Gyroscopic Investing

I posted a summary of this year's results. Looks like around -2.4% for the year:

https://web.archive.org/web/20160324133 ... 3-results/

In the face of the largest gold market decline in 30 years along with a bond decline, I'm OK with this little of a loss. I remind myself that a year after a loss is often followed by a better year as things settle out. As an investor for some time, I'm also aware that I can't win every year. I just want to avoid really big catastrophic losses if I can. So in this sense, the Permanent Portfolio's diversification is still working for my own goals.

Have a Happy New Year!

Only a 2.4% loss?

Wow.  That really is very impressive, given that based upon the day-to-day posts here it often felt like the wheels had completely fallen off of the PP.

When reading the pros and cons of the PP before adopting it a few years ago the major contrary argument seemed to be that the impressive performance over the last decade or so was due to the price of gold and that this was destined to come to an end when the price came back to earth.

Well, I guess that happened this year and if this is the worse hit the PP takes in such a scenario then it buoys my confidence.

Having said that, I do hope we see a repeat of the pattern of good performance following a negative year as I honestly don't think I have the stomach for two negative years in a row.

MediumTex wrote: Only a 2.4% loss?

Wow.  That really is very impressive, given that based upon the day-to-day posts here it often felt like the wheels had completely fallen off of the PP.

A reasonable PP investor would agree with your comment if looking at the PP in isolation. When comparing the annual PP returns to a 60/40 SPY/BND allocation, the results are less impressive. The latter returned 14.2% in 2013 for a difference of 16.6%

During the 2008 time frame, the PP returned 1.5% and the 60/40 allocation -22.1% for a net difference of 23.6%

If we praise the PP for its stellar performance in 2008 when compared to a traditional 60/40 allocation, then we should scrutinize the 2013 returns using the same benchmark.

buddtholomew wrote: A reasonable PP investor would agree with your comment if looking at the PP in isolation. When comparing the annual PP returns to a 60/40 SPY/BND allocation, the results are less impressive. The latter returned 14.2% in 2013 for a difference of 11.8%

You mean 16.6%

Kshartle wrote:

buddtholomew wrote: A reasonable PP investor would agree with your comment if looking at the PP in isolation. When comparing the annual PP returns to a 60/40 SPY/BND allocation, the results are less impressive. The latter returned 14.2% in 2013 for a difference of 11.8%

You mean 16.6%

Yes, duh! Thanks, I'll update the original post.

buddtholomew wrote:

Kshartle wrote:

buddtholomew wrote: A reasonable PP investor would agree with your comment if looking at the PP in isolation. When comparing the annual PP returns to a 60/40 SPY/BND allocation, the results are less impressive. The latter returned 14.2% in 2013 for a difference of 11.8%

You mean 16.6%

Yes, duh! Thanks, I'll update the original post.

NP. It happens!

craigr wrote: I posted a summary of this year's results. Looks like around -2.4% for the year:

https://web.archive.org/web/20160324133 ... 3-results/

What are the 2013 results in real as opposed to nominal dollars?

goodasgold wrote:

craigr wrote: I posted a summary of this year's results. Looks like around -2.4% for the year:

https://web.archive.org/web/20160324133 ... 3-results/

What are the 2013 results in real as opposed to nominal dollars?

Depends on what you think inflation is. The CPI is up what...1.2% YTD?

M2 is up according to the FED by 4.2% YTD as of 12/16 and M1 is up 8.2%

Kshartle wrote:

goodasgold wrote:

craigr wrote:

What are the 2013 results in real as opposed to nominal dollars?

Depends on what you think inflation is. The CPI is up what...1.2% YTD?

M2 is up according to the FED by 4.2% YTD as of 12/16 and M1 is up 8.2%

Thanks. CPI is what I look at. M2 And M1 are beyond my knowledge to evaluate.

goodasgold wrote:

Kshartle wrote:

goodasgold wrote: Depends on what you think inflation is. The CPI is up what...1.2% YTD?

M2 is up according to the FED by 4.2% YTD as of 12/16 and M1 is up 8.2%

Thanks. CPI is what I look at. M2 And M1 are beyond my knowledge to evaluate.

See I think those are easy because they are objective. What the heck is the CPI supposed to represent? Why does the computation method change so often?

Kshartle wrote: See I think those are easy because they are objective. What the heck is the CPI supposed to represent? Why does the computation method change so often?

It's supposed to measure the change in prices, not the composition or size of the money supply.

I don't know about you all, but the prices I pay for things didn't increase by 4.2% or 8.2% during 2013.

Pointedstick wrote:

Kshartle wrote: See I think those are easy because they are objective. What the heck is the CPI supposed to represent? Why does the computation method change so often?

It's supposed to measure the change in prices, not the composition or size of the money supply.

I don't know about you all, but the prices I pay for things didn't increase by 4.2% or 8.2% during 2013.

Maybe not the price of gold....but stocks, housing, food, healthcare, education all sure did.

craigr wrote: I posted a summary of this year's results. Looks like around -2.4% for the year:

https://web.archive.org/web/20160324133 ... 3-results/

As I said in the blog, if you check again 2013 returns in morningstar the results are a bit better

MediumTex wrote: Only a 2.4% loss?

Wow.  That really is very impressive, given that based upon the day-to-day posts here it often felt like the wheels had completely fallen off of the PP.

The 2.4% assumes that the portfolio's asset allocation was perfectly even at the start of 2013.  Mine had already drifted by then, was heavier in stocks and lighter in gold.  When I calculated my return, I found that the portfolio was down only 0.6%.

Pretty amazing considering the gold crash.  If this is what the PP does when there's a major downturn in one of the assets, then I am not at all regretting going this route.  Admittedly, I'd be a lot happier if I'd started a few years earlier, though.

My own PP was -1.6%.  It is not pure PP but it's a reasonable facsimile thereof.  I guess I can deal with that performance.  When I see my SP500 index fund gained 32%, that hurts.  Still, I feel the same as Craig. 

Looks like the PP is up +0.3% YTD for 2014, for a projected annualized gain of 113%!

Kshartle wrote:

Pointedstick wrote: I don't know about you all, but the prices I pay for things didn't increase by 4.2% or 8.2% during 2013.

Maybe not the price of gold....but stocks, housing, food, healthcare, education all sure did.

+1

Plus, Amazon increased their free-shipping-minimum from $25 to $35 in 2013

Tortoise wrote:

Kshartle wrote:

Pointedstick wrote: I don't know about you all, but the prices I pay for things didn't increase by 4.2% or 8.2% during 2013.

Maybe not the price of gold....but stocks, housing, food, healthcare, education all sure did.

+1

Plus, Amazon increased their free-shipping-minimum from $25 to $35 in 2013

I think the big mac went up by 6.5% also

Now I realize this is only one sandwich.......but I suspect it doesn't go up while everything else stays the same. Probably all fast food went up by a similar amount unless the special sauce is truly as unique and special as it tastes.

Kshartle wrote: I think the big mac went up by 6.5% also

Now I realize this is only one sandwich.......but I suspect it doesn't go up while everything else stays the same. Probably all fast food went up by a similar amount unless the special sauce is truly as unique and special as it tastes.

Thats called pricing power and is one reason MCD can raise their profits faster than inflation. KO and a lot of other consumer stocks with great brands like PG,CL or UL have this kind of pricing power.

frommi wrote:

Kshartle wrote: I think the big mac went up by 6.5% also

Now I realize this is only one sandwich.......but I suspect it doesn't go up while everything else stays the same. Probably all fast food went up by a similar amount unless the special sauce is truly as unique and special as it tastes.

Thats called pricing power and is one reason MCD can raise their profits faster than inflation. KO and a lot of other consumer stocks with great brands like PG,CL or UL have this kind of pricing power.

You really think they can raise their prices faster than competitors and help profits rather than hurt them?

I also have my 3 yr return: 3.7%.
My 5 year is 7.9%, and that will get a nice boost after this February, when 5 years earlier the market stopped crashing and turned upward.
However, my 5 year portfolio did not begin as a PP.  I converted 4.x years ago.

3.7% for 3 years seems rather anemic.  Has anyone else got a 3 year number?

Kshartle wrote: You really think they can raise their prices faster than competitors and help profits rather than hurt them?

Yes. Do you buy Pepsi instead of Coke because its 3 cent cheaper?

frommi wrote:

Kshartle wrote: You really think they can raise their prices faster than competitors and help profits rather than hurt them?

Yes. Do you buy Pepsi instead of Coke because its 3 cent cheaper?

Sometimes I even buy RC cola for a lot less.

This isn't the point though. My point is McDonalds should be able to charge a premium over other equivilant burgers because of branding, but above that fixed premium they can't raise prices at a faster rate than competitors without losing market share. They can't raise the price of a burger by $2 everytime the competition raises by $1 because at some point their branding premium is all used up. They should already be maximizing it or be very very close...they aren't dumb.

Maybe we can see how the big mac price increase compares to the other burger and fast food joints although I'm not too interested. I know the Whopper jr. went from $1 to $1.20 last year.....a 20% increase after staying at a buck for several years. It's also pitiful now. There is a BK across from my company and we occasionally drop in for a quick getaway at lunch. The "value" burgers seem extremely pitiful now.

Sorry for derailing this thread. 

My €-PP ended in August/September @-5%, after rebalancing 100% into my VP i was up +5% alltogether at the end of the year. 
And i am up YTD in 2014 +0.4% in €.