Gyroscopic Investing

Sam Brazil wrote: I don't even think the griping about the PP is because of the draw down, more because of tracking error.

Sam, Do you mean that it's not tracking the S&P 500? Or maybe a 60/40 portfolio? It's so common - but I think mistaken - for folks to use those portfolios as their PP benchmarks. It's not supposed to track either of those because it holds different assets.

as well as serve a different purpose . it isn't designed to grow money but to preserve it with lower volatility .

mathjak107 wrote: as well as serve a different purpose . it isn't designed to grow money but to preserve it with lower volatility .

The problem is, it's not even preserving it.

Interesting little digs on the PP.  "Isn't designed to grow money." and I know I can find others, but that was the most recent.  Maybe I'm sensitive but you seem to be playing a little psychological warfare with PPers again.

And what's happening right now?  Stocks down, gold down, bonds up. 

Hey, I love gold and have been pissed at it for about the past 4 years and again today.  But like some have said here, most likely the moment the PP bottoms coincides with the most people saying it sucks.

buddtholomew wrote:

mathjak107 wrote: as well as serve a different purpose . it isn't designed to grow money but to preserve it with lower volatility .

The problem is, it's not even preserving it.

I don't think the promise of the PP to preserve capital means that it will never ever lose money.  I think it means that in the short term it will minimize potential for massive losses and preserve what you have in the long term.

harry's intention was to have the pp keep you ahead of inflation and preserve purchasing power . it was never conceived as a growth vehicle .


that certainly is fact and not a dig

mathjak107 wrote:

buddtholomew wrote: Stocks up, gold and treasuries down as usual. More pain for the PP.

Sure looks like one of the assets is in a positive uptrend, yet at 25% of portfolio it cannot counterbalance the decline in the other assets. I have been forced to increase stock exposure in an attempt to stop the losses.

hmmmmm , this sounds like something I heard before    lol.

looks like the treasury's and gold are taking it on the chin again today . equity's in another rally

I hear you. Both.

Wish I had more stocks today.

Cortopassi wrote: Interesting little digs on the PP.  "Isn't designed to grow money." and I know I can find others, but that was the most recent.  Maybe I'm sensitive but you seem to be playing a little psychological warfare with PPers again.

And what's happening right now?  Stocks down, gold down, bonds up. 

Some fun quotes by our resident troll from earlier today:

mathjak107 wrote: looks like today will hopefully be a strong up day again from the looks of the futures so all three models should be positive again for the year .  it looks like bonds may get whacked again today but an intermediate term bond fund never really falls much in these run ups , no where near the damage the long treasury bond sees .


i think yesterday TLT was down almost 1.50% ,  fidelity total bond was down .28%.  big difference in the drag on stocks on those up days .  i also see the yield is higher on the total bond fund then TLT .

as typically happens stocks lead the pack out of the gate .  they may fall more but as you see the cushion from the up cycle is usually greater  so the fall is better cushioned hence while the growth model fell more it actually pulled a head faster in the recovery .

mathjak107 wrote: looks like the treasury's and gold are taking it on the chin again today . equity's in another rally

that certainly is fact and not a dig

True, I think that's the main reason some are so disappointed. It's also the reason that all comparisons with 60/40 portfolios are pretty much useless.

@Budd
I've stated in quite a few posts that I've never had a 4x25. Mainly because I see some issues with a 4x25 Eurozone PP and because I started investing around 2008, overestimated my risk tolerance, and didnt want to sell low. The past few years I've slowly reduced my equity allocation and gotten a bit closer to the PP.

I think the PP has performed as can be expected the last couple of years, certainly nothing out of the ordinary.

Interesting day today. If gold drops down much further, I'll be buying it. I won't enjoy it, but I enjoyed buying it at 1600/oz and look how that worked out. Will just have to hold my nose and buy, and someday it will pay off.

I'm very curious to see what happens on September 16. I mean, I will not be surprised if interest rates do not rise, but I have no idea what the assets will do.

mathjak107 wrote: harry's intention was to have the pp keep you ahead of inflation and preserve purchasing power . it was never conceived as a growth vehicle .


that certainly is fact and not a dig

I thought the goal from the book (I could be wrong, someone please correct me) was 4-6% or so real return after inflation, not just keeping up with inflation.

iwealth wrote:

mathjak107 wrote:

buddtholomew wrote: Stocks up, gold and treasuries down as usual. More pain for the PP.

Sure looks like one of the assets is in a positive uptrend, yet at 25% of portfolio it cannot counterbalance the decline in the other assets. I have been forced to increase stock exposure in an attempt to stop the losses.

hmmmmm , this sounds like something I heard before    lol.

looks like the treasury's and gold are taking it on the chin again today . equity's in another rally

I hear you. Both.

Wish I had more stocks today.

Still wish you had more stocks? 

Sorry that's my dig from my minority position of one who holds his nose when buying stocks.  Yeah, I probably won't make the killer gains.

Still wish you had more stocks? 

Sorry that's my dig from my minority position of one who holds his nose when buying stocks.  Yeah, I probably won't make the killer gains.
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stocks can recover on a dime  when  it is time  .  any bets on which recovers sooner and higher  ?  gold or equity's ?

retracement in stocks to where we were  is usually fairly quick , making new gains can be a lot slower

mathjak107 wrote: stocks can recover on a dime  when  it is time  .  any bets on which recovers sooner and higher  ?  gold or equity's ?

You seem to be under the impression that there is some kind of gold vs equities dick measuring contest going on here. This isn't the gold bugs forum.

We hold gold as inflation insurance. We hold equities to profit during times of prosperity. We're not betting that gold will do better than equities.

if you were around for the first parts of the discussion the issue being discussed is that the pp uses very powerful opposite asset classes which have always succeeded in moving forward because of strong trends in one of the assets as well as interest on the cash portion .

that insurance coverage was easily paid for by a strong trend .

well today is a new normal and it never existed before .  we never had zero interest rates , low yields on bonds , high valuations on stock and gold in the toilet responding to nothing in a positive way all at  the same time .

that insurance cost has now made it very difficult for the pp to get any traction .

on the biggest up days in stocks the weight of gold and treasuries have either dragged it down or held it back .

when there are no strong trends and the chances of getting something going in the new norm not that great it seems now the pp is stuck in a rut and can't get pulled out .

equity's will likely be the first one out of the box but with so much tough opposition it may be to little to late  to unstuck the pp .

my opinion , which of course might be wrong , is that today you need the assets not fighting each other holding each other back but helping each other or at the least providing some fighter cover without actually pulling the likely horse equity's back in .

again , my opinion is i think the pp met its waterloo for the near future .  it may be quite a while before the pp gets out of the hole  and can once again  do its thing .

i think conventional investing with intermediate and short term bond type  portfolios  may be the answer to at least squeaking out some gains even if single digits .

i think this is not the right time to have any dead weight dragging on things making it harder for equity's to do its thing .

i do think that equity's will be the asset class that is first out of the hole but only with single digit returns . .

iwealth wrote:

mathjak107 wrote:

buddtholomew wrote: Stocks up, gold and treasuries down as usual. More pain for the PP.

Sure looks like one of the assets is in a positive uptrend, yet at 25% of portfolio it cannot counterbalance the decline in the other assets. I have been forced to increase stock exposure in an attempt to stop the losses.

hmmmmm , this sounds like something I heard before    lol.

looks like the treasury's and gold are taking it on the chin again today . equity's in another rally

I hear you. Both.

Wish I had more stocks today.

I get the sarcasm. Yes, I'm comfortable with my allocation to stocks as they actually go up...unlike gold.

buddtholomew wrote: I get the sarcasm. Yes, I'm comfortable with my allocation to stocks as they actually go up...unlike gold.

It was a wild day for sure.

You've already dealt with your long term treasury problem by synthetically turning them into intermediate treasuries, but you seem pretty dug in on hating holding your gold. What if it's just getting started on another multi-decade bear market? Do you have a breaking point or would you ride it all the way down?

I truly do understand everyone's differing positions, because at some point or another I have been in each one to the extreme.  That background continues to guide my reasoning.  I have gotten burned by ALL asset classes, except cash, unless you count inflation I guess.

So, 25% of everyone's portfolio is relatively safe, for now.  The other 75% is up for grabs.  MJ, I can't predict whether gold or equities recover faster.  After the past month, it was, is and will be anyone's guess.  You have your bias that stocks will recover fastest.  I don't know.  I have no illusion about gold recovering faster.  It either will or it won't.  Bonds will go up or down.  The Fed may or may not raise rates.  That may or may not affect anything.  China may or may not blow up.  And so on.

I wish I had an answer.  For me, it is not more equities.  It is not more gold.  Hell, find me a 5% money market and I will gladly move 100% into that at this point! 

i wish we had those old  5-1/4% savings accounts we all used to laugh at .

iwealth wrote:

buddtholomew wrote: I get the sarcasm. Yes, I'm comfortable with my allocation to stocks as they actually go up...unlike gold.

It was a wild day for sure.

You've already dealt with your long term treasury problem by synthetically turning them into intermediate treasuries, but you seem pretty dug in on hating holding your gold. What if it's just getting started on another multi-decade bear market? Do you have a breaking point or would you ride it all the way down?

At this point my equity capital gains can offset gold losses. I honestly don't know what to do other than continue to follow the plan. It is what it is, but I feel let down by the PP and have zero confidence that losses to date will be recovered anytime soon. I'm sick to death of looking at the portfolio daily, but I can't afford to leave it alone. I might lose another 200K without even blinking.

buddtholomew wrote: I feel let down by the PP.

The PP returns recently haven't been outside the bounds of historical PP returns.  If you feel let down by the PP, then you didn't do your due diligence before you got into it.  All portfolios have ups and downs.  The important thing is to ride them out rather than panicking and selling low.

mathjak107 wrote: i think conventional investing with intermediate and short term bond type  portfolios  may be the answer to at least squeaking out some gains even if single digits .

Go to the Desert!

mathjak107 wrote: i wish we had those old  5-1/4% savings accounts we all used to laugh at .

There was a short period around 1990 when CDs were paying 9% and inflation was far lower than that.

Ah, the good old days.

Jack Jones wrote:

mathjak107 wrote: stocks can recover on a dime  when  it is time  .  any bets on which recovers sooner and higher  ?  gold or equity's ?

You seem to be under the impression that there is some kind of gold vs equities dick measuring contest going on here. This isn't the gold bugs forum.

But if this were a dick-measuring contest in a gold bug forum we'd have to call it Goldmember. We'd just have to!*

We hold gold as inflation insurance. We hold equities to profit during times of prosperity. We're not betting that gold will do better than equities.

Totally agree.

*Where did our Dutch (forum)member Jan Van go off to, anyway? That was his avatar.

dualstow wrote:

Jack Jones wrote:

mathjak107 wrote: stocks can recover on a dime  when  it is time  .  any bets on which recovers sooner and higher  ?  gold or equity's ?

You seem to be under the impression that there is some kind of gold vs equities dick measuring contest going on here. This isn't the gold bugs forum.

But if this were a dick-measuring contest in a gold bug forum we'd have to call it Goldmember. We'd just have to!

To borrow a favorite term from Liar's Poker and its celebration of the piggishness of Wall Street, the contest could be called:

Goldmember vs. The Big Swinging Dicks

mathjak107 wrote: i wish we had those old  5-1/4% savings accounts we all used to laugh at .

Laugh?  I used to take out 12-month (or longer) zero interest cash advances from my credit cards and stick them in CDs paying over 5%.  You bet I was laughing.