Gyroscopic Investing

What is going on here, everything rallying for days on end. Is anyone doing anything? There's nothing for me to do...

It is a bit unsettling. Up over 2.5% in just the past 6 days for me. 12.6% for the YTD.

If only this could happen for the next 15 years....I would retire without a financial concern...

Is it inflation, deflation or the FED?
Maybe its to punish those that went to cash..

Cortopassi wrote:It is a bit unsettling. Up over 2.5% in just the past 6 days for me. 12.6% for the YTD.

If only this could happen for the next 15 years....I would retire without a financial concern...

I'm already there and the feeling's grand!

buddtholomew wrote:Is it inflation, deflation or the FED?
Maybe its to punish those that went to cash..

I think inflation is headed our way finally. I operate a business, and prices, including wages have been pretty flat for the last several years.

Recently however, hiring has become extremely difficult, and wage pressure is ramping up big time.

Greenspan the other day on CNBC said (paraphrasing) "We have declining productivity and there's no one left to hire.... that usually ends in inflation".

I agree.

And for those that think the last several days/weeks have been too good to be true, it's important to keep in mind that the PP has been averaging approximately 5.3% CAGR since April of 2011.

And PRPFX is basically flat since that time.

I think gold/inflation will play catch up.

My gut says shorting the long bond wouldn't be a terribly risky short-term trade right now.

iwealth wrote:My gut says shorting the long bond wouldn't be a terribly risky short-term trade right now.

I agree, but then look at yields across the world.
U.S. LTT's sure look attractive from that perspective.
The question is...are treasuries driving gold higher or is rising gold due to inflation on the horizon?

buddtholomew wrote:

iwealth wrote:My gut says shorting the long bond wouldn't be a terribly risky short-term trade right now.

I agree, but then look at yields across the world.
U.S. LTT's sure look attractive from that perspective.
The question is...are treasuries driving gold higher or is rising gold due to inflation on the horizon?

I have no idea what's going on but it makes me uneasy and I don't normally get uneasy. Stagflation with the stock market near all-time highs?

clacy wrote:

buddtholomew wrote: Greenspan the other day on CNBC said (paraphrasing) "We have declining productivity and there's no one left to hire.... that usually ends in inflation".

But he also said that he never saw the 2008 meltdown coming. He had to be in a position of having as much information on the US economy as anyone... and he just totally missed it.

This forum seems to be populated by folks that need reassurance when the PP is doing poorly but ALSO when it is doing really well! Alas, I am one of those people.

barrett wrote:

clacy wrote:

buddtholomew wrote: Greenspan the other day on CNBC said (paraphrasing) "We have declining productivity and there's no one left to hire.... that usually ends in inflation".

But he also said that he never saw the 2008 meltdown coming. He had to be in a position of having as much information on the US economy as anyone... and he just totally missed it.

This forum seems to be populated by folks that need reassurance when the PP is doing poorly but ALSO when it is doing really well! Alas, I am one of those people.

Its a sickness barrett.
Never imagined a portfolio could move with such ferocity to the upside.
PP was not a "growth portfolio" is what they said...

Just looked at PeakToTrough for similarities in prior years and there are precedents. The most recent is 1995. Coming off a year in which there was a 2.3% decline the portfolio was up almost 19.5% with all 4 sectors showing gains. Same thing in 1982. A 6% drop in 1981 followed by a 23% gain with all 4 sectors up. There are also plenty of other years with all sectors showing significant gains.

So it's not unprecedented although the one week gains do look pretty astounding. Unfortunately, PeakToTrough lacks the granularity to see if anything like it has ever happened before.

curlew wrote:Unfortunately, PeakToTrough lacks the granularity to see if anything like it has ever happened before.

On PeakToTrough you can set the "Result View" to daily. It gives you a ton of data to wade through, but it certainly is granular. But even if you set it to monthly, you can see what a wild ride 1980 was with February and March showing a 12% drop and April-June showing a 17.5% gain.

My guess is that the rush to Treasuries in Europe, pushing yields negative, has caused some spillover effect where people are deciding to buy gold instead of bonds that are guaranteed to lose money in real terms. And instead of cash i.e. short term Treasuries.

It's all the same to the PP. We can just sit back and capture the gains wherever they end up. Loving it. And, I really enjoy seeing how the PP is functioning as designed even under a scenario that hasn't existed in its history. The historical data is worthless, but just seeing the portfolio in action...priceless! This has been so needed, because honestly the PP is a very tough portfolio to stay with.

sophie wrote:My guess is that the rush to Treasuries in Europe, pushing yields negative, has caused some spillover effect where people are deciding to buy gold instead of bonds that are guaranteed to lose money in real terms. And instead of cash i.e. short term Treasuries.

It sure would be nice to see where the buying and selling is taking place at any given time But I like that thought. What's been bothering me about the move up in gold is that I am at a loss to explain it. I guess if rates in Europe and Japan continue to go even further into negative territory and gold continues to rise, that will strengthen Sophie's take.

sophie wrote: This has been so needed, because honestly the PP is a very tough portfolio to stay with.

Agreed! It's only the longtime PP investors who seem to be totally dispassionate about the portfolio. AND, my guess is that many of them just never show up to join in our little angst party. I mean, sure, we are all a bit wealthier now, but what happens when the markets open on Monday??? Ah, forgot about 4th of July. An extra day of smugness!

So when the portfolio goes down for a few days, people complain bitterly and need reassurance.

And when the portfolio goes up for a few days, people complain bitterly and need reassurance.

Maybe you guys need a therapist more than you need an Internet forum.

I kid, but seriously: the PP is having a good run, enjoy the returns and try not to overthink things.

barrett wrote:Agreed! It's only the longtime PP investors who seem to be totally dispassionate about the portfolio.

After a while these fluctuations become uninteresting, and it becomes easier to be dispassionate. My advice is to never look at your balances or market quotes unless you have a specific reason.

The good thing about a well-constructed passive portfolio is that it works, whether you can explain every fluctuation or not.

My guess is that gold rallied due to a flight-to-safety reaction to fears (probably overblown) of global geopolitical conflict. The PP views gold mainly as a currency hedge, but it's also a chaos hedge. Gold rallied right after 9/11 too.

I could be wrong, or I could be right, but it doesn't matter. The PP is working as intended. Something "crazy" happened in the financial markets, and some assets went up, some went down, but overall the PP was slightly up.

Ha! Hold your breath.

The PP is a great portfolio. You have to look away, though. Look away when it is going up and Look Away when it is going down. Make sure you have 5 years of expenses in cash and you'll be just fine.

Drink a pint when it goes up and and drink a pint when it goes down. Don't do more than that and you'll live a happy life.

Mark

Get ready for pain. Bonds and gold:





The dumb money is buying gold like there is no tomorrow:



So "risk on" until Trump starts to look like he wins then actually wins and than all hell breaks loose?

barrett wrote:

sophie wrote:My guess is that the rush to Treasuries in Europe, pushing yields negative, has caused some spillover effect where people are deciding to buy gold instead of bonds that are guaranteed to lose money in real terms. And instead of cash i.e. short term Treasuries.

It sure would be nice to see where the buying and selling is taking place at any given time But I like that thought. What's been bothering me about the move up in gold is that I am at a loss to explain it. I guess if rates in Europe and Japan continue to go even further into negative territory and gold continues to rise, that will strengthen Sophie's take.

This is easy to explain: All the other currencies are in a race to the bottom via an orgy of printing. Since no one can print gold, it can't participate in the race.

Mark Leavy wrote:The PP is a great portfolio. You have to look away, though. Look away when it is going up and Look Away when it is going down. Make sure you have 5 years of expenses in cash and you'll be just fine.

Drink a pint when it goes up and and drink a pint when it goes down. Don't do more than that and you'll live a happy life.

Excellent advice and thanks Kevin W. for weighing in as well. Obviously this way is the only logical way to go with investing. The long weekend seems a good time to stop paying such close attention.

Onward and upward!

Reub wrote:

Cortopassi wrote:It is a bit unsettling. Up over 2.5% in just the past 6 days for me. 12.6% for the YTD.

If only this could happen for the next 15 years....I would retire without a financial concern...

Yes

Reub wrote:

Reub wrote:

Cortopassi wrote:It is a bit unsettling. Up over 2.5% in just the past 6 days for me. 12.6% for the YTD.

If only this could happen for the next 15 years....I would retire without a financial concern...

Yes

A dozen eggs would cost $5000 at that rate.
I honestly think we are witnessing an inflation adjustment.
Just not sure if this is what it's like...a step up in all assets.

Anyone care to comment?
"Just Own Something". Seems like the biggest risk is in cash.
Is this what an inflationary environment feels like?

When the pp was lingering for so long, one might've wondered, How is this strategy going to keep up the 5% real return?
Well, here's your answer.

buddtholomew wrote: ....Seems like the biggest risk is in cash.
Is this what an inflationary environment feels like?

Cash is fine with me, as I own most of it in those much-scorned I-bonds, inflation-proof for a whopping 30 years. Largely due to chance, a number of years ago I backed up the truck and bought a load of them when it was easy to purchase $30,000 per year, with a 1.3% premium above the inflation rate to boot.

Some of the other cash, a remnant of my earlier Boglehead portfolio, is in TIPs, held in a Roth account.

And speaking of Bogleheads, who are some of the wisest people I know, it is still a mystery to me why they have so adamantly closed their minds on the subject of gold, the ultimate in uncorrelated assets.