Gyroscopic Investing

Hey guys

I took down my popular blog a few years ago, but still have a big sheet with yearly historical investment returns for gold, stocks, bonds, cash and the Permanent Portfolio, in different regions USA, EU, UK, Japan, Iceland, some going back only 5 years, others 50 years.

If someone would like to have them, please send me your email in pm.


Where can I find yearly investment returns these days for USA and EU?


As an update, I still hold the opinion that real inflation is around 5% per year, and a house, an ounce of gold, or a mix of the top stocks, does not go up in real value over time, it's just inflation you are looking at. Just made a video about this: https://www.youtube.com/watch?v=M3MHMdh6TFU 

(Check out my post history to see historical prices of certain goods, services, commodities and how much they went up in price, this indeed is also around 5% per year.)


With my personal investments I have taken on a lot more risk over the years, but in investments that have an even higher potential reward. Was able to triple my portfolio thanks to investing in bitcoin early, and then lost all my profits again to another cryptocurrency. Yes, yes, still learning every day In the end I was able to have 5% per year, keeping my capital intact in purchasing power, after living off it as well, but I hope I can still succeed in growing it, for real. Currently my portfolio consists of mainly cryptocurrencies, an angel investment in a startup, and a little bit of gold.


The PP was a great education in investing for me, as was Julian Simon his book 'The Ultimate Resource 2'. I still think the PP is a great way to store value. If I ever need a PP again I would take gold and stocks only though, 50/50. Simply because cash in the long run is the only asset not returning real inflation rate and should not be considered an investment, and bonds have been in a 30 year bull market and are way too highly valued to have in a portfolio.

Sure such 2xPP portfolio is more volatile but can also be a good nest egg, requiring even less maintenance and very likely considerably higher returns than a 4 x PP. However, stocks should be 'global stocks', as it is unlikely but possible that local stocks sink together with gold (Japan 90's). Either global stocks, or gold, to my knowledge, have always performed well on a 10 year basis anywhere in the world.


Just my 2 cents, whatever you decide to do, we all need, and I wish you all, good luck! 


Special thanks to Craig Rowland, who was instrumental in learning me about the PP


Check out my:
https://twitter.com/marcdemesel
https://youtube.com/user/marcdemesel
https://instagram.com/marc_de_mesel/

Good to see you back, Marc. Please stick around!
Still reading your post...

Was able to triple my portfolio thanks to investing in bitcoin early, and then lost all my profits again to another cryptocurrency.

I'm terribly sorry to hear that.

I'm curious why you view your cryptocurrency ventures as investments rather than speculations.

Jack Jones wrote: I'm curious why you view your cryptocurrency ventures as investments rather than speculations.

To me, a speculation is just a dirty name for an investment.

One is higher risk than the other, but often the risk/reward ratio is better in the higher risk category.

dualstow wrote: Good to see you back, Marc. Please stick around!
Still reading your post...

Was able to triple my portfolio thanks to investing in bitcoin early, and then lost all my profits again to another cryptocurrency.

I'm terribly sorry to hear that.

hey dualstow!

Thanks man, it was hard indeed the past 2 years losing so much. 


But it was all worth it.

Eventhough in the end I'm not up, thanks to a period of big profits I was able to spend and invest a lot in myself, growing more healthy, finding love, enjoying travelling and luxury that I never could before.


The subsequent losing also learned me an important lesson:

Do not apply the 'balancing' strategy to startups!!!

https://www.youtube.com/watch?v=gVe3IXgPUgw


Now that I think of it, this is the one weak point of the PP as well, balancing into bonds that end up going broke, nobody ever researched the effects on ones portfolio, but it may be now exactly the right time to think about this. Imagine you start balancing into bonds over the next 10 years while they start and continue to go down, and then in the years after go into default, or become worthless due to much stronger inflation, and can never come back. Not much of your gold and stocks will be left.

I know that this is a rare event and it is much more likely that inflation over time actually will continue to go down. But it is true that eventhough balancing reduces volatility and generates extra profits, it also adds risk. You may want to not balance if you also invest in assets that can go broke or can become near worthless to never recover. Therefore I also like the 2xPP because gold and stock index will never go broke and will always come back. Another advantage of the 2xPP is that you become mobile, it doesn't matter anymore what country you are in, it's the same portfolio wherever you reside in the world.


Anyhow, how have your investments been?

Marc De Mesel wrote: If I ever need a PP again I would take gold and stocks only though, 50/50. Simply because cash in the long run is the only asset not returning real inflation rate and should not be considered an investment, and bonds have been in a 30 year bull market and are way too highly valued to have in a portfolio.

Sure such 2xPP portfolio is more volatile but can also be a good nest egg, requiring even less maintenance and very likely considerably higher returns than a 4 x PP. However, stocks should be 'global stocks', as it is unlikely but possible that local stocks sink together with gold (Japan 90's). Either global stocks, or gold, to my knowledge, have always performed well on a 10 year basis anywhere in the world.

Hi Marc!

Good to hear from you!  I think your views makes sense for the European investors, but maybe less so for US-based investors.

Stocks:  If you're in the US, then I think you can be 100% US and still be well diversified due to the global presence of many US companies.  I am personally 100% US stocks.  But for the European investors, investing in a Total World fund makes more sense.

Bonds: In the US, long-term bonds still have a bit of room left to drop, with rates in the mid-2% range.  But in the EU, long-term rates have fallen to 1% or less, so I can surely understand why you would not want to hold any long-term government bonds.  Seems like you would want to hold SOME time of shorter-term fixed income securities though, just to smooth out the total portfolio volatility.  Perhaps bank CDs or online savings accounts are an option?  I don't know much about the investor protections in the EU, but in the US, the FDIC will always protect you  .

Gold: I think 50% gold is way too much.  Even strict followers of the PP only hold 25%, and even that usually seems 'crazy'  for ordinary investors.

Perhaps you could do:
50% stocks
25% gold
25% something else (a mixture of real estate, Bitcoin, bank CDs, etc.)

Marc De Mesel wrote: hey dualstow!

Thanks man, it was hard indeed the past 2 years losing so much. 
But it was all worth it.

Eventhough in the end I'm not up, thanks to a period of big profits I was able to spend and invest a lot in myself, growing more healthy, finding love, enjoying travelling and luxury that I never could before.
<snip>
Anyhow, how have your investments been?

Mine? My pp is doing well. Most of my gold is below breakeven, but 3 out of 4 is not bad. (3 assets are up). Vp has winners and losers, but the stocks are very much winning because I've had so many of them for so long, and they're mostly mainstream. Bond funds are, you know, doing their thing, paying me monthly. I have no complaints.

And, some kind soul gave me a fractional bitcoin once upon a time.  I check on that once in a while.

Austen Heller wrote: Gold: I think 50% gold is way too much.  Even strict followers of the PP only hold 25%, and even that usually seems 'crazy'  for ordinary investors.

I have about 50% gold. Obviously I'm not a strict follower of the PP though. 

Hi Marc,

Good to see you back again!
Also interested in your 50/50 Gold/Stocks proposal.....

Out of curiosity, what rebalancing bands would you use, and the rationale behind what you choose??

Libertarian666, feel free to comment seeing you are running 50% gold as well.

Hal

WElcome BACK MArC!

Nice to hear from you Marc!

Can you post some information showing that annual 5% inflation?  I know it's been discussed but it's been a while.

I just checked the MIT billion prices project, and it does look like there is a small gap emerging between the official U.S. CPI and actual prices:

http://bpp.mit.edu/usa/

Still doesn't explain your 5% claim, but I'm not sure these prices are taking into account the reduction in quantity for goods not sold by weight, that's being done in order to avoid increasing the sticker price.  e.g. when you buy toilet paper from Costco, you pay the same price (which should be 0% inflation) but instead of getting 36 rolls you now only get 30 (16% reduction).  In other cases, the size of the rolls are being reduced, which would be even harder to detect.

Hal wrote: Hi Marc,

Good to see you back again!
Also interested in your 50/50 Gold/Stocks proposal.....

Out of curiosity, what rebalancing bands would you use, and the rationale behind what you choose??

Libertarian666, feel free to comment seeing you are running 50% gold as well.

Hal

I don't rebalance, mostly because I can't modify my other main investment any more. I'm also retired (mostly) at this point, but if I start making a bunch of money, I'll probably divide it between CEF and cash.