Gyroscopic Investing

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Clive, the final portfolio you propose is fantastic - I've never been able to recreate such a high-yield portfolio with such a good risk-reward ratio before!

At the same time, this is a huge deviation from any standard version of the PP.

The use of total-bonds, the adding of an additional percentages to gold, and the heavy investment in EM don't seem to be really consistent with the basis Harry browne developed for basically investing domestically and proportionally to prosper during Bear markets, Bull markets, Deflation and inflation.  For example if you invested in both EM and such a high percentage of gold, perhaps you'd suffer if the dollar strengthens.

Do you think this could just be a result of effective data mining rather than a strategy you could trust going forwards??

My fear is that in the late 90's I would have given up on this strategy, as it underperforms from 1994-1999 - and usually very significantly, I might add.  Still, the same could be said about most versions of the permanent portfolio.

Regardless, this is an interesting discovery!

Clive,

Your finale portfolio suggestion is very much what Paul Boyer does over at the Mad Money Machine site:

25 each in gold, tlt and cash, 12.5 each in EM and SCV. To very good results this year so far!

If you wanted to go "all out" FF 3 factor model globally, I'm wondering if the impending release of the Russell Global Value 2000 etf might be an interesting substitute for the PP equity component, assuming competitive ER.

Best,

Maestro G

Backtesting should be prohibited :-). Seriously, it sucks reading posts like this when I'm trying to convince myself that I should switch to and stick with PP...

How about

33.3% SCV
33.3% LTT
33.4% GLD

I'm a fan of leaving the 25% ST bonds - since I do fear a Japan-style meltdown and Cash might be a savior.

I know that 10% SCV 10% EM and 5% REIT (I'm biased in favor of REITs) will get 11.01% returns and 8.45 for std. dev.

What I like about this is that the max year-over-year drawdown was 3.33%.


33% SCV
33% GLD
33% LTGB
This gets you 11.31% returns but with a Std. Dev. of 10.85
A little too volatile for my blood - max drawdown is 5.98%

The drawdowns are calculated year-over-year so if you look at your monthly, weekly or daily highs to lows - they'll be larger.

VFISX:6.5
VUSTX: 31%
VEIEX:12.5%
VISVX: 12.5

Clive, I am trying to replicate your results, however, according to Yahoo/Google none of the above has data that goes back beyond early 90s.
How did you extend their data back to 1972? just curious.