Gyroscopic Investing

vincent_c wrote: ↑Sat Mar 13, 2021 10:07 am

vincent_c wrote: ↑Fri Mar 12, 2021 12:46 pm A dollar invested in the PP today has to reflect the aggregate of the expected returns (nominal and real) for each individual component of the PP.

For stocks, because ​PE ratios are high, stock returns are expected to be lower than average in both real and nominal terms. Bond returns are highly correlated to starting yield and we know how low bond yields are in absolute terms. In real terms, bond returns are either negative or the alternative is not good for gold.

If gold has positive nominal returns going forward then the real return of bonds again is likely to be negative. Current gold prices are way off the peak but also relatively high in recent history. We can say that there is likely an equal chance of gold going higher or lower in nominal terms which is the same as a 50/50 bet with no expected long term returns. This makes sense when in real terms, we don't expect gold to produce a real return.

For cash, we expect negative real returns but we're getting zero nominal returns. The expected return for well-managed cash equivalents/short term bonds is likely to do slightly better than inflation in the long run.


So if we start with nominal returns and weight the expectations according to PP allocations.

We get 1/4 lower than average returns for stocks + 1/4 low returns for LTT + 1/4 no (risk adjusted) return for gold + 1/4 zero/low return for cash.

The weighted average seems to be somewhere around lower than average returns for a dollar invested in the PP today.

In real terms.

We get 1/4 lower than average returns for stocks + 1/4 negative returns for bonds + 1/4 no return for gold + 1/4 negative return for cash.

The weighted average seems to be low to negative real returns for a dollar invested in the PP today.

MJ,

This was actually my way to kick start our debate in case you missed it.

I'm eagerly waiting your response on the positive side for the PP. Looking forward to it.

mathjak107 wrote: ↑Sat Mar 13, 2021 2:53 am Most people tend to hang out , high five and support only those who support their view ....they never spend time really getting in to the enemies camp ..they never really understand the negatives the other side sees because they never sleep with the enemy .

When one fully understands the enemy’s side and can argue for or against some thing then they likely have a full understanding which they never got just hanging with their own. it is very different when you intimately learn the other side vs believing our own bull shit about the other side

vincent_c wrote: ↑Fri Mar 12, 2021 7:51 pm

Kbg wrote: ↑Fri Mar 12, 2021 5:16 pm This post may be a big muddled mush of nonsense but maybe I can express the thoughts well enough to foster some good comments as it's something I've been thinking about but have not formed any conclusions.

1. What do we really know about any asset class? Are there any "truths" to various asset classes or just a historical record that we assume will continue as the past?

Yes I think there are some truths.

There are 3 asset classes (I prefer to call them types of risk)

1) Money (which is a store of value/unit of account) or the lack of risk.

2) Someone else's debt (which under any normal market condition, if somewhere were to lend out money then they would demand their principal + interest)
- The risks here is just what the credit worthiness of the borrower is as well as how long the loan is for because that affects the likelihood of them remaining credit worthy.

3) An interest in the nature of trade (equity, work, business, etc basically exposure to some form of productivity)
- because any business when you find something that produces a positive return you typically will borrow money to multiply those returns then it exposes those who have an interest in this kind of activity to credit risk.

When you can obtain exposure to 2 and 3 at a fair value, then you can guarantee that in the long run you can have a positive return.

Just so people don't point out that I should be arguing in the negative for the PP.

I would point out that it may be that there are times where you are buying into the PP where the credit and duration risks are overvalued. Is that possible?

vincent_c wrote: ↑Thu Mar 11, 2021 12:10 pm

sophie wrote: ↑Thu Mar 11, 2021 11:35 am Let's not.

Yeah let's not debate the permanent portfolio on this forum!

buddtholomew wrote: ↑Sat Mar 13, 2021 6:17 pm
The authors who wrote the book on the PP used to contribute to this forum (one started it), so why will this new thread propel the discussion to new heights?

yankees60 wrote: ↑Sat Mar 13, 2021 6:20 pm

buddtholomew wrote: ↑Sat Mar 13, 2021 6:17 pm The authors who wrote the book on the PP used to contribute to this forum (one started it), so why will this new thread propel the discussion to new heights?

There are now some people here who were not here then?

buddtholomew wrote: ↑Sat Mar 13, 2021 6:33 pm

yankees60 wrote: ↑Sat Mar 13, 2021 6:20 pm

buddtholomew wrote: ↑Sat Mar 13, 2021 6:17 pm The authors who wrote the book on the PP used to contribute to this forum (one started it), so why will this new thread propel the discussion to new heights?

There are now some people here who were not here then?

Sure, but what do they have to offer that the authors didn’t in the pages that comprise this forum?

Who joins a community, assigns their own phrasing to the 4 asset classes and leads senior members along on a journey they’ve already taken. What’s the motive? Too lazy to read the threads?

buddtholomew wrote: ↑Sat Mar 13, 2021 6:33 pm

yankees60 wrote: ↑Sat Mar 13, 2021 6:20 pm

buddtholomew wrote: ↑Sat Mar 13, 2021 6:17 pm
The authors who wrote the book on the PP used to contribute to this forum (one started it), so why will this new thread propel the discussion to new heights?

There are now some people here who were not here then?

Sure, but what do they have to offer that the authors didn’t in the pages that comprise this forum?

Who joins a community, assigns their own phrasing to the 4 asset classes and leads senior members along on a journey they’ve already taken. What’s the motive? Too lazy to read the threads?

buddtholomew wrote: ↑Sat Mar 13, 2021 6:51 pm
Vinny, my comment was not directed towards you.
I only think it’s fair to question the motives of a new member when they want to lead others down a certain path. If I need a refresher I can turn to HB or CR.

Xan wrote: ↑Sat Mar 13, 2021 8:06 pm
Towards the beginning of the musical 1776, the representative from Rhode Island, when casting the deciding vote on whether or not to allow discussion on the question of independence, said "Hell yes, I'm for debatin' anything!"

Go for it, guys.

Kriegsspiel wrote: ↑Sat Mar 13, 2021 8:15 pm
As one of the forum's retard-adjacent members, I am an enthusiastic proponent of you smart people talking about the PP in ways I won't understand.

whatchamacallit wrote: ↑Sat Mar 13, 2021 9:58 pm
Long thread already here. What I skimmed, it isn't necessarily question of what is much better than PP.

What I feel and I assume others as well is all the market confusion in general.

Record debt makes you question cash and bonds.

Stock prices that have no correlation to productivity at all.

Gold that feels like it should still be king but isn't as easy to move across borders as crypto.

Crypto that requires more faith than the depreciated cash and bonds.

Maybe the confusion really is being caused by the new asset class crypto which would also be a whole new thread.