the piece the author is missing is the pp never fell in 2008 so it didn't need  to gain a lot in the  recovery.

see I told you when you understand both sides well  you can argue for and against .

a good comparison would be 2008  to present.

I don't have those numbers though but the way you guys work those spread sheets I am sure we can get them.

Blue is PP, red is 100% stocks, orange is 60/40:

[img width=700]http://i.imgur.com/pG68EjN.png[/img]

I'm nitpicking, PS, but the max drawdown for the PP should be more than 2.03% for that time period.

Peaktotrough shows this for the Max DD:

14.26% (2008-03-18 - 2008-11-13). A PPer would have been "made whole" again by 2009-09-08, or about 18 months later.

-2.03% was the year-end figure for 2008 which masked a lot of the internal PP chaos from the latter part of that year.

It's not the PP that's dead, it's gold.

I've ridden it down this far...even though it falls day after day, the total dollar loss is less and less...starting to look like a conservative BH allocation now...

Something tells me gold's turn to shine again might not be that far away.

if you got a telescope -  ha ha ha

Reub wrote: Something tells me gold's turn to shine again might not be that far away.

I don't need it to gain, I just need it to stop losing...

I thought the same thing at 1800, 1600, 1400, 1300, 1200, 1150 and on and on and on...

mathjak107 wrote: if you got a telescope -  ha ha ha

It is BY FAR the safest of the 4 assetclasses to hold.
If you understand a little bit of what is happening today, then you understand that 'SHY' isn't exactly as safe as you think either, and that's not coming from a "goldbug", far from it, but just from someone with some common sense.

The fact that a lot of people seem to believe gold is the riskiest asset of the PP is borderline insanity.

keep in touch , let us know how that works out for you long term compared to other assets.

mathjak107 wrote: keep in touch , let us know how that works out for you long term compared to other assets.

I don't understand your obsessive behaviour hammering down any other portfolio than yours, it seems as if you are incredibly insecure and need confirmation that what you are doing is the right thing....every 5 minutes, as the only thing you seem to be doing is being a broken record slamming down this portfolio nonstop.

dutchtraffic wrote:

mathjak107 wrote: keep in touch , let us know how that works out for you long term compared to other assets.

I don't understand your obsessive behaviour hammering down any other portfolio than yours, it seems as if you are incredibly insecure and need confirmation that what you are doing is the right thing....every 5 minutes, as the only thing you seem to be doing is being a broken record slamming down this portfolio nonstop.

He is prolific for sure, averaging 15+ posts per day since joining, many (most) of which do seem to be beating up long bonds and gold. Mathjak, you've made your point loud and clear!