Gyroscopic Investing

Volatility is the pain we have to suffer to achieve greater rates of performance.

I feel bad in negative days.

Can you please help changing my mindset for the future.

rocketdog wrote:Here's the part where I get sick:  AAPL was trading for around $10 per share at that time. 

Well, don't beat yourself up. I bought Apple at $9 a share (the day they announced the iTunes store) and I held on to it for a 2,500% profit. Unfortunately, I only invested a pittance in it at the time. Keep in mind that people had a LOT of doubts about AAPL back then.

You can read the story about how challenging it was for me to hold onto AAPL during its wild ride...

http://gyroscopicinvesting.com/forum/ht ... ic.php?t=1

Had I invested enough to make a fortune, I probably would have sold it even earlier — likely missing it's run.

Whether you want to believe it or not, your brain often prevents you from investing successfully.

Gumby do you see any other "Apples" out there today?

Reub wrote: Gumby do you see any other "Apples" out there today?

I think the Permanent Portfolio really has some potential!

Now that I started PP, it is going down 


EU-PP is going down and US-PP is going up

can you please explain?

frugal wrote: Now that I started PP, it is going down 


EU-PP is going down and US-PP is going up

can you please explain?

Yeap, you are watching the portfolio to closely.  Sit back, let it do what it was designed to do.

Make a VP that you can micro manage if you want, and forget about your PP.  Mr. Bogle said it awhile ago and I have found it to be sage advice; the two items with the greatest correlation to a stable return are lower fees and less transactions.

Hello Bean,

Being 65% on PP and thinking to move to 90% is not easy to sit back and relax.

But I don't know where more to put my savings...

frugal wrote: Hello Bean,

Being 65% on PP and thinking to move to 90% is not easy to sit back and relax.

Why is it not easy to sit back and relax?

Hello Boss,

Well maybe I am to much conservative and I don't like to see my savings , hard earned money DECREASING.

Can you write me some nice words about the feelings and volatility.

Thank you MT!

frugal wrote: Hello Boss,

Well maybe I am to much conservative and I don't like to see my savings , hard earned money DECREASING.

Can you write me some nice words about the feelings and volatility.

Thank you MT!

How about a haiku:

Don't watch the PP
Watched pots never seem to boil
Signed, the PP chef

I wasn't going to post again on this thread because as usual we stopped discussing economic reality and ventured into the realm of fantasy. It happens often which is frustrating. It goes something like this...."Long term rates haven't moved up so there's no way to know for sure they will". Ok sure. You have to believe that humans will continue to accept ever increasing negative rates into perpetutity and that the US government can borrow an unlimited amount of dollars without consequence. You have to believe in a fantasy world that doesn't exist. "Japanese investors have made a killing in their bond market". No they haven't. Rates have been low for a long time now. They had capital appreciation a long time ago yes. Now they are in a bubble. There is no where for their rates to go. They haven't been making squat. The BoJ has announced a 2% inflation target. It can accomplish this easily. It has just devalued the Yen by a tremendous amount. Bond holders are getting killed by inflation. They will be heading for the exits or they will have to keep getting killed by inflation. Either way they are going to lose. The Japanese have so much debt that if the rates on their 10-year go to 2.5 from the current 1% it will take their entire tax revenue just to service the debt. This is economic reality. The bubble is obvious. Saying that it's wise to bet a portion of your capital on it continuing is like saying saying I'm gonna take a reward-free risk investment because it hasn't blown up yet. It's like buying tesch stocks in 1999 or a big house to flip in 2006. It's actually worse because at least then the trend was intact and the stated government policy wasn't the opposite of your goals.

Same thing for US bonds. The central bank is a bunch of USD printers. They have said over and over and over that they want inflation. They want a weak dollar. They will fight any attempt by the market to deflate. They have show they will do this with blast after blast of inflation. Gold has been the canary in the mine. It has at least quadrupled the return of US bonds. Stop looking at Jan-Dec 12 month periods. Stop saying for this particular 12 month period this turd performed good so it makes sense to own it. There is no economic reason why anyone should think the long-term US government bonds will do better than the last decade. And the return for the last decade has not been good, despite what is sometimes touted here. TLT has returned about 120% in a little more than a decade. The same as US stocks. Emerging markets and gold have returned 350% plus in the same time. This is the only place investors have been safe. Sound money and sound economies. Just because two crappy investments (US LTTs and US stocks) are negatively correlated doesn't mean together they form a good investment. It's just a smooth ride to losses in real terms.

The condition we are in is stagflation. The central bank is expanding the money supply. They are telling us they will keep going. There is no end in sight. Prices are rising despite central banks all over the world buying up the dollars and locking them away. What do you think will happen if they ever stop? What if they actually start buying things with their dollars? The dollars will hit like a Tsunami on our shores. Americans will not be able to afford imports anymore. The effects of all the inflation are going to be evident to the biggest idiot out there. There is no economic growth in the country. There is no savings. There is no investment being made in capital because there is no savings. Printing dollars does not create wealth. It cannot help the economy. It is the theft of purchasing power from anyone dumb enough to still be holding large amounts of dollars. It's being used to buy votes and give bribes to special interest groups. Stop helping the mafia wreck the country by loaning them your savings. They are fleecing you. You will not make money doing it.

The yeilds cannot stay low with the FED buying. They are almost the only game in town now. When they stop......the losses will be terrible. If they never stop the losses will be terrible. Either way it is going to end badly for the bond holders. The government is running a TRILLION dollar deficit with interest rates near zero. Zero guys. Ask yourself what's to happen if short-term rates go to 3 or 4 percent?!?!? Or keep pretending it's not going to happen.

Don't believe that if rates bounce between 3.5% and 2.5% you are making money. If you think you can trade that then good luck to you. If you think re-balancing gives you "volitility capture" or something you are mistaken. The 50% you lose on the way up will offset the 50% you lose on the way down unless other assets (stocks and gold) are doing better than bonds and adding to your capital when you rebalance into bonds in which case you would have been better off avoiding bonds entirely. Imagine two investments with perfect negative correlation. every swing up in one is met by a swing down in the other. Imagine after ten years the return on both is equal but it's been a perfect zig-zag. Your return will be exactly the same as the two. Your equity curve will split the two. There is no "volatility capture". Browne was talking about one asset class going into a bull market and rising much farther than the other assets drop. It's volitility capture on whatever is in a bull market. Volitility to the upside. That's what you want to capture. If you think LTTs are going to be in a bull market after 30 years and historic prices with the FED vowing to keep rates negative and the government swimming in unpayable debts and the creditors getting out of the game and the demand for dollars decreasing as the American economy is ruined and the demand for dollars shrinking as we have less and less to offer the world...well all I can say is good luck.

I hope this doesn't hurt anyone's feelings. I hope somebody here reads it and realizes the risks they are taking on.  A gold-stock portfolio is going to be more volitile that the PP. No question. It might have a lower return this year, or next year. Yields might go down in the short run, they might stay low in the long-run. But you aren't going to make any more money in them in the long-run. If it's low-volitility you're looking for ok. But don't fool yourself into thinking you're safer with the paper right now. The lunatics are in charge of the assylum.

Well crap I meant this for the thread on Economic conditions.

Kshartle wrote: I wasn't going to post again on this thread...

I knew this was probably intended for the other thread.  I don't really feel "qualified" to enter the debate, but I wanted to say that I appreciate hearing your perspective and I hope you will continue to post.

Thanks. Listen I think The PP concept is brilliant. I've read all of Harry's books. The ones from the 70's are much much better trust me. They are much more relavent to today also.

The PP is probably right for some people with very short time horizons who don't intend to pass on wealth or can't handle ups and downs.

I'm 33, no wife, nor kids, no mortage, no debts, plently of savings and am earning more money then ever in my life. So I don't worry about what will happen to my investments this year or next year. I'm sure I would feel differently if I were in a different situation. No question. I'm sure none of you are in the exact same situation as me. For those of you who aren't worried about what your investment are going to do in the short run I'm just trying to say do yourself a favor and ease out of the investments that have little economic hope of safeguarding your wealth in the long-run. I don't have a crystal ball. I certainly don't know exactly what is going to happen. I just don't see any justification for the risk in holding the government paper right now. If anyone can think of a scenario in which it might work to your benefit please tell me. It's not enough to say "Well.....what if bond prices rise"? or...."what if gold and stocks fall what then huh"? What if pigs fly? What is the economic scenario? The only dollar holdings I would have right now is cash under the matterss or a little in your checking account. If the FED tightens it will be nice to have it. I'm betting that won't happen.  I might be dead wrong.

Kshartle,

I used to get as worked up as you are now about the things you are worked up about, but I saw too many things that were supposed to be inevitable never happen.  Now, I just let things happen without trying to impose my own narratives onto reality.  The PP helps me do this.

I get your concern and outrage.  We live in a world filled with stupid arrangements run by stupid people.  The thing is, your vision of the future might not happen, no matter how strongly you believe that it will.

Stupid things can often continue for a long time.  Look at all of the wacky things people do in the name of religion.

I'm just asking how anyone can benefit long-term in US debt. The government has no way of paying it back in non-inflated currency. The point of loaning money is to get paid back. Creditors are getting swindled. No one has offered an idea of how the government can pay them back except by having the Fed print.

Kshartle wrote: I'm just asking how anyone can benefit long-term in US debt. The government has no way of paying it back in non-inflated currency. The point of loaning money is to get paid back.

What explains zero-coupon bonds, then? Purely a deflation bet?

The point of loaning money is to get paid back, true. But there's another point to owning a bond--as distinct from simply handing over your cash to a friend or a bank--you get to count the bond as a tradeable asset with a value of its own in addition to the stream of coupon payments. I get that at 3.15%, 30-year bonds look like terrible assets to you. People said that when yields were at 4%. They said it when yields were 5%, and 6%, and 7%, when everyone was getting rich in tech stocks and gold was falling year after year.

"Why would any fool buy a bond at 7% when inflation's 5% and my blue-chips are going up 20% a year? Why on earth would anyone own a useless lump of metal that doesn't have any dividends or interest, and has been losing value for 10 years?"

I'm like you in my attitudes to personal indebtedness. I have none at all, and no mortgage. But loaning the U.S. Government money is different. They're not going to default. Paying it back in inflated dollars is not defaulting, it's called normality, because every debt is paid back in inflated dollars when you live under a debt-based monetary system with some level of constant background inflation.

If rates rise, that implies greater inflation. That will cause gold to explode in value and I'm glad I have a bunch of it, unlike most investors. It will also cause cash to yield more. It's just not too worrisome to me. One asset will always be a stinker. It was gold in the 90s. Stocks sucked in the 2000s for buy-and-hold investors. Cash is trash right now.

If my crystal ball functioned better, I'd be more than happy to only own the best-performing asset during the time when it performs best… but sadly, it's been broken since I started investing. That's why I have a Permanent Portfolio full of smelly government bonds, useless yellow metal, worthless cash, and schizophrenic stocks.

The primary reason I hold USTs is because of the short term (daily, weekly, monthly) portfolio volatility dampening protection they provide.  If I didn't have them, I would NEVER be ever to withstand the fluctuations of holding the other assets, stock in particular, and I would be getting zero return.

For me, as my portfolio grows in size, minimizing volatility becomes as, if not more important than maximizing return. 

Just another way of saying - it really should be looked at as a package that balances risk, return and volatility in a manner that provides a relatively stress free ride.

MediumTex wrote:

frugal wrote: Hello Boss,

Well maybe I am to much conservative and I don't like to see my savings , hard earned money DECREASING.

Can you write me some nice words about the feelings and volatility.

Thank you MT!

How about a haiku:

Don't watch the PP
Watched pots never seem to boil
Signed, the PP chef

I will try to see it less times per day :-)

Thank you boss!

Pointedstick wrote: What explains zero-coupon bonds, then? Purely a deflation bet?

Do you mean bonds with no coupons (otherwise known as strips) or do you mean bonds with a 0% coupon?

strips are sold at a discount to face so the return becomes a capital gain.

Most 0% (or less) bonds are being sold to large (institutional) investors that have to place cash somewhere.  It could be cash for short-term needs, or it could be money market fund cash from everybody holding cash in their 401(k) or brokerage accounts.

Pointedstick wrote: If rates rise, that implies greater inflation. That will cause gold to explode in value and I'm glad I have a bunch of it, unlike most investors. It will also cause cash to yield more. It's just not too worrisome to me. One asset will always be a stinker. It was gold in the 90s. Stocks sucked in the 2000s for buy-and-hold investors. Cash is trash right now.

Real rates rising is bearish for gold.  If nominal rates rise, but inflation is lower, gold will not explode.

MachineGhost wrote:

Pointedstick wrote: If rates rise, that implies greater inflation. That will cause gold to explode in value and I'm glad I have a bunch of it, unlike most investors. It will also cause cash to yield more. It's just not too worrisome to me. One asset will always be a stinker. It was gold in the 90s. Stocks sucked in the 2000s for buy-and-hold investors. Cash is trash right now.

Real rates rising is bearish for gold.  If nominal rates rise, but inflation is lower, gold will not explode.

True. But if rates rise without inflation, we're entering a tight money recession and nothing except for cash is going to be doing well until it's over.

Eurozone
2013 (€)
Total Ret. Stocks Bonds Gold Cash Perm.
Portf. RVD
Analyse
Portf. Silver Bitcoin Amount of € Printed Estim. True
Inflation

15-Feb 1.3% -3.7% -3.2% 0.0% -1.4% -4.0% -0.7% 97.4% -8.1% -1.6%








started at a bad point

Frugal, it's very hard to interpret the numbers you posted. Could you format them in a more readable way?

Regardless, any portfolio can start to fall as soon as you get in; it's just a sad fact of life. As long as your investment time horizon is a few years or longer, it really doesn't matter what the portfolio does from one week or month to the next.

Ironically, when people begin to question a strategy it is often the best times to jump in, and when everyone is jumping in and slapping each other on the back it is often the best time to wait.

In investing, if something feels 100% right, it is probably wrong.