Why should PP continue going up?

[Kbg]

MG,

Yes you are right it could be backtested. Totally agree about AB. I don't know why Tomasz doesn't build a function that allows one tap individual position equity without having to resort to using the custom backtester. OBTW, when are you going to post max intraday drawdown post 1981? Pretty please will you do that?

[MachineGhost]

MG,

Yes you are right it could be backtested. Totally agree about AB. I don't know why Tomasz doesn't build a function that allows one tap individual position equity without having to resort to using the custom backtester. OBTW, when are you going to post max intraday drawdown post 1981? Pretty please will you do that?

1982 to date is 7.85% CAGR and -14.46% MaxDD. Do keep in mind Vanguard S&P500 had atrocious tracking error for about a decade after its introduction so the return may be a bit understated compared to what is possible nowadays.



Looks like 1981 was no more than a 2 sigma event based on 1982+:

[Reub]

Speaking of Britain, might this not be a good time to pick up some British stocks post-Brexit?

[Kbg]

Thanks MG!

[MachineGhost]

Deleted.

[Kbg]

The max intraday DD post 1981 I think is a better practical DD bogey, but who knows? Eventually I'd like to attempt coding a min variance PP similar to the Gestault U series on the PP from a couple of years back. Trying to get my brain around matrix algebra again first though.

[grapesofwrath]

hi this is my first post here. I learnt of the permanent portfolio several months back and subsequently read both harry brown's and greg rowlands recent book (clearly written I should add). what i took away was the permanent portfolio basically says buy your four assets in equal quantity for protection - since you are a fool if you think you can predict the future - and then shut up and get on with life and stop obsessing about it. i started reading this blog a few days back and see so many people obsessing how to tweak it, back test it and predict the future. seems at odds to me ?

[dualstow]

i started reading this blog a few days back and see so many people obsessing how to tweak it, back test it and predict the future. seems at odds to me ?

haha, yeah, it boggles the mind, doesn't it? The variable portfolio or vp is supposed to be an outlet for other investments so that we can avoid tweaking. Some just can't resist leveraging, taking out the cash portion, replacing the cash portion, and so on.

Also, once you learn the rules, there isn't that much to talk about, save fretting over the price of gold and the crazily low yields. Hence "other discussions."

Just tune it out.
And welcome, by the way!

[grapesofwrath]

thank you for the welcome. i will try ignore the navel gazing... i thought this forum may serve useful advice on implementation issues. what i have is not too far removed from pp. i have a significant chunk in "cash" - a vanguard short term treasury fund, and also in a vanguard long term treasury fund. i've been wondering about instead buying the bonds from the treasury directly (a self constructed bond ladder). my thinking was this would reduce some of the "institutional risk" and it may also reduce the fees i pay albeit it with a little bit more work on my part (the vanguard fee is low % but the total is noticeable). i've never bought treasuries directly. is it easy ? how does one set a price or you just take what is there? would you expect an institution (eg blackrock, vanguard etc) to gets a lower purchase price than the little person which would offset their fee ? thanks.

[dualstow]

It's easy. I think there are How To stickies on it in the bond section. There's treasury direct, which I consider to be a clunky website, but you can do it. It's easier still in Vanguard and Fidelity, and fee-free in both.

You can look at the prices in the secondary market. I usually buy at auction when I have the cash which means I "just take what is there" with regard to price, but I'm pretty sure I'm in the minority.

I'm certain institutions get better prices because they can buy at such high volume. Enough to offset the fund fee? Well, I don't avoid treasury funds due to the fees, as they're not that high to begin with. I just like holding the pure bonds and knowing that nothing else is mixed in. You can buy teriyaki sauce with all the crap in it, or you can make your own from soy sauce, brown sugar, sake & mirin.

Still, I seem to remember Craig saying the Vanguard fund is fine. I used to hold it, and TLT and EDV.

[MachineGhost]

The max intraday DD post 1981 I think is a better practical DD bogey, but who knows? Eventually I'd like to attempt coding a min variance PP similar to the Gestault U series on the PP from a couple of years back. Trying to get my brain around matrix algebra again first though.

I've tried it all. It doesn't improve it much. In some cases adding in correlation and momentum kills the return as well as the MaxDD. I'd say just stick to 12-month trailing volatility for sizing during rebalancing for the least amount of work.

I ran an optmization and 33 trading days was optimal for the volatility calculation: 7.94% CAGR and -19.78% MaxDD. I imagine there's some interplay between the optimal rebalancing band, volatility calculation period and rebalancing frequency.

[MachineGhost]

hi this is my first post here. I learnt of the permanent portfolio several months back and subsequently read both harry brown's and greg rowlands recent book (clearly written I should add). what i took away was the permanent portfolio basically says buy your four assets in equal quantity for protection - since you are a fool if you think you can predict the future - and then shut up and get on with life and stop obsessing about it. i started reading this blog a few days back and see so many people obsessing how to tweak it, back test it and predict the future. seems at odds to me ?

Welcome to the forum! In 1987 when the PP first came out was a different world then. Tweaking wasn't really practical or on anyone's radar. Even now, any tweak really needs to be looked at with a skeptical and jaded eye since there's so many contrary influences to overcome. It certainly isn't mandatory and if you want to just live your life instead of being obsessed, you'll be fine.

[MachineGhost]

how does one set a price or you just take what is there? would you expect an institution (eg blackrock, vanguard etc) to gets a lower purchase price than the little person which would offset their fee ? thanks.

Sign up for a TreasuryDirect account and you can look around and at the buying process.

The way the auction process works is fair. Everyone gets the same price.

[MachineGhost]

The max intraday DD post 1981 I think is a better practical DD bogey, but who knows? Eventually I'd like to attempt coding a min variance PP similar to the Gestault U series on the PP from a couple of years back. Trying to get my brain around matrix algebra again first though.

You can't ignore a MaxDD just because you don't like it!

I cleaned up my data some more so now 1982+ basis Jan is 8.10% CAGR and -14.19% MaxDD.

The other bad news is the MaxDD has increased to -26.38% for 1968+.

Interestingly, P2T shows using other durations and bands is still inferior to 40/10 and 30-year Treasury, at least for recently. See the Resort thread for the chart.

[Kbg]

You can't ignore a MaxDD just because you don't like it!

I cleaned up my data some more so now 1982+ basis Jan is 8.10% CAGR and -14.19% MaxDD.

The other bad news is the MaxDD has increased to -26.38% for 1968+.

Interestingly, P2T shows using other durations and bands is still inferior to 40/10 and 30-year Treasury, at least for recently. See the Resort thread for the chart.

True bro. I just think going off the gold standard was a one off. Kinda like the Swiss currency peg. Once it came off, boom.

Personally, if one is going to tweak going forward I think we need to spend some time with the LTT component. I see nothing particularly weird about gold or stocks at a macro level. Yes US stocks are expensive which doesn't bode well but there's nothing abnormal. LTTs not the case. I've held them since I got into PP and don't plan on changing until I see concrete evidence of a global turn. Will definitely get some pain at the turn but that's OK. The fact is LTTs are doing exactly what they should.

Off the top of my head, one simple tweak may be to overweight/explicitly add a small wedge of banks/financials when the turn occurs. What else does well in a rising interest rate environment? Could tweak to those as well.

In any event, my personal opinion is that LTTs are going to be the pivot off which PP relative performance turns.