Gyroscopic Investing

buddtholomew wrote: Unbelievable, what a complete disaster. Wait...PS is sure to post about how great the PP is and what is the alternative? blah, blah, blah.

Pointedstick wrote:

buddtholomew wrote: Unbelievable, what a complete disaster. Wait...PS is sure to post about how great the PP is and what is the alternative? blah, blah, blah.

Actually, I'm more likely to post about how you should just exit the portfolio and stop being such a wet blanket.

I knew going in that the PP had previously experienced 3-year periods of flat or slightly negative performance. If this is another one, that sucks, but so be it. Until someone like frommi or kshartle can convince me of fundamental shifts in the natures of the asset classes themselves (e.g. gold is dead, bonds are dead, indexing is dead, etc), I feel like it's still worth it for me. If it's not worth it for you, then what are you waiting for? Just get it over with.

buddtholomew wrote: I knew it! And, I agree. What the heck is the alternative expect chasing equities...

DragonJoey3 wrote: Budd,

I'm not going to pretend that the PP has performed admirably this past year in doling out returns.  But it has done admirably in keeping away steep losses in a year during which gold and bonds are both getting hammered.  As such it's doing it's job of making sure no individual components of the portfolio can drag the entire thing down.  I rather take encouragement from the fact that it's done as well as it has in a year where gold has dropped so much.

I know you often compare it to the 60/40 portfolio and I will admit that portfolio has done better this year.  We are even at the point now where if you go back to 2007 you'll find the CAGR of the two portfolios is close to the same at this point.  The difference being that the largest draw down in the PP is much smaller than that of the 60/40 portfolio in 2008.

I personally feel that both portfolios will average out to around the same CAGR (7-8%) over long periods of time, but the PP will do that without the significant draw downs of the 60/40.

I find it interesting that you view the PP's inability to keep up with the S&P as a failure, but it's not a failure when it fails to keep up with Gold or Bonds, or Cash?  If you choose the S&P as the benchmark then it is probable that any time the S&P is carrying the portfolio, it will be missing the mark.  If you use the 60/40 portfolio it's the same case, whenever stocks are surging the 60/40 will be the winner, but you take on more risk for what I feel to be similar returns.

That's just my view on it Budd.  I agree it must be frustrating for you, and I apologize for taking advantage of your angst for the sake of humor.  I just wanted to point out that if you lay a chart of 60/40 over the PP, you'll see the returns are close to the same, but the PP has smaller swings.  I feel that's worth staying put through the bad times.  A single bad year, I don't think a bad portfolio makes.

Dragon J.

DragonJoey3 wrote: I'm not going to pretend that the PP has performed admirably this past year in doling out returns.  But it has done admirably in keeping away steep losses in a year during which gold and bonds are both getting hammered.  As such it's doing it's job of making sure no individual components of the portfolio can drag the entire thing down.  I rather take encouragement from the fact that it's done as well as it has in a year where gold has dropped so much.

ns2 wrote:

DragonJoey3 wrote: I'm not going to pretend that the PP has performed admirably this past year in doling out returns.  But it has done admirably in keeping away steep losses in a year during which gold and bonds are both getting hammered.  As such it's doing it's job of making sure no individual components of the portfolio can drag the entire thing down.  I rather take encouragement from the fact that it's done as well as it has in a year where gold has dropped so much.

That's the way I feel about it too. With one of the asset classes taking a major hit (gold) and another a fairly significant one (LT's) it is my opinion that this was a fairly good test for the portfolio and I actually have more confidence in it going forward. And being a glass half empty sort of person that's saying a lot for me.

MediumTex wrote: With many investment strategies, when you look at the historical performance there is always that period of time you see where you think to yourself "That would have been a great time to be plowing as much money as possible into the strategy."

As people actually live through those periods, though, plowing money into a strategy often feels like the wrong thing to do.

buddtholomew wrote: Its fairly clear to me that a rise in equities is insufficient to buoy the portfolio when gold and treasuries are on the decline. Given that equities rise 7/10 years, the PP seems like a losing proposition. The PP trades equities for gold and has an AVG bond duration of IT. The PP and 60/40 comparison benefits one or the other depending on how gold does. So the question is what percent of your overall portfolio should be invested in gold? Mine is 10%, unfortunately it is all in taxable so the losses in this account are more pronounced.

LC475 wrote: So again, anyone know what asset(s) actually went down yesterday?  I don't want to have to look up charts.  Though, if anyone has a convenient link to a live chart that shows all four components and the aggregate, I would happily save such a thing.

LC475 wrote: I don't want to have to look up charts.  Though, if anyone has a convenient link to a live chart that shows all four components and the aggregate, I would happily save such a thing.

Pointedstick wrote:

LC475 wrote: So again, anyone know what asset(s) actually went down yesterday?  I don't want to have to look up charts.  Though, if anyone has a convenient link to a live chart that shows all four components and the aggregate, I would happily save such a thing.

All of them went down. No portfolio won yesterday.

Grab the URL for this image (it self-updates):


red = stocks, green = cash, blue = bonds, yellow = gold.

LC475 wrote:

Pointedstick wrote:

LC475 wrote: So again, anyone know what asset(s) actually went down yesterday?  I don't want to have to look up charts.  Though, if anyone has a convenient link to a live chart that shows all four components and the aggregate, I would happily save such a thing.

All of them went down. No portfolio won yesterday.

Grab the URL for this image (it self-updates):


red = stocks, green = cash, blue = bonds, yellow = gold.

Cool, thanks very much!

Well, if everything went down, I guess I don't see what the big deal is.  Everything is not going to go down forever.  This is hardly a design flaw in the portfolio, that when everything goes down it does not go up!

LC475 wrote: Can I sue Harry Browne to make up the difference if it fails to meet that 10% guarantee?

Seriously, I looked up yesterday's chart since it was easy thanks to Adam, Prince of Eternia, whoops, I mean Pointedstick, and it looks like stocks went down less than gold and bonds, and so I would have been better off if I had waited until today to make the switch to the PP instead of earlier this week.  But, I still feel good about it.  Perfect timing is impossible.

Nevertheless, I guess it's my irrational deep animal instincts for believing in timing, but I still like to think that I'm timing my entrance into the PP pretty well.  It's gone down two years in a row!  This is fantastic!  18 months is the longest down-time Harry and John could find in the computer back-testing when they were inventing the portfolio, according to the radio show.  So this 24 month downturn (or however long it is now) is a super sale!  Last time it went down in 1981, afterwards it shot back up, way more than the typical return one should expect from the PP.  So it's due to shoot up, right?

Of course, as I say, I know all of that thinking is irrational.  After flipping a quarter tails a hundred times, the odds of heads next time are still 50-50.  But still, there's something deep in the brain that says otherwise.