Gyroscopic Investing

Forum members,

I know many non-US investors have implemented the ideas of the Permanent Portfolio where you live. I have seen various posts, but wanted to get a thread going where you list out your specifics for others that may be in the same situation. So this is the place to document the details of how you implemented a Permanent Portfolio where you live outside the US:

In what country do you reside?

What funds did you choose for stocks?

What bonds did you use?

What cash options did you use?

What do you recommend for gold?

So spill it! Feel free to explain each choice and your thought process if you want.

US investors have it easy by comparison with the products available here. So let everyone know how you did it where you live while keeping to the basic principles of the strategy such as low costs, passive investing, etc.

Sounds like I have a Saturday project.  I'll do what I can tomorrow to condense my thoughts on the Canadian Permanent Portfolio into a single post.

Ok, I write my posts helping me with the Google Translator, but I'll try my best.
I live in Uruguay, where there is no index of stocks or long-term bonds or options to purchase gold easily (3 million residents only). For what I have tried to implement a Global PP trying also to closely match the HB PP (mainly in volatility).

My PP:

Equity
VTI
VXUS

Bonds
Individuals 30 years U.S. Treasury
EDV

Gold
IAU
SGOL
PHYS

Cash
SHY
BWZ

I'm thinking about changing SHY by UUP that compensates me the BWZ volatility and low overall volatility of the entire portfolio.

My main problem now is that in Uruguay inflation averages 8.5% and the dollar is being devalued in recent years, so I lose purchasing power locally.

I'm UK based and what I did was:

bonds: TR60 (UK treasury gilt 4% 21/01/60)
gold: etfs PHGP and SGLN
stocks: equal amounts of CTY, BRSC and TEM
cash: NS&I ILSC and some bank savings accounts.

I realise that my stock allocation as managed investment trusts especially flies in the face of what is kosher but it is what I did.

The Canadian Permanent Portfolio

Canadian Stocks (25%):

XIC – The best option.  It includes the top 250 companies in Canada based on market capitalization, and has a 10% cap on individual stocks to help reduce the “Nortel effect”? (in 2000 Nortel accounted for 1/3 of the entire TSX).  It does the best job of tracking the TSX.  (MER = 0.25%)
VCE – Just over three months ago Vanguard jumped into the Canadian market!  VCE includes the top 100 Canadian companies, but I don’t believe there is a cap on individual stocks.  I’m always weary of new ETF’s, but I’ll keep an eye on it. (MER = 0.09%)
XIU – Top 60 Canadian companies.  No cap.  (MER = 0.17%)
ZCN – Top 60 Canadian companies.  10% cap. This is actually a decent option.  (MER = 0.15%)

(Optional) US/International Stocks (10-0%):
XWD – Includes 50% US and 50% EAFE stocks.  It is not hedged to CAD which is important since hedging can increase the tracking error by 0.50-1.0%.  (MER = 0.45%).
US ETF’s – Another option is to buy US ETF’s directly.  This is best if you already hold USD, or are willing to use Norbert’s Gambit to convert CAD to USD.


Long Bonds (25%):

ZFL – The best ETF for holding only Canadian Government Long Bonds.  The trading volume is low, but this is not a problem since “bots”? maintain bid/ask prices close to the real-time NAV. The downsides are it contains 8% mortgage debt and lends it bonds to short-sellers. (MER = 0.20%)
Buy Direct – It really is quite painless to buy them, just try to get them into your tax-sheltered accounts (RRSP or TFSA).  The longest available is 2045.

(Optional) US Long Bonds (10-0%):
TLT – It’s not perfect and they do lend their bonds, but at only 5% of my portfolio I’m not too worried.
Buy Direct – I’m not sure about this.  US bonds are not available at my online bond desk, but they can likely be obtained by calling your broker.


Gold (25%):

GTU.UN – Out of the entire gold eft’s, I trust GTU.UN the most.  They have been in business since 1961 with their CEF fund.  GTU.UN is a closed-ended etf which means it can trade at a premium or discount to its NAV price.  I would not buy GTU.UN if the price is 5% greater than the NAV.  (MER = ~0.40%)
IGT – This is the CAD version of IAU and trades on the TSX.  It has the lowest MER, but I have been swayed by Zerohedge to not quite trust them.  This is an open-ended etf, which means it ‘always’ trades near its NAV.  (MER = 0.25%)
CGL.C – Can be traded for free if you are with Scotia iTrade.  It’s similar to IGT.  (MER = 0.50%)
Physical – Obviously the best option.  Canada applies a sales tax to mixed alloy gold coins (Eagles, Krugerrands) to encourage the purchase of Maple Leafs, so only buy gold coins that are at least 99.99% pure gold, such as Maple Leafs, Philharmonic, Buffalo, etc.  I mainly buy Maple Leafs since they are the cheapest and have the best resale value.

Cash (25%):

Buy Direct – Best option.  Create a 3 or 6 rung ladder of short term Canadian Government bonds going out two or three years.
Savings Account / GIC’s – I have a savings account which I like for the liquidity.  The downside is you open yourself up to a failure of the CDIC system, which could happen under extreme stress.  Keep savings account below $100,000.
ZFS – Not a good option since it contains a lot of mortgage debt. (MER = 0.20%)


I think that covers most of the options for a Canadian Permanent Portfolio.  I would keep exposure to foreign currency/assets and gold below 50%, since above this point back-testing shows that the portfolio becomes more volatile and returns are reduced.

Below are additional links to where the Canadian PP has come up in this forum:

- I discuss the '50/50 Option' where I question the optimal amount of foreign currency/assets.  It also includes a lot of back-testing data.
- More discussion on foreign currency/assets
- Here is what I personally do for the Canadian PP.  I'm in the process of adding 5% TLT.

Thanks for taking the time to reply to the thread. Looks like a lot of interesting options out there.

I'm in Australia and have just started an HBPP.  Our government doesn't issue bonds longer than 15 years so I have purchased 50% 10 year bonds instead (see discussion at http://gyroscopicinvesting.com/forum/ht ... ic.php?t=4).

50% 10 year bonds purchased directly from RBA
25% physical gold largely purchased from Perth Mint (easy as I've had this for several years already)
25% VAS Vanguard ASX 300 ETF index (0.15% costs)

I've also been thinking about adding a US index and world ex-US index to the share component.  Our stock markets is largely made up of mining companies and banks so it's not broadly diversified.  Australia is an all-in bet on China's future and the continuation of our housing bubble...

Clive, thanks for the tip. I didn't know about that. Previously I failed to convince her that they were a sensible alternative to a bank savings account but I took out my limit. If they issue them again and she does take out her limit, then I guess that trust set up would be the next level of weirdness to try and bring in.

escafandro wrote: Ok, I write my posts helping me with the Google Translator, but I'll try my best.
I live in Uruguay, where there is no index of stocks or long-term bonds or options to purchase gold easily (3 million residents only). For what I have tried to implement a Global PP trying also to closely match the HB PP (mainly in volatility).

My PP:

Equity
VTI
VXUS

Bonds
Individuals 30 years U.S. Treasury
EDV

Gold
IAU
SGOL
PHYS

Cash
SHY
BWZ

I'm thinking about changing SHY by UUP that compensates me the BWZ volatility and low overall volatility of the entire portfolio.

My main problem now is that in Uruguay inflation averages 8.5% and the dollar is being devalued in recent years, so I lose purchasing power locally.

Thank you for your post. Are you purchasing these ETFs on the US exchanges or are they being offered in Latin America?

Through a U.S. broker.
You can access to many of these ETFs in the Argentine brokers. But the commissions are higher and there is no something like insurance SIPC. I could pay less in taxes by investing through a local broker, but the reality is that I don´t trust them, or the legal security that we have.
Uruguay is better in terms of legal security, but today I was checking a broker commissions and for example they charge you 1% for buying and selling stocks and bonds.

Off topic: What could be a possible portfolio if the only concern was inflation? - Is an alternative that I'm studying for my VP. - I thought a combination of Gold, Latin American indices, Oil and Silver, maybe it could work but I don´t have a very clear idea about it.

I am a Euro investor and here is my PP:

IMEU iShares MSCI Europe Fund
X25E Db X Trackers Ii Iboxx Euro Sovereigns Euro Zone 25+ Tr Inde
PHAU ETFS Physical Gold Fund
C3M CASAM ETF EMTS 3M

These and other Euro PP choices are discussed in the thread http://gyroscopicinvesting.com/forum/ht ... ic.php?t=8.

In what country do you reside?
Germany

What funds did you choose for stocks?
- iShares DAX (50%)
- iShares DJ EURO STOXX (50%)

What bonds did you use?
30-year German Federal Bonds (Bundesanleihe)

What cash options did you use?
German Day Bonds (Tagesanleihe)

What do you recommend for gold?
I bought coins (Krüggerands, Wiener Philharmoniker etc.) online from
http://www.ps-coins.com
http://www.silber-corner.de/

For other gold dealers, see:
http://bullionpage.de/
http://www.goldseiten-forum.de/index.ph ... adID=14323

Thank you, craigr, for introducing me to the PP and Harry Browne, and for answering my many questions before.
Thanks a lot for the wealth of information you provide through your blog, this forum and the PP thread on Bogleheads.

escafandro wrote: Off topic: What could be a possible portfolio if the only concern was inflation? - Is an alternative that I'm studying for my VP. - I thought a combination of Gold, Latin American indices, Oil and Silver, maybe it could work but I don´t have a very clear idea about it.

I think you are on the right track there if you are building a VP with higher inflation as your investment thesis.  Gold would definitely be a part of such a VP and maybe some silver.  I would also consider real estate, especially rental property with short term leases (1 yr or less).  That would almost be an adjustable rate bond.  Beyond that look at commodities that people will have to buy no matter the economic conditions.  This would include food (people have to eat), fuel (you can cut back on driving but not many people can just stop altogether and in many places you need to consider heat in the winter) and alcohol.  Drunks may eschew the expensive stuff in hard times, but booze will always be in demand.  Tobacco is another option, though for moral reasons I personally would not go there.

Other more traditional routes include currency diversification using foreign stocks (index funds serve nicely here) or foreign government bonds.  Believe it or not there are a handful of countries whose bonds I would consider a buy (Canada, Sweden, Norway, and Switzerland come to mind).  I would steer clear of the big four currencies (USD, EURO, JPY and GBP) as I think they are all compromised by dangerous levels of sovereign debt.

And lastly one can make a great deal of money by making contrary bets, which is to say identify the assets you think will get murdered in a high inflationary scenario and short sell them.  This I would note is a high risk strategy since you have to not just be right about looming inflation, but you have to have the timing right as well.

escafandro wrote: Off topic: What could be a possible portfolio if the only concern was inflation? - Is an alternative that I'm studying for my VP. - I thought a combination of Gold, Latin American indices, Oil and Silver, maybe it could work but I don´t have a very clear idea about it.

Inflation where you live only? Or inflation only in US dollar?

Sounds like your main problem is the local currency. In which case it may make sense to buy either a US Dollar based Permanent Portfolio or your VP options in US Dollars. But may be better to own a diversified portfolio of short-term bonds from a number of countries along with gold. Or you could do a commodities index, real estate index and gold mix.

Thanks for the suggestions.

Inflation where you live only?

Yes, the problem is local inflation in conjunction with declining dollar.

I live in Uruguay but because I´m argentinean I pay taxes there. The tax treaty between Argentina and the U.S. is pending, so I guess that double taxation is an issue (for interest and dividends, no for capital gain). Therefore I've stayed away from bond and real estate ETFs. In my PP I purchase bonds directly to avoid paying the US 30% withholding.

escafandro,
You could choose tax-friendlier jurisdictions like Singapore, Switzerland, Luxembourg? You would not  have to bother with US paper work and witholdoings, just your local taxes.

You could choose tax-friendlier jurisdictions like Singapore, Switzerland, Luxembourg?

Clive´s link:

On 31 January 2012, Argentina’s Official Gazette contained a summary of a note sent on 16 January by the Foreign Affairs Bureau to the Swiss Ambassador, informing Switzerland that Argentina no longer intends to provisionally apply the tax treaty signed in 1997 (as well as the 2000 and 2006 protocols) and intends to discontinue the formal approval process for the treaty.

But there is a treaty with Canada.
Do you have any online broker recomendation?

escafandro,
If you refer to switzerland (and also Lux), double tax treaty or not is not really an issue, since they will not tax you to start with.
Except on swiss origin income (interest, swiss bonds income, etc.), if I remember correctly.

In effect, you would just have to be concerned with local reporting/taxation.

anyone use Phillips (Singapore)?

http://the-international-investor.com/b ... -singapore

I live in Canada, and I have been using a Canadian version of the PP for about 1 year.  I used to use other methods to manage my funds/portfolio, but I must say, since I have switched to the PP I find I can sleep so soundly, and it seems to perform reasonably well. 

Here is my allocation.  It is very simple, just 4 securities:

25% stocks - I use XIC - the ishares capped canadian stock market index
25% ltb - I just purchased the 2041 canada government bond directly.  (I don't like any of the available long term ETFs, as they typically have an average maturity between 10-15 years, which doesn't give the variability needed)
25% gold - I currently hold IGT for this (which holds gold priced in Canadian dollars).  I am planning to switch to buy the gold directly using Questrade - they will sell you gold bars, and store them (or you can pick them up) for a small fee.
25% cash - I hold my cash in the renaissance high interest savings account (mutual fund code ATL5000) (if I ever get more than 100,000 in cash, I will move this to a tbill mutual fund), the only reason I am using the renaissance accout is that the rate is a bit higher than the tbills, and it is effectively government backed anyway, in the unlikely event that CIBC goes bankrupt..

I check the performance every week or two, and have been happy with the result.

Hi Craig,

I'm also implementing the PP from Canada. I have one for myself (PP1) and one for my mother (PP2). Hers is the traditional one, mine I've made adjustments to the stock allocation.

PP2

25% stocks    - XIC (described by Gosso previously)
25% lg bonds  - ZFL (again described by Gosso)
25% gold        - IGT ("")
25% st bonds  - CLF (Claymore 1-5 year laddered Canadian Government Bonds)

PP1

12.5% stocks - XMD (iShares Completion index - basically everything that isn't in XIU, but is in XIC)
12.5% stocks - CRQ (Claymore Canadian Fundamental Index - tracks the FTSE RAFI Canadian Index)
25% lg bonds - ZFL
25% st bonds - CLF
25% gold      - CGL.C (no commissions with Scotia iTrade)

Hello fellow Hosers Canadians!

msauer, could you please expand on the Questrade physical gold program -- it seems pretty good with the gold stored at the Royal Canadian Mint, at least it's better than IGT but not as good as physical coins in a safe deposit box.  Also I'm a little iffy on your cash allocation, maybe provide a link to their website?

NewPPer, you have me worried with CLF.  It holds plenty of provincial bonds and with several of them in trouble I would not be too happy with CLF.  Cash is tricky in Canada since we don't have a good ETF with only Canadian Government Bonds.  You may want to look into building a 2-3 year ladder of Canadian Government short term bonds (they hold the printing press).

Gosso,

Good points. My position on this is something Craig advocates (as does HB) in that it's better to do what you can instead of not doing it at all. Since I'm fairly new to this (and don't have a tremendous amount invested ~20K) I prefer to go the all ETF route. My Scotia iTrade account lets me purchase 3 of the 4 ETFs in my PP commission free. That's the reason that I took CLF over ZFS (I also noted the high amount of Housing Trust debt in the ETF). I also figured that even with the provincial debt it is likely better than XSB which holds a lot of corporate debt. While I do believe in the HBPP I must admit that my slight problem is not with the gold, but with the cash. I'd prefer it to be in short term bonds. I think later as my portfolio and savings (hopefully!) grow I will look at my bond position (both short term and long term) more closely. Although by that time perhaps some provider with offer a complete short term 1-3 year federal gov't bond fund!

NewPPer 

NewPPer wrote: Gosso,

Good points. My position on this is something Craig advocates (as does HB) in that it's better to do what you can instead of not doing it at all. Since I'm fairly new to this (and don't have a tremendous amount invested ~20K) I prefer to go the all ETF route. My Scotia iTrade account lets me purchase 3 of the 4 ETFs in my PP commission free. That's the reason that I took CLF over ZFS (I also noted the high amount of Housing Trust debt in the ETF). I also figured that even with the provincial debt it is likely better than XSB which holds a lot of corporate debt. While I do believe in the HBPP I must admit that my slight problem is not with the gold, but with the cash. I'd prefer it to be in short term bonds. I think later as my portfolio and savings (hopefully!) grow I will look at my bond position (both short term and long term) more closely. Although by that time perhaps some provider with offer a complete short term 1-3 year federal gov't bond fund!

NewPPer 

I agree with all your points.  I just wanted to make sure you were aware of the disadvantageous of CLF, and that you weren't wondering around with a blindfold on.  Sounds like you have it figured out.  I agree that cash is tricky in Canada, especially with a smaller Permanent Portfolio, since most brokers require at least $5000 face value of bonds per transaction.

escafandro wrote:
I'm thinking about changing SHY by UUP that compensates me the BWZ volatility and low overall volatility of the entire portfolio.

Thinking better of this idea, it occurred to me that a multicurrency fund might be a more logical if one tries to implement a Global PP. So I could replace my current position SHY/BWZ for something like DBV or ICI (I know by adding an ETN would be an extra risk, but is a less volatile fund).