Gyroscopic Investing

Cortopassi wrote: Ahh, now I understand what you are getting at!

Mike

Another look at gold from Jan 1980 to July 2014 shows a CAGR of 2.75% vs 6.23% for 3 year treasury bills!  The goverment shows CPI or a rough measure of inflation @ 3.1%.  Your estate is missing $55,000 on a $10,000 investment.  It is sad but your gold return did not keep up with understated inflation.

It a tough hold, and most folks will not believe in gold after 34 1/2 years.

I believe in the PP and of course invest in Gold. 

buddtholomew wrote: I curse the day I ever found the PP. I would be way ahead if I just invested in a 60/40 allocation and forgot about gold. I hate gold!

Why don't you like to buy things when they're on sale (and the fundamentals probably never been stronger)?

murphy_p_t wrote:

buddtholomew wrote: I curse the day I ever found the PP. I would be way ahead if I just invested in a 60/40 allocation and forgot about gold. I hate gold!

Why don't you like to buy things when they're on sale (and the fundamentals probably never been stronger)?

Gold has been on sale since the high of approximately 1900...and I've heard the story about fundamentals before. Its crap.

buddtholomew wrote: I curse the day I ever found the PP. I would be way ahead if I just invested in a 60/40 allocation and forgot about gold. I hate gold!

Tholomew:  You are truly my budd.  I feel the same way, but in answer to murphy of course we don't want to switch to 60/40 NOW after gold has dropped and is "on sale".  Boo.

dragoncar wrote:

buddtholomew wrote: I curse the day I ever found the PP. I would be way ahead if I just invested in a 60/40 allocation and forgot about gold. I hate gold!

Tholomew:  You are truly my budd.  I feel the same way, but in answer to murphy of course we don't want to switch to 60/40 NOW after gold has dropped and is "on sale".  Boo.

I may TLH GLD and offset gains in the stock portion of the portfolio. If I choose this path, then my foray in the PP is over. Permanently.

Not that I'd try to encourage anyone to stay in or leave the PP, but am I missing some recent event that is causing all of this angst? Or is it just angst over individual components of the overall strategy? Last I checked the PP is still up about 7% YTD. Today's decline is maybe 0.25%?

Stocks are 5+ years now into a bull run with what, one 10%+ correction? Is now really the time to sell off gold once and for all and capitulate into equities?

iwealth wrote: Not that I'd try to encourage anyone to stay in or leave the PP, but am I missing some recent event that is causing all of this angst? Or is it just angst over individual components of the overall strategy? Last I checked the PP is still up about 7% YTD. Today's decline is maybe 0.25%?

Stocks are 5+ years now into a bull run with what, one 10%+ correction? Is now really the time to sell off gold once and for all and capitulate into equities?

I personally have been invested in the PP since 2011 (taxable) and have significant long-term losses in gold (PP CAGR 4.35%). A loss, in and of itself, is not sufficient to challenge the investment philosophy, but the success of the overall portfolio appears dependent on the performance of this individual asset. I am not committed to owning gold, consider it an insurance policy and challenge whether a 25% allocation to the investment is warranted.

FWIW, Budd, I'm down more than 16% in gold. Sure, I wish I had only rebalanced into gold instead of buying gold along with the other assets every time I put more cash into the pp overall. You pays your money and y'takes your chances. PP overall is doing alright, and that's what counts.

dualstow wrote: FWIW, Budd, I'm down more than 16% in gold. Sure, I wish I had only rebalanced into gold instead of buying gold along with the other assets every time I put more cash into the pp overall. You pays your money and y'takes your chances. PP overall is doing alright, and that's what counts.

Thanks dualstow...everyone tells me what an idiot I am for investing in gold. I hate it when they are correct.

buddtholomew wrote:

iwealth wrote: Not that I'd try to encourage anyone to stay in or leave the PP, but am I missing some recent event that is causing all of this angst? Or is it just angst over individual components of the overall strategy? Last I checked the PP is still up about 7% YTD. Today's decline is maybe 0.25%?

Stocks are 5+ years now into a bull run with what, one 10%+ correction? Is now really the time to sell off gold once and for all and capitulate into equities?

I personally have been invested in the PP since 2011 (taxable) and have significant long-term losses in gold (PP CAGR 4.35%). A loss, in and of itself, is not sufficient to challenge the investment philosophy, but the success of the overall portfolio appears dependent on the performance of this individual asset. I am not committed to owning gold, consider it an insurance policy and challenge whether a 25% allocation to the investment is warranted.

I got PP returns of 6.3% if you started Jan 2011 and inflation of 1.7% for a real BOGEY of 4.6%.  Sounds good to me!

buddtholomew wrote: everyone tells me what an idiot I am for investing in gold. I hate it when they are correct.

They are idiots for thinking that a stock/bond portfolio is truly diversified, when in fact stocks and bonds happen to be highly correlated.  Don't let idiots' opinions influence your behavior.  Sure gold hasn't done so great since 2011.  How did it do from 2001 to 2011?  Would you have been an idiot for owning gold then?  If you sell gold now and buy stocks, how are you going to feel if stocks go down and gold goes up, which it probably will at some point.  I'm very comfortable with the PP, because it is much more diversified than a typical 60/40 portfolio, and because it is agnostic about the future.

modeljc wrote:

Cortopassi wrote: Ahh, now I understand what you are getting at!

Mike

Another look at gold from Jan 1980 to July 2014 shows a CAGR of 2.75% vs 6.23% for 3 year treasury bills!  The goverment shows CPI or a rough measure of inflation @ 3.1%.  Your estate is missing $55,000 on a $10,000 investment.  It is sad but your gold return did not keep up with understated inflation.

It a tough hold, and most folks will not believe in gold after 34 1/2 years.

I believe in the PP and of course invest in Gold.

The best face I can put on gold is if you have 43 years to live you may equal the investment return for other assets or about 8% to 9%.  Of course that is the past!  The future is uncertain.

But most folks can't do this one!  Why do we believe?

So gold is mooning us again.
Saw a chart of gold on CNBC that almost made me throw up.
Based on history this will pass.
Head down till it does...

modeljc wrote:

buddtholomew wrote:

iwealth wrote: Not that I'd try to encourage anyone to stay in or leave the PP, but am I missing some recent event that is causing all of this angst? Or is it just angst over individual components of the overall strategy? Last I checked the PP is still up about 7% YTD. Today's decline is maybe 0.25%?

Stocks are 5+ years now into a bull run with what, one 10%+ correction? Is now really the time to sell off gold once and for all and capitulate into equities?

I personally have been invested in the PP since 2011 (taxable) and have significant long-term losses in gold (PP CAGR 4.35%). A loss, in and of itself, is not sufficient to challenge the investment philosophy, but the success of the overall portfolio appears dependent on the performance of this individual asset. I am not committed to owning gold, consider it an insurance policy and challenge whether a 25% allocation to the investment is warranted.

I got PP returns of 6.3% if you started Jan 2011 and inflation of 1.7% for a real BOGEY of 4.6%.  Sounds good to me!

Congrats, but your comment doesn't address the question. Does gold at 25% dominate the overall performance of the portfolio?

buddtholomew wrote:

modeljc wrote:

buddtholomew wrote: I personally have been invested in the PP since 2011 (taxable) and have significant long-term losses in gold (PP CAGR 4.35%). A loss, in and of itself, is not sufficient to challenge the investment philosophy, but the success of the overall portfolio appears dependent on the performance of this individual asset. I am not committed to owning gold, consider it an insurance policy and challenge whether a 25% allocation to the investment is warranted.

I got PP returns of 6.3% if you started Jan 2011 and inflation of 1.7% for a real BOGEY of 4.6%.  Sounds good to me!

Congrats, but your comment doesn't address the question. Does gold at 25% dominate the overall performance of the portfolio?

It depends on how long you can live and believe!  If you have 43 years then history may help.  But only maybe.  Gold is a real stinker.  It smells and will not happen for most of us and unless you got a big time frame or believe in the balanced PP.

Budd, I fear that the PP is not for you after all. I would suggest that you hold 100% stocks when the market goes higher and 0% when it declines. This will be a much more prudent portfolio for you.

Reub wrote: Budd, I fear that the PP is not for you after all. I would suggest that you hold 100% stocks when the market goes higher and 0% when it declines. This will be a much more prudent portfolio for you.

Do either Vanguard or Fidelity offer such an ETF so that I can minimize transaction costs?

The ONLY difference between a portfolio invested in SPY, TLT, CASH and SPY, TLT, CASH and GLD is gold. The percentages held in each common asset may vary between the the two portfolios depending on an investors appetite for risk, but everyone can see that the second portfolio has an allocation to gold (25% in the case of the HBPP). I question whether 25% is the appropriate amount to hold in such a volatile asset. I despise investing in gold (others don't), even more than going to the dentist or eating brussels sprouts.

If you just hate gold, then get rid of it. But you'll have to accept the consequences of a portfolio that may be very painful to have your money in when stocks and bolds sync up in the downward direction for a while. Ain't no free lunch.

It's the same way with someone who can't tolerate volatility: maybe it would be worth it for them to have a more smooth and stable portfolio with a very high cash allocation, even at the expense of returns. I'm a firm believer in having a portfolio that will help you feel safe and secure. If that feeling of safety and security comes at the expense of some returns, that's probably a good trade-off, because we humans tend to do the stupidest things at the worst times when we're feeling fearful.

It's a free country, Budd, and I wish you well, but speaking personally, I would not be in a hurry to dispose of gold. Here's why:

CBO says US deficit levels are unsustainable

http://thehill.com/policy/finance/21226 ... ustainable

Krugman, of course, scorns any talk of holding gold because of runaway printing of money to pay for the colossal mess being created with his approval.

Argentina, here we come. Just Google "corralito" to find out how Argentina tried to "solve" its debt problems, not to mention the Argies' contempt for those naïve investors who had the gall to loan money to Argentina with an expectation of getting their money back. I don't think Krugman is terribly worried about the losses inflicted on Argentina's arrogant creditor-exploiters any more than he will be by the fate of us PPers who buy long bonds and TLT. The lesson, in my opinion, is: hold onto that gold.

buddtholomew wrote: I despise investing in gold (others don't), even more than going to the dentist or eating brussels sprouts.

Hey, despise gold all you want but what the hell is wrong with brussels sprouts? 

Seriously, you might prefer a boglehead portfolio.
I still have less than 10% in gold and I accomplish that by only having the pp as my core holdings. The vp is full of stocks and bonds.

buddtholomew wrote:

Reub wrote: Budd, I fear that the PP is not for you after all. I would suggest that you hold 100% stocks when the market goes higher and 0% when it declines. This will be a much more prudent portfolio for you.

Do either Vanguard or Fidelity offer such an ETF so that I can minimize transaction costs?

The ONLY difference between a portfolio invested in SPY, TLT, CASH and SPY, TLT, CASH and GLD is gold. The percentages held in each common asset may vary between the the two portfolios depending on an investors appetite for risk, but everyone can see that the second portfolio has an allocation to gold (25% in the case of the HBPP). I question whether 25% is the appropriate amount to hold in such a volatile asset. I despise investing in gold (others don't), even more than going to the dentist or eating brussels sprouts.

I don't understand why you despise gold but not stocks. 

Gold has dropped from its high of 1900 to 1300 (or so) - about 30%.  Absolutely despicable!  I never ever want to hold such a miserable investment.

Stocks regularly drop 30% or more, for example in 2008 stocks dropped 54% - and 31% in 2002, 35% in 1988, 45% in 1975, and 36% in 1970.  I never ever want to hold such a miserable investment!

Why is your angst so gold-specific?

Even while gold was getting creamed (1900 to 1300) the PP did not get creamed (sure, 2013 was not a good year, but it wasn't anything like a -30% sort of year).  Similarly, even while stocks were getting creamed in 2008 (-54%!), the PP did not get creamed (again, 2008 was not a good year but it wasn't anything like a -54% year).

Don't look at the ingredients.  Look at the sausage.  It's pretty tasty no matter what's happening.

Gold goes from 1340 to 1295 in the past few days.

But those ounces I have still weigh the same.

I know it's really not a good argument, but it is yours, assuming you hold in physical form.  The stock market, bond market, government, your insurance companies, etc all could blow up or shut down for days or permanently in any given situation.  Gold might be worth more or less in those cases, but it will be worth something.

I am not predicting nor want an apocalypse, I just want all my assets in the PP to go up simultaneously.  But I don't think that is practical nor the norm.  Gold had its day, lost it and will have it again.  Just like every other market.

dualstow wrote: Seriously, you might prefer a boglehead portfolio.
I still have less than 10% in gold and I accomplish that by only having the pp as my core holdings. The vp is full of stocks and bonds.

When viewing the portfolio as a whole, I have 7.5% allocated to GLD and 2.5% to GDX (precious metals and mining). The balance is invested 50/40 (globally diversified equities, fixed income and cash).

The entire gold position is invested in a taxable account (GLD ETF) and periodic fluctuations of 3-4% equate to substantial losses. Perhaps I would feel less anxious holding physical gold (something tangible) as the weight of the coins remains constant as Cortopassi highlights below.

rickb wrote: I don't understand why you despise gold but not stocks. 

Investors generally have strong opinions on the value of gold in a portfolio asset allocation. I unfortunately am not swayed one way or the other. I question my decision to hold the metal when I hear gold advocates and there catastrophe theories. I am not in the doom and gloom camp and fear that I am holding the metal for invalid reasons. Hope this sheds some light on my thought processes.

I agree with Cortopassi about the physical gold. I'd like to have coins for 100% of my gold when I'm older, b/c I feel more comfortable leaving coins to my wife and nieces/nephews than ETFs. Having less than 10% in gold, I don't worry about it doing well in my lifetime as long as the pp does well. That may sound defeatist, but I think it's just pragmatic. Like rickb said, it's the whole sausage that counts, not the ingredients. The pp is greater than its individual parts.

Since you have only 10% in gold too, I don't know why you're so concerned.  A lot of members here are all in and they seem to be doing just fine.

Who knows, it could be our star asset in the future.

rickb wrote: Theoretically, yes - but the gold price seems to act fairly strangely fairly often.  Almost as if there were very powerful forces with unlimited amounts of money, like, I don't know, maybe central banks or something, keeping the price down.

Newsflash: Governments and central banks manipulate stock and bond prices as well.

IMO, if you're properly diversified and don't day trade, how the big dudes twist the dials in the background largely doesn't matter.  The important thing is to stay out of their way and never take their bait.