Are most people here sticking with Treasuries?

[yankees60]

I have left the permanent portfolio behind in the past year, for the time being. Don't need options, I'm not that greedy.

Precious metals, mining companies, and explorers... That is enough. Options with no expiry date.

This still your current position?

[yankees60]

I think I will do a 3 way version of PP w/o the bonds, and then add bonds later when yields rise. I'll probably do shorter duration bonds, maybe 10 year max.

What is your update on this?

[yankees60]

It appears that there were more investors than panicked old Budd who questioned the validity of the PP moving forward. Where were you when I was being attacked for my perspective? Were you too afraid to voice the same opinion as mine?

Now people are either selling some or all of their LTT’s down 15%+ and locking in losses. Makes me think it’s a reasonable time to start buying.

But did you?

[yankees60]

If there's another Volker who's going to put the interest rates above the rate of inflation, that would be a reason to reevaluate

Maybe he is here? Seems to be headed in that direction.

[yankees60]

...

Now people are either selling some or all of their LTT’s down 15%+ and locking in losses. Makes me think it’s a reasonable time to start buying.

I'm with you. I will likely make a big purchase of LTT's soon.

Did you follow through with this? If so, how are you evaluating that purchase?

[yankees60]

The PP has been neutralized.
Talk of rising interest rates has turned the bond market upside down. Gold will face headwinds with yields rising as it does not pay a dividend. Stocks will continue to fall until rates stabilize and inflation subsides. Cash is the only true diversifier and I don’t but the argument about cash losing to inflation. It loses less to inflation than assets declining in value lose to inflation.

How well we have been reinforced regarding that this year!

[yankees60]

Timely post, I have to buy some treasuries!

Did you?

[yankees60]

We could easily tip into deflation.
Or not.

I think someone should propose a portfolio that could navigate all kinds of economic environments...

ALWAYS appreciate YOUR humor!

[yankees60]

What if the PP held 50% in a 20 year Treasury Ladder instead of a Short/Long dated treasury barbell? Each year around 2.5% of the portfolio value matures into cash, and 2.5% of the ongoing portfolio value is used to buy another 20 year Treasury. Average maturity 10 years. In cash terms after the portfolio has done well that's more $$$'s being invested in a 20 year Treasury, typically when the good gains = lower yields at the time. If the portfolio has performed relatively poorly less $$$'s are invested in the 20 year but typically when yields are higher. Broadly washes. Differences between a 20 year ladder and a short/long dated treasury barbell = noise.

If a retiree spends most of the bond interest each year, along with the maturing bond value, then assuming a average 4% yield, 2% relative to the total portfolio value, that'a a combined 4.5%. Spending 4% of that, reinvesting the other 0.5% leaves the hope/intent that the stock/gold 50% of portfolio value will rise enough to offset the 2% of portfolio value being invested in another 20 year treasury, and a further 2% to offset (broad) inflation (central banks typically target a 2% 'natural' inflation rate). If the 50/50 stock/gold allocation collectively achieves around a 8% average nominal reward they'll tend to see the inflation adjusted value of the portfolio remaining much the same after 4% SWR withdrawals. Over the last 130 years I measure a stock/precious metal barbell as having achieved a 8.8% linest(ln ... nominal gain value (exponential trend line slope).

Simply, we're in the current era where high current portfolio values are buying more treasury bonds paying relatively low yields, than if we were in a era where a low portfolio value were buying fewer bonds paying high yields, and where broadly that all washes.

Something you are still recommending?

[yankees60]

The third generation rule of thumb however is that there's also a good chance that such heirs will just waste that wealth away anyway, so better to invest with ones own best interests in mind than for others.

Agree!

[yankees60]

My mom has a theory that a big inheritance can be as much a curse as a blessing. She was trying to convince my grandparents to spend more on themselves...spending well wasn't easy for folks who lived through WW2 before immigrating to America.

Neither for those who lived in the United throughout The Great Depression of the 1930s ....

[yankees60]

BTW according to Barton Biggs, I forget the name of his book, those two war loser stock markets actually preserved a fair amount of wealth assuming one held on into the post war years.

I assume that this is the book?


Wealth, War and Wisdom

[yankees60]

Interesting historical tidbit...did you know Hitler's finance minister was born in the US? Apparently dad was an immigrant to the US and it didn't work out. The son's name - Hjalmar Horace Greeley Schacht

Does not seem to conform with this?

https://en.wikipedia.org/wiki/Hjalmar_Schacht

"He served in Adolf Hitler's government as President of the Central Bank (Reichsbank) 1933–1939 and as Minister of Economics (August 1934 – November 1937)."

"Schacht was born in Tingleff, Prussia, German Empire (now in Denmark) to William Leonhard Ludwig Maximillian Schacht and Baroness Constanze Justine Sophie von Eggers, a native of Denmark. His parents, who had spent years in the United States, originally decided on the name Horace Greeley Schacht, in honor of the American journalist Horace Greeley."

[yankees60]

I remember technovelist having a portfolio like that. It was quite unconventional but matched his personality.

MAJOR understatement!

[yankees60]

I have to assume that high-yield savings account interest rates will increase again soon to catch up with T-Bills.

Define "soon". Seems like almost two months later that they are not even close yet?

[yankees60]

One credit union is listing 4% for 5 year cd.

https://www.depositaccounts.com/cd/5-year-cd-rates.html

At some point these rates start looking really tasty.

4% is 40k income per year on 1m deposit.

Looks good except for what the inflation rate could be for each of those five years.

[Cortopassi]

Vinny!!!!! Slow down!!!

[yankees60]

Although most people on the forum now tend to dismiss Budd, either I missed or there never was a great response to his opinion. If we are actually in a multi-year trend of slowly rising interest rates, what will keep the PP or any Risk Parity portfolio from having the losses we have seen this year happening every year until it ends?

The PP is supposed to be for money you can't afford to lose. That was it's mantra. Well this year it has lost -12% and a lot more in real terms. Maybe T Bills or cds are for money you can't afford to lose?

As I disclosed yesterday --- through the first 3/4's of this year the equity & bond portion of my investments lost 20%. Adding in the cash (Treasury bill) portion put it at an overall down 13%.

What was the pure Permanent Portfolio loss through September 30, 2022?

[yankees60]

there may be such a thing as hypothetical safe withdrawal rates based on non-historical sequences of returns and Monte Carlo simulations that provide much more data than the limited data set of actual returns available to us. w understanding of portfolio withdrawal (not surprising given your understanding of everything else).

What is the reason for why they would be a superior forecasting tool than using the actual returns?

[yankees60]

If you don't understand how Monte Carlo can be more beneficial than basing withdrawals off of a relatively tiny set of data and sequences that have occurred, you are an idiot.

Jim Otar rejects Monte Carlo and his software is entirely based upon that "relatively tiny set of data".

http://retirementoptimizer.com/

I can assure you that he is no idiot!

[yankees60]

I've done some math quite a while ago, using reasonable expected returns and volatility for the PP, and did a Monte Carlo simulation, and found a swr for longer retirements in the 50-60 year range to be more like 3.3% instead of 4%, with 90% confidence if I remember correctly.

From this post and subsequent posts in this topic you seem to be a great believer in the concept of Monte Carlo simulations? If so, how do you react to these Monte Carlo flaws that I just read in a book that I am reading?

Capture1.JPGCapture2.JPGCapture3.JPGCapture4.JPGCapture5.JPGCapture6.JPG

I'm aware of some of the limitations, but I consider MC simulations to be at least as useful as using the very small dataset we have available to us, meaning the small sample size of historical 'rolling' returns, especially for something like the PP that has even less rolling returns available due to gold's history. As with all tools, one must be aware of their limitations and then use them appropriately. Used incorrectly, they may be worse than worthless.

I'm curious on which book this information came from. I realize I'm reading much of this out of context, but it seems to be pinpointing flaws in MC simulations as it pertains to pure market timing or short term market predictions or something along those lines. Trying to use MC simulations to predict short term movements of the market is a fool's errand, no doubt. Trying to predict a large range of hypothetical outcomes for a portfolio over 50-60 years, and basically ignoring outliers and focusing on 90th percentile type results, is much less of a fool's errand. Trying to determine investment returns over the next 50-60 years and basing it off a small sample of 30 year rolling returns from a single country is also something of a fool's errand.

It starts with this web site:

http://retirementoptimizer.com/

"What is Aftcasting?

Luck is the second-most important factor for retirement planning; second only to withdrawal rate. Good luck can give you lifelong income, bad luck can deplete your portfolio very fast. It creates the perils of the sequence of returns and the sequence of inflation.

How can you visualize luck? This is where aftcasting comes in.

Aftcasting uses the actual market history, including growth rate and inflation, as they exactly happened in history. It reflects the actual sequence of events, the actual sequence of returns (stocks, interest rates, and inflation), AND the actual correlation between stocks, interest rates, and inflation, actual volatility, and actual black swan events exactly as they occurred since 1900. Now, you can see the worst-case situations and see what can go wrong, instead of assuming average growth rates or inflation. Unlike simulators, it shows not only the impact of random but also fractal events of the past.

To help you with your planning, I have three tools for you: 1. My aftcast retirement calculator (ORC), 2. My book, "Unveiling the Retirement Myth", 3. My course "Advanced Retirement Income Planning "

The book: Advanced Retirement Income Planning

The book is only 104 pages, cost $4.99, and someone like you could get through it quite quickly.

One of his major points is that you cannot ignore those 10% outliers because they carry so much weight, both good and bad.

[yankees60]

Vinny!!!!! Slow down!!!

When these posts come in day-by-day they hit me at times when I cannot give them my full attention and are not always to understand them in the best context.

I think you stated today you'd gone through all 10 pages of this topic?

I just did the same as it put me solely in the mindset of the topic and I made comments appropriately having a lot of context to do so.

[dualstow]

Vinny!!!!! Slow down!!!

Looks like Vinny has had a busy night.

[I Shrugged]

BTW according to Barton Biggs, I forget the name of his book, those two war loser stock markets actually preserved a fair amount of wealth assuming one held on into the post war years.

I assume that this is the book?


Wealth, War and Wisdom

Yes that’s it.

[yankees60]

BTW according to Barton Biggs, I forget the name of his book, those two war loser stock markets actually preserved a fair amount of wealth assuming one held on into the post war years.

I assume that this is the book?


Wealth, War and Wisdom

Yes that’s it.

Thanks. Just bought it for $7.27 delivered.