Gyroscopic Investing

It is given statistical fact that a PP portfolio averages in the 9% to 10% over time. Certainly PPRFX, where I had all my savings for the last ten years, has performed with in this area. Things seem to have stalled for PP investors. I am averaging only a few percent over the last year while the market is up in the neighborhood of 13%, translated, the market was not strong enough to pull a perm portfolio makeup into average gains. Gold taking a hit didn't help and now the long term treasuries got smack down well. The net effect is not much. The question is, what scenario will have transpire to get our gains moving again?

It's all speculative, but I suspect we're about to enter a period where gold and bonds take turns falling and stocks are consistently hot. Once this becomes entrenched, the Fed is likely to tighten its interest rate policy which could see better rates on cash and higher stock dividends to (hopefully) offset the decline in bond prices. Kinda like the 90s. But the fundamentals of the economic recovery seems shakier, so I personally think that the current stock boom could collapse at any time as people flee to one of the various other assets we own.

Of course I am probably wrong and really have no idea what the future holds, which is why I confidently hold all four PP assets.

I get your point very well.

As I'm drawing near the end of the accumulation phase with some ground to make up I don't like it at all when I see a YTD return of only 1.43 percent almost midway through the year with the stock market posting much more impressive gains.  I was kind of counting on that 9 to 10% in my retirement plan spreadsheet.

All I can say is the year is still young. Maybe the PP will do better in the second half.

I am doing a few things to juice it a little with stocks but I'm not going overboard having experienced the greatest setback ever in 2008 with the stock market meltdown.

portart wrote: It is given statistical fact that a PP portfolio averages in the 9% to 10% over time. Certainly PPRFX, where I had all my savings for the last ten years, has performed with in this area. Things seem to have stalled for PP investors. I am averaging only a few percent over the last year while the market is up in the neighborhood of 13%, translated, the market was not strong enough to pull a perm portfolio makeup into average gains. Gold taking a hit didn't help and now the long term treasuries got smack down well. The net effect is not much. The question is, what scenario will have transpire to get our gains moving again?

Remember this thread from mid-2012?
Time to revisit it: http://gyroscopicinvesting.com/forum/ht ... ic.php?t=2

portart wrote: It is given statistical fact that a PP portfolio averages in the 9% to 10% over time. Certainly PPRFX, where I had all my savings for the last ten years, has performed with in this area. Things seem to have stalled for PP investors. I am averaging only a few percent over the last year while the market is up in the neighborhood of 13%, translated, the market was not strong enough to pull a perm portfolio makeup into average gains. Gold taking a hit didn't help and now the long term treasuries got smack down well. The net effect is not much. The question is, what scenario will have transpire to get our gains moving again?

I think it's more important to look back on the historical real gains, which means measured against inflation. Historically the PP tends to yield between 3-6% in real gains over time. With inflation at or near record lows we are pretty much in the right area for PP returns. There is of course the very normal reaction to try and weigh returns against stocks since our culture has been trained to be stock bugs. But actually the PP is just a means of providing real returns coupled with very low volatility over time. It is a given that the PP will underperform the hot asset class de jour. After all we limit ourselves to around 25%. Right now stocks are hot. For most of the last 12 years it was gold, and the PP underperformed gold for the same reasons.

As far as I can see the PP is doing exactly what I expect it to.

portart wrote: The question is, what scenario will have transpire to get our gains moving again?

Stocks collapsing and bonds rallying.  That's the last act left in this bubbleorama.

This may or may not happen in accordance with the global recession underway.  Economies and stock markets are not always aligned.  I could foresee a poor global real economy where everyone turned into stock gamblers to produce "economic activity".

"I am doing a few things to juice it a little with stocks but I'm not going overboard having experienced the greatest setback ever in 2008 with the stock market meltdown".

Sounds like you did not go crazy on the stock purchase.
 
It is so hard not to want to chase performance with a portfolio, PP or not... If you just purchased more stocks now, you purchased them at a multiyear high. The rally could keep going or you could have just bought at a peak. Basically buying high versus selling high.

From a pure timing stand point, now seems to be the time to over purchase the lagging assets with the assumption that the greatest gains from this stock rally have been missed and the next rally will come from one of the currently lagging assets classes. Buying low..But... how can you purchase gold now when it has been dropping like, well like, a stone.

I guess the bottom line is we just don't know what's going to happen with the markets so trying to chase performance is not always advisable.
The conservative advice would be to save more, stay the course and follow your rebalance bands.

Funny so easy to give advice when it's not my money. 

GT wrote: Funny so easy to give advice when it's not my money. 

You noticed that too? 

I think we are entering a low return environment for all asset classes. I am not counting on the PP being that strong for the next couple of years. I am bearish on gold, ambivalent on bonds, and slightly bullish on stocks (which funnily enough roughly corresponds to their recent performance, maybe I am just a performance chaser!). I think the PP might continue to tread water for the next year or two. Despite these thoughts I am still following the PP. So, either I am disciplined or stupid. Time will tell! 

melveyr wrote: I think we are entering a low return environment for all asset classes. I am not counting on the PP being that strong for the next couple of years. I am bearish on gold, ambivalent on bonds, and slightly bullish on stocks (which funnily enough roughly corresponds to their recent performance, maybe I am just a performance chaser!). I think the PP might continue to tread water for the next year or two. Despite these thoughts I am still following the PP. So, either I am disciplined or stupid. Time will tell! 

This is my feeling as well. The PP did unusually well 2008-2012. I'll be unsurprised if it reverts to the mean and does poorly for a couple years. No one can predict the future so I won't say it's inevitable, just unsurprising.

portart wrote: It is given statistical fact that a PP portfolio averages in the 9% to 10% over time.

That's over its entire 40-year history, which factors in the enormous gains in gold and stocks during the 1980s.  Over the past 20 years it's averaged closer to 8%.

melveyr wrote: I think we are entering a low return environment for all asset classes.

Two words: accumulation phase. 

GT wrote: If you just purchased more stocks now, you purchased them at a multiyear high. The rally could keep going or you could have just bought at a peak. Basically buying high versus selling high.

Funny so easy to give advice when it's not my money. 

I purchase stocks every paycheck as that is where all the 401k money for both me and my wife goes. So currently my PP gains are probably in line with the historical average - a bit better than if we were balanced at 25% in each asset class. It was the opposite story in 2008-9 where my new contributions barely kept me even as the stocks were losing.

I could be buying at a multiyear high. Maybe not. I could also be buying low at the beginning of the next bull market. Do you have a formula for knowing the difference?

melveyr wrote: I think we are entering a low return environment for all asset classes. I am not counting on the PP being that strong for the next couple of years. I am bearish on gold, ambivalent on bonds, and slightly bullish on stocks (which funnily enough roughly corresponds to their recent performance, maybe I am just a performance chaser!). I think the PP might continue to tread water for the next year or two. Despite these thoughts I am still following the PP. So, either I am disciplined or stupid. Time will tell! 

I wonder how much of this kind of thinking can be better attributed to psychology than economic fundamentals. In regards to the psychology I can think of two things....

1.) It's been doing so well for so long it's bound to do disappoint for a while. Nothing lasts forever.

2.) I don't want to set my hopes too high so I'm preparing myself to tread water.

As for the economics, I'll leave that to you better minds.

As I am near my rebalance limits to sell stocks and buy Gold. I predict that stocks will collapse and Gold will rise 
The last rebalance move was mrt 2009 from Gold to Stocks which turned out very well. So I just trust the PP concept.

When ? When de Goverments will stop buying bonds; stocks will collapse and inflation will rise. I think that will happen maybe end this year maybe next year. However my previous predications were also right but always to soon. So taking that in account, the turn from stocks to Gold will occur in 2015.

portart wrote: It is given statistical fact that a PP portfolio averages in the 9% to 10% over time. Certainly PPRFX, where I had all my savings for the last ten years, has performed with in this area. Things seem to have stalled for PP investors. I am averaging only a few percent over the last year while the market is up in the neighborhood of 13%, translated, the market was not strong enough to pull a perm portfolio makeup into average gains. Gold taking a hit didn't help and now the long term treasuries got smack down well. The net effect is not much. The question is, what scenario will have transpire to get our gains moving again?

Anyone who thinks the market is going to continue to sustain double digit gains with this economy needs to quit Bogarting the joint.

RuralEngineer wrote:

portart wrote: It is given statistical fact that a PP portfolio averages in the 9% to 10% over time. Certainly PPRFX, where I had all my savings for the last ten years, has performed with in this area. Things seem to have stalled for PP investors. I am averaging only a few percent over the last year while the market is up in the neighborhood of 13%, translated, the market was not strong enough to pull a perm portfolio makeup into average gains. Gold taking a hit didn't help and now the long term treasuries got smack down well. The net effect is not much. The question is, what scenario will have transpire to get our gains moving again?

Anyone who thinks the market is going to continue to sustain double digit gains with this economy needs to quit Bogarting the joint.

As long as the Fed continues to flood the market with cheap money I see no reason why stocks cannot continue to rise. But I agree that if/when the free money dries up, and if the economy is not healthy, well then things could get ugly quick.