Gyroscopic Investing

Isn't PP going down big time last few days?

D wrote: Isn't PP going down big time last few days?

Everything's going down the last few days except long bonds.  Who knows what can happen tomorrow?  Would you feel safer all in cash?

D wrote: Isn't PP going down big time last few days?

What are you worried will happen?

I have become convinced that at some point in the future we are all going to die.

I timed it just right--not.  I started my portfolio in November 2011 near the peak of GLD and VTI.  Needless to say, I'm getting pummeled.  Perhaps it won't be too long before my GLD quadrant will hit its 15% rebalance signal.  If it does and these trends continue, I might feel like I'll be throwing good money (CASH and TLT sales) after bad (GLD buys).

HB said you shouldn't try to time the portfolio, but I'm not sleeping as well as I might have been had I started at the beginning of this year.

D, there is a short term cycling of the gold price and that gives a bit of volatility to the PP. When it coincides with a stock sell off, that gives a more pronounced dip. Margin calls can cause a stock drop to accentuate a short term gold sell off. I take it as a time to add to the PP if I have some savings to add.
If you are fond of reading about short term gold price movements you might like:
http://jessescrossroadscafe.blogspot.com/

Personally I'm relaxed that this is just a short term wiggle that will soon correct. My impression is that the PP jitters by a couple of % to and fro but over time the upside jitters somewhat out number the downside jitters. A long term 8% annual rise can be made up from a slight excess of 2% upside moves to 2% downside moves. I don't get too freaked out by a couple of compounding 2% downward moves every once in a while.

gardnercr, the UK PP was pummeled earlier this year. Soon after I set up my PP, gold had "the worst January for over a decade". UK LTT  also dropped, then stocks dropped in March without much recovery of the others. Then everything recovered, then stocks plummeted but gold exploded upwards, then gold plummeted but LTT exploded upwards. Basically things are jittery now just as when I started. But once I had a 10% gain behind me, a 3% fall somehow seems easier to give the benefit of the doubt even though ofcourse it makes no difference in reality. You buying a few weeks ago rather than now is no more of a missed oppertunity than it is for someone who has had a PP since 1975 and who could in principle have sold it three weeks ago and then rebought it today.

If it is any consolation a PP allocation(25% each) to SHY/GLD/SPY/TLT

would have performed as follows this month as I measure it now:


SHY           GLD          SPY            TLT
100.0% 91.0% 97.7% 102.6%

PP             97.82%
SPY           97.66

gardnercr wrote: HB said you shouldn't try to time the portfolio, but I'm not sleeping as well as I might have been had I started at the beginning of this year.

During the gold bull market of the 1970's gold had something like a 50% pullback at one point before it shot up to $800/oz.  
Just stick to the plan.  You'll be glad in the end.

There's a saying that is something to the effect of "the more nauseous you are when you make a trade, the better it is likely to turn out."  Keep that in mind if you have to rebalance.  

D wrote: Isn't PP going down big time last few days?

At the moment the chart of the PP (GLD, TLT, SHY, VTI) shows it near the long term trend line:
http://etfreplay.com/combine.aspx

Odds are this is simply a pullback to the trend line and the trend will continue.

In my opinion, it is easier to stay in the portfolio when your initial investment incurs a short-term loss. More seasoned PP investors know that the portfolio will decline from time to time and one should expect to experience drawdowns similar to what we are experiencing this week.

Personally, I began investing in the portfolio earlier this year with money that is "precious" to me and have unrealized gains that I would like to protect. I have not witnessed a 3-day period where the portfolio has declined to this extent. I am living under the fallacy that the investment can only incresase in value. I may have been better off if I sustained a loss early in the year and realized that the portfolio fluctuates both positively and negatively.

It's days like this that makes me appreciate the PP even more. Gold took a beating, yet the total PP still beat the S&P. A "down" day or week for the PP sure beats the down days from any of my past investing strategies.

Tyler wrote: It's days like this that makes me appreciate the PP even more. Gold took a beating, yet the total PP still beat the S&P. A "down" day or week for the PP sure beats the down days from any of my past investing strategies.

Is that really a fair comparison? How did the PP perform today versus a 60/40 S&P500/BND investment mix (equivalent)?

I will panic (or more accurately, reassess) if/when assets stop behaving as they are designed, for protection of the portfolio over the long haul. 3 days of portfolio performance is meaningless noise.

A little over two years ago, I started the portfolio and bought gold at 1154. Within a month it had dropped almost 10% and it was a little painful to almost immediately buy more at 1060. Now, that move feels like genius, but it did not at the time. That has played out over and over again. My last purchase of TLT was at 88 or 89 dollars a share, but that was much less painful, a year later, despite what Bill Gross was saying around that time. The portfolio will tell you what to do if you will let it. But it will never guarantee days or weeks or months (18, I believe is the record) without loss. You just have to learn what to listen to and what to tune out.

Clive wrote: You have to remember that Harry devised the PP as a means to diversify out of gold heavy holdings.

The PP yearly gains since 1972 have had a 0.7 (relatively high) correlation to gold.

For the most part, stocks and LTT's cancel each other out on a daily basis. Producing a somewhat flat-line combination across stocks, LTT and ST's, but that rise over time (inflation + some). Gold in effect drags that combination up/down on a shorter term basis - and gold has declined -8% to -9% over the last 5 days

We are well aware of the recent decline in gold and the impact on the PP. Are you suggesting that long-term portfolio performance can be attributed to the increases and decreases in gold as well?

Price drops are a good time to buy, especially if it's close to a rebalance time.

I think it's interesting that in other markets when the prices drop, people take that as a cue to load up.  We call that a "sale."   A few weeks ago there was a sale on waffle irons and big-screen TVs.  Right now there's a December sale on gold.

And if the price goes down another $100, that's an even better sale!  Whoop whoop!

When I started the PP in 2009 it was a way for me to diversify out of gold holdings I had bought at $900 an ounce, so I'm still doing pretty good overall...

D wrote: Isn't PP going down big time last few days?

Hi, D,

This question reminds me of the way some folks think of diversification:  diversification "works," when the portfolio gains, and doesn't "work" when it declines, and it's all modified by one's general understanding, plus how frequently the portfolio is examined by any individual, whose emotions either impel questions like these, or don't. 

Of course, when beginning anything, those sorts of questions are often appropriate responses to worries or panics.  If past beginner stage (however that gets defined), these sorts of questions may be representative of something else.

Interim volatility is how this thing works, and by thus it attains lower volatility with strong returns over longer time frames. 

It is a good thing.  Revisit the basic posts by MT and Craig on how to deal emotionally with this wondrous composite creature.

Not looking at the daily (or perhaps, monthly) noise is helpful for many investors, in my view. 

smurff wrote: Price drops are a good time to buy, especially if it's close to a rebalance time.

I think it's interesting that in other markets when the prices drop, people take that as a cue to load up.  We call that a "sale."   A few weeks ago there was a sale on waffle irons and big-screen TVs.  Right now there's a December sale on gold.

And if the price goes down another $100, that's an even better sale!  Whoop whoop!

HB clearly differentiates between investing and Speculating. The PP should be rebalanced back to 4x25 when a tolerance bad is reached, not based on some intuition that an investment is "on sale". Speculate in your variable portfolio and "load up" if you believe gold is at an attractive price. Is something still considered on sale today if it can be purchased at 100 or 200 dollars less tomorrow?

buddtholomew wrote: HB clearly differentiates between investing and Speculating. The PP should be rebalanced back to 4x25 when a tolerance bad is reached, not based on some intuition that an investment is "on sale". Speculate in your variable portfolio and "load up" if you believe gold is at an attractive price. Is something still considered on sale today if it can be purchased at 100 or 200 dollars less tomorrow?

I agree with you here, Budd, when we're talking about individual asset classes (and I know you're referring to gold).

But, for something like PRPFX, I think it's a good idea to buy when it's down a bit. 

Right now it's down around 8% since early November.  I've started buying a few shares every day at market close, and will keep doing it until it rallies a bit. 

buddtholomew wrote: Is something still considered on sale today if it can be purchased at 100 or 200 dollars less tomorrow?

Yes, that's actually how sales are run.  If it doesn't sell today, the price drops tomorrow. 

smurff wrote:

buddtholomew wrote: Is something still considered on sale today if it can be purchased at 100 or 200 dollars less tomorrow?

Yes, that's actually how sales are run.  If it doesn't sell today, the price drops tomorrow.  

Investments are never "on sale", but rather represent the price investors are willing to pay for the holding.

buddtholomew wrote:

smurff wrote:

buddtholomew wrote: Is something still considered on sale today if it can be purchased at 100 or 200 dollars less tomorrow?

Yes, that's actually how sales are run.  If it doesn't sell today, the price drops tomorrow. 

Investments are never "on sale", but rather represent the price investors are willing to pay for the holding.

By that, nothing is ever on sale.  Every price paid, whether for an ounce of gold, a share of IBM stock, a Treasury bond, a pair of pants, is based on the price someone is willing to pay for it.

6 Iron wrote: 3 days of portfolio performance is meaningless noise.

And that ladies and gentlemen is the quote of the day.  Now it's time to go find a good book to read before bed.

smurff wrote:

buddtholomew wrote:

smurff wrote: Yes, that's actually how sales are run.  If it doesn't sell today, the price drops tomorrow. 

Investments are never "on sale", but rather represent the price investors are willing to pay for the holding.

By that, nothing is ever on sale.  Every price paid, whether for an ounce of gold, a share of IBM stock, a Treasury bond, a pair of pants, is based on the price someone is willing to pay for it.

Precisely...but I wouldn't consider a pair of pants an investment. Is BAC on sale? Its current NAV is 85% below the purchase price in 1991.