Gyroscopic Investing

Is anyone worried that the PP is only up about 1%, total, in the past 24 months (since February 3rd, 2012)?  Is this the worst 24 month stretch the PP has ever had?

jason wrote: Is anyone worried that the PP is only up about 1%, total, in the past 24 months (since February 3rd, 2012)?  Is this the worst 24 month stretch the PP has ever had?

No. 

The stock market is on a tear.  It's not surprising that the PP has been stagnant.  I'm not sure when it will happen, but there will eventually be a correction, and when there is, I will happy to watch the PP remain flat.  In fact, I'm cramming as much money as I can into the PP right now because it seems to me that the spring is wound pretty tight right now. 

Nothing out of the ordinary.  Things could get worse or stay flat for a little longer, but it generally appears to be a good time to buy into (or remain in) the PP.


The above chart may contain errors.

Gosso wrote: Nothing out of the ordinary.  Things could get worse or stay flat for a little longer, but it generally appears to be a good time to buy into (or remain in) the PP.


The above chart may contain errors.

Phew!  That's a relief, thanks!  I had no idea this is "normal" for the PP.

jason wrote: Is anyone worried that the PP is only up about 1%, total, in the past 24 months (since February 3rd, 2012)? 

Yes.  I agree with jason gosso above, but that doesn't mean I don't worry. 

Gosso wrote: Nothing out of the ordinary.  Things could get worse or stay flat for a little longer, but it generally appears to be a good time to buy into (or remain in) the PP.


The above chart may contain errors.

Gosso, do you happen to have a 3 year or 4 year rolling CAGR chart?

jason wrote: Is anyone worried that the PP is only up about 1%, total, in the past 24 months (since February 3rd, 2012)?  Is this the worst 24 month stretch the PP has ever had?

I think I'd be worried if I were trying to get rich quick. Although this is not as much fun as 2010, the pp seems to be doing its job, absorbing the huge downtrend in the gold price without spoiling overall portfolio value.

When stocks soar I peek at my vp. On days like this -- down 323 pts as I write at 3:48 -- I peek at my permanent portfolio core.

dualstow wrote: When stocks soar I peek at my vp. On days like this -- down 323 pts as I write at 3:48 -- I peek at my permanent portfolio core.

Yep.  Trends are fickle and investors always think they are more risk tolerant than they are until they experience the aftermath.

When the stock market is way up and the PP is slightly down, people naturally get nervous.  But if we see a few more days and weeks like today where the stock market is way down and the PP is slightly up, I predict we'll see an influx of people kicking the tires. 

Agree with dualstow that the PP is doing it's job at the moment. Very short term (today) stocks get hammered but LTTs are way up and gold goes up as well. If people bail from one PP asset and put money in two (just jumping to conclusions, I realize), that is OK. I'd like to see slightly longer rolling returns too if anyone has them. Thanks!

Flat for two years sucks.
PP needs to get it on.
It's like a dark cloud following me,lol...

annieB wrote: Flat for two years sucks.
PP needs to get it on.
It's like a dark cloud following me,lol...

Wait until Mama Yellen ups the QE ante.

They were all just on CNBC speculating how much she should increase it. One guy said doubling it might do the trick.

Hold onto your gold.

jason wrote: Gosso, do you happen to have a 3 year or 4 year rolling CAGR chart?

Your wish is my command!

[img width=700]http://i60.tinypic.com/2vxi1b6.jpg[/img]
Charts are complete up to end of 2013.

I'm not sure if these charts are too busy, but they look okay to me.  The first one gives the 3, 5, and 10 year rolling real CAGR for the PP.  The second chart compares the 2 year rolling real CAGR for US PP with 60/40.

The second chart shows the divergence between the PP and 60/40 beginning in 2013, which is roughly the same as during the 90's.

To me these charts show the PP can reasonably handle most environments, except for when interest rates are jacked up to fight off escalating inflation, but we are already aware of this.

Just keep in mind that it isn't the Perfect Portfolio, since there will still be bumps and plateaus in the returns.  I find it helps to not have unrealistic expectations of what the PP is designed to do, since this only results in unnecessary stress and disturbed sleep, which is exactly what we're trying to avoid.

More messing around with Excel:

[img width=700]http://i58.tinypic.com/29dk5dz.jpg[/img]

Over the past 45 years the occurrence of the five-year-rolling-real-CAGR (measured monthly) being less than 0%:
- PP = 4%
- 60/40 = 31%

Over the past 45 years the occurrence of the ten-year-rolling-real-CAGR (measured monthly) being less than 0%:
- PP = 0% (although very close in 1982)
- 60/40 = 20%

Great charts, Gosso.  Thanks!

Those are indeed great charts.
Tells the story.
Thanks.

Gosso wrote: More messing around with Excel:

[img width=700]http://i58.tinypic.com/29dk5dz.jpg[/img]

Over the past 45 years the occurrence of the five-year-rolling-real-CAGR (measured monthly) being less than 0%:
- PP = 4%
- 60/40 = 31%

Over the past 45 years the occurrence of the ten-year-rolling-real-CAGR (measured monthly) being less than 0%:
- PP = 0% (although very close in 1982)
- 60/40 = 20%

Nice work!  But, I think you meant the past 35 years?

edsanville wrote: Nice work!  But, I think you meant the past 35 years?

Merci!

The data is for the past 45 years, it begins in 1969, which is as far back as I could go with the data.  I think the confusion is coming from the data points beginning in 1979 on the 10 year chart, but that data point is measuring the CAGR over the previous 10 years back to 1969.

If I had balls of steel I'd just own something like VSMAX (small-cap index), no bonds, and hold on for life. And for dear life.
But, I don't have balls of steel.

dualstow wrote: If I had balls of steel I'd just own something like VSMAX (small-cap index), no bonds, and hold on for life. And for dear life.
But, I don't have balls of steel.

I already know I don't have balls of steel because I sold out of stocks in 2008 (luckily near the top)... but of course I didn't get back in at the bottom.

dualstow wrote: If I had balls of steel I'd just own something like VSMAX (small-cap index), no bonds, and hold on for life. And for dear life.
But, I don't have balls of steel.

How about a 70% gold allocation? I must say that got pretty painful at times last year...

Libertarian666 wrote:

dualstow wrote: If I had balls of steel I'd just own something like VSMAX (small-cap index), no bonds, and hold on for life. And for dear life.
But, I don't have balls of steel.

How about a 70% gold allocation? I must say that got pretty painful at times last year...

IMO, that takes both balls of steel and chutzpah. I am not into gold for the reasons that Buffett and Rick Ferri are against it. I hold it, against my personal judgment, solely because of the judgment of Harry, Craig, and others, whose wisdom and experience I trust more than my own.

I think the only way I could hold 70% gold is if I were a vampire and had several centuries to play with. ;-) Even so, I think the pp would suit multicentarian vampires just fine.

Gosso wrote:

edsanville wrote: Nice work!  But, I think you meant the past 35 years?

Merci!

The data is for the past 45 years, it begins in 1969, which is as far back as I could go with the data.  I think the confusion is coming from the data points beginning in 1979 on the 10 year chart, but that data point is measuring the CAGR over the previous 10 years back to 1969.

I stand corrected in my correction!

dualstow wrote:

Libertarian666 wrote:

dualstow wrote: If I had balls of steel I'd just own something like VSMAX (small-cap index), no bonds, and hold on for life. And for dear life.
But, I don't have balls of steel.

How about a 70% gold allocation? I must say that got pretty painful at times last year...

IMO, that takes both balls of steel and chutzpah. I am not into gold for the reasons that Buffett and Rick Ferri are against it. I hold it, against my personal judgment, solely because of the judgment of Harry, Craig, and others, whose wisdom and experience I trust more than my own.

I think the only way I could hold 70% gold is if I were a vampire and had several centuries to play with. ;-) Even so, I think the pp would suit multicentarian vampires just fine.

I appreciate the compliment(:P) but the reason I have a very high gold allocation is not because I am so brave but because I am so concerned about the collapse of the "US economic miracle".

Gosso wrote: More messing around with Excel:

[img width=700]http://i58.tinypic.com/29dk5dz.jpg[/img]

Over the past 45 years the occurrence of the five-year-rolling-real-CAGR (measured monthly) being less than 0%:
- PP = 4%
- 60/40 = 31%

Over the past 45 years the occurrence of the ten-year-rolling-real-CAGR (measured monthly) being less than 0%:
- PP = 0% (although very close in 1982)
- 60/40 = 20%

WELL DONE!

edsanville wrote:

Gosso wrote:

edsanville wrote: Nice work!  But, I think you meant the past 35 years?

Merci!

The data is for the past 45 years, it begins in 1969, which is as far back as I could go with the data.  I think the confusion is coming from the data points beginning in 1979 on the 10 year chart, but that data point is measuring the CAGR over the previous 10 years back to 1969.

I stand corrected in my correction!

Actually, now that I think about it, you may have been more correct than me.  The 10 year rolling data only applies to portfolios that were initially bought between 1969 (I know 1972 is the preferred start date for PP backtesting) and the end of 2003.  So the line on the chart could be shifted 10 years to the left and give the future 10 year rolling returns based on the start date.

So there is 35 years worth of 10 year rolling data based on 45 years of monthly returns.  It might be more accurate to say:

Between 1969 and the end of 2008 the occurrence of the future five-year-rolling-real-CAGR (measured monthly) being less than 0%:
- PP = 4%
- 60/40 = 31%

Between 1969 and the end of 2003 the occurrence of the future ten-year-rolling-real-CAGR (measured monthly) being less than 0%:
- PP = 0% (although very close in 1982 1972)
- 60/40 = 20%