This is the best time in 45 years to invest in the Permanent Portfolio

General Discussion on the Permanent Portfolio Strategy

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vnatale
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by vnatale »

ppnewbie wrote: Sat Feb 10, 2024 9:23 am
7.7 percent higher than previous all time high.


That is always a tricky comparison as all things have to be equal. So higher than previous all-time high for the exact same time period?

And, is that 7.7% higher 7.7% added to the previous return? Or 7.7% of the previous return?
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by ppnewbie »

This thread is taking a strange turn. Last time I will respond. Take the last high for the last year or so before the portfolio went sideways and down for a bit then use that high number muliply by 1.077.

Now it will get even more strange if you say something like is that rolling returns month over month. I can delete the post if you want Vinny.

Just looked now its 8.3 percent higher than the previous high (2 year look back).
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by dualstow »

vnatale wrote: Sat Feb 10, 2024 8:52 am ..
I made my only investments now 21 years ago in January 2003. All investments since have gone into cash.
..
Seems like I would have been much better off over these last 21 years by having done the exact opposite. Having the bulk in Growth and giving away the Value funds.
Opposite: I thought you were going to say not putting so much into cash. O0 Still, if you were in your late 50’s or older by then, I can undertand the desire to sock more away in non-stocks.
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by vnatale »

dualstow wrote: Sat Feb 10, 2024 7:18 pm
vnatale wrote: Sat Feb 10, 2024 8:52 am
..
I made my only investments now 21 years ago in January 2003. All investments since have gone into cash.
..
Seems like I would have been much better off over these last 21 years by having done the exact opposite. Having the bulk in Growth and giving away the Value funds.


Opposite: I thought you were going to say not putting so much into cash. O0 Still, if you were in your late 50’s or older by then, I can undertand the desire to sock more away in non-stocks.


Doing all that cash worked out well during 2007 / 2008 and other down periods. At this point, I'm at about 50 / 50, equity / (fixed + cash).
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by dualstow »

I appreciate the smooth ride of the PP. If I had the stomach for it, I’d be 90% stocks to just fight inflation and bet on prosperity (and my own longevity).
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by mathjak107 »

vnatale wrote: Sat Feb 10, 2024 10:01 pm
dualstow wrote: Sat Feb 10, 2024 7:18 pm
vnatale wrote: Sat Feb 10, 2024 8:52 am ..
I made my only investments now 21 years ago in January 2003. All investments since have gone into cash.
..
Seems like I would have been much better off over these last 21 years by having done the exact opposite. Having the bulk in Growth and giving away the Value funds.
Opposite: I thought you were going to say not putting so much into cash. O0 Still, if you were in your late 50’s or older by then, I can undertand the desire to sock more away in non-stocks.
Doing all that cash worked out well during 2007 / 2008 and other down periods. At this point, I'm at about 50 / 50, equity / (fixed + cash).
pretty much the same if i take all my models plus cash and make one big portfolio

53% equities 37% assorted short to intermediate term bond funds , 10% cash
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by Wonk »

Checking back in 18 months later. Since 10.31.22, a cashless PP (33x3) is up over 20% as of 3.31.24. From a big picture perspective, it still looks to be about 12% undervalued relative to expected real return of about 5.6% over the long term. So I feel good about continuing to put cash to work vs t-bill & chill.

Back in '22, it was ~20% undervalued which is pretty rare--the last time being 1982. As a reference point, there should have been alarm bells going off in July of 2020 when it was 20% overvalued relative to expected real returns, which would suggest near term underperformance at best or a healthy drawdown at worst. Although t-bills weren't paying anything back then, that was the place to park liquidity until a more attractive environment presented itself. We all witnessed what happened over the next 2 years. Of course, hindsight is always 20/20.
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by ppnewbie »

Can you remind me what the cashless PP is? Stocks, Gold, LTTs? Also how are you measuring the value? I am currently seeing an everything bubble inflate (Stocks, Gold). But I guess LTTs are getting cheaper and small cap value is still a bit stagnant. So maybe not an everything bubble.
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Re: This is the best time in 45 years to invest in the Permanent Portfolio

Post by Wonk »

ppnewbie wrote: Wed Apr 10, 2024 12:28 pm Can you remind me what the cashless PP is? Stocks, Gold, LTTs?

Yes. Cash is a dead asset that dampens volatility. It has useful features and everyone should have cash, but for the purposes of tracking this portfolio, I don't include cash.
ppnewbie wrote: Wed Apr 10, 2024 12:28 pm Also how are you measuring the value?
The mean expected real rate of return for this portfolio is 5.6% over the last 46+ years. If you take the real rate of return from 1978 and plot highs and lows, the mean is 5.6%. Projected over a long time horizon, it gives you an idea of what the expected value of these assets as a whole should be. Keep in mind:

1. It's only 46 years, not 400 years. So it's a limited data set. As Long Term Capital Management found out, that can sometimes be problematic.
2. Past returns do not guarantee future returns.
3. The portfolio rarely returns exactly 5.6%. It's typically trending either higher or lower but that's the direction it is going in. It can take years to revert to the mean. When the variance is extreme, as in 1980(+33%), 1982(-20%), 1987(+25%), 2002(-18%), 2008(-19%), 2012(+18%), 2020(+21%) & 2022 (-21%), it likely makes sense to take a step back and look at the big picture. Those extremes are where fear and greed are felt the most and should be put in perspective. When it's overvalued, sometimes it trends sideways and bleeds off the excess. Other times there's a sharp drawdown as in 2020-2022. When it's undervalued, it likely make sense to put more liquidity to work, but knowing that it may take years to trend back up.

Right now the portfolio sits at -12% so it's in the lower quartile of expected returns.
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