Permanent Portfolio - A Sympathetic Boglehead's Perspective

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MediumTex
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by MediumTex »

magician wrote:
Call_Me_Op wrote:
Noobvestor wrote: C) "Half of its contents generate no value"
A common idea is to replace the cash portion with ST treasuries.
What's the difference between cash and short-term Treasuries?
Harry Browne recommended 12 month t-bills for the "cash" portion of the PP.

In backtesting the PP, one can get slightly better returns by moving just a little bit farther out on the yield curve to an average duration of 2-3 years (i.e., "short term treasuries").
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by magician »

MediumTex wrote:
magician wrote:
Call_Me_Op wrote:
Noobvestor wrote: C) "Half of its contents generate no value"
A common idea is to replace the cash portion with ST treasuries.
What's the difference between cash and short-term Treasuries?
Harry Browne recommended 12 month t-bills for the "cash" portion of the PP.

In backtesting the PP, one can get slightly better returns by moving just a little bit farther out on the yield curve to an average duration of 2-3 years (i.e., "short term treasuries").
So it boils down to how short is "short" in "short-term Treasuries".

Thanks.
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by MediumTex »

magician wrote:
MediumTex wrote:
magician wrote:
Call_Me_Op wrote:
Noobvestor wrote: C) "Half of its contents generate no value"
A common idea is to replace the cash portion with ST treasuries.
What's the difference between cash and short-term Treasuries?
Harry Browne recommended 12 month t-bills for the "cash" portion of the PP.

In backtesting the PP, one can get slightly better returns by moving just a little bit farther out on the yield curve to an average duration of 2-3 years (i.e., "short term treasuries").
So it boils down to how short is "short" in "short-term Treasuries".

Thanks.
Whether you use t-bills or 2 year notes it's not all that significant from a long term returns perspective.

With rates near zero right now, I would be inclined to stick with t-bills just because you aren't getting much extra return right now by going farther out on the yield curve.
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Lbill
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Post by Lbill »

When considering an allocation to Gold, there are 3 time periods to consider: 1972-1980 (9 yrs), 1981-2000 (20 yrs), and 2001-2011 (11 yrs). During the first and last of these time periods (20 years in total) there is no question that holding gold gave your portfolio a big boost. It lowered portfolio volatility, it boosted compound returns, it boosted risk-adjusted returns. In the middle time period, holding gold was a drag on your portfolio: it diluted compound returns, it diluted risk-adjusted returns; however, it still did a good job of reducing portfolio volatility.

So, we can probably conclude that gold diversification is one way to lower portfolio volatility - gold seems to have a persistently low or negative correlation with stocks as we know. Whether it improves absolute or risk-adjusted returns is another question. When gold returns are high, as in 1972-1980 and 2001-2010, then gold boosts absolute and risk-adjusted portfolio returns. When gold returns are low, as in 1981-2000, then gold diminishes absolute and risk-adjusted portfolio returns.

Holding gold is not necessary to reduce portfolio volatility, so that doesn't provide a rationale. You can do that by having a large allocation to bonds and a smaller allocation to stocks. In fact, from 1972-2010 a portfolio with 25% stocks and 75% 5-year treasuries had an annualized standard deviation of 7.1% compared to 8% for 25% stocks, 50% treasuries, 25% gold (the PP). And this is true for most any particular time period within the 1972-2010 framework.

That means that an allocation to gold really only makes sense if you expect it to improve your portfolio returns and/or risk-adjusted returns. As I've pointed out this result is time-period dependent and is determined by the performance of gold. Since no-one can know what that will be in the future, a large allocation to gold in one's portfolio (as opposed to a larger allocation to bonds) is a bet that the gold price is going up, or it is insurance against a bond default or some such event that will destroy bond values. That is OK, and can provide a sufficient rationale to invest in gold IMO. In fact, I'm scared enough of what's going on these days to want some of my saving in gold.

But for me, it doesn't compute that gold automatically results in a "safer" or "all-weather" portfolio with magically counterbalancing moving parts. That part of the PP rationale sounds good, but I'm always a bit cynical about the marketing for any investment formula and like to look at the data. Whether the PP does better than a conservative portfolio that is 25% invested in stocks and 75% invested in fixed-income is a speculation based largely on the price of gold. In that sense, I agree with other posters that the PP is "all about the gold." If you can tell me what the price will be over the next 10 years, please let me know.
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Post by Joe S. »

Gumby wrote:The chart posted above seems to only go to 2006. Whereas the chart in the link next to the chart, goes to 2008, and looks like this:

What we see is that since 1971, gold has 'zigged' when the other assets have 'zagged' in "real" terms.

So, the chart actually does a good job of illustrating the role of gold with stocks and bonds. If we were to extrapolate that chart to 2011, you would continue to see that relationship. Prior to 1971, the laws that governed our monetary system suppressed that relationship — making holding physical gold all but irrelevant during that time.
Thank you for loading the chart to 2008, I was having some trouble loading it. I see now what I did wrong. If anyone knows of this chart showing up anywhere on the internet than includes 2009 and 2010, please tell me, as I refer to this chart a lot.

You note there is an inverse relationship between stocks and bonds, and say our monetary system suppressed that relationship prior to 1971, but look at 1929-1971. From 1929-1931 the stock market went down, gold went up. From 1932-1971, the stock market went up, gold went down. The inverse relationship was there. Maybe gold couldn't be bought be U.S. citizens, but international economic forces caused the relationship to hold. However, gold did much worse overall during this period. If this period was added to the analysis, you would probably start saying: "Let's up the percentage of stocks in the portfolio, and lower the percentage of gold. Of course ideally, we would have a computer analyze the whole mess, and produce an optimal percentage, and produce an efficient frontier.

I may also add the in the distant past whenever there was a panic (or recession) we would often have deflation. In deflation prices go down, meaning money is more valuable, and rising in value. Since we were on a gold standard, that means gold was more valuable. Gold going up during a recession has happened for many decades before 1971. Gold and stocks have shown an inverse relation before 1971.
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Post by Gumby »

If it helps anyone at all, on April 17th, 2005, Harry Browne answered a listener's question on how the Permanent Portfolio would perform during a period of rising interest rates. I've taken the liberty of transcribing the first 10 minutes of that episode for everyone to read. If you'd rather listen to the episode yourself, you can download that episode from the radio show archive here:

Harry Browne Investment Radio Show: April 17th, 2005

Here is Harry Browne's response:
[01:37]

HARRY BROWNE: A question from "Jim" out in cyberspace...he says, "Your [Permanent] Portfolio seems to have a proven track record over a long period of time and through many different increasing investing environments. But, has the environment really been all that different over this period of time? Haven't we been enjoying a 20+ year period with down-trending interest rates? Fluctuating of course, but trending down. As you point out, a falling interest rate environment is good for both the stock and bond portions of the portfolio. Also, through most of this period, we've had a much lower rate of inflation than we experienced in the '70s. Would this have had the effect of keeping the cash portion from hurting the portfolio over most of this period?"

So, Jim goes on to say... I'll paraphrase the rest of it. He's worried that an inflation scenario gives you only gold as the one asset performing well. And he says, "Not to predict, but if this does happen, do you think the Portfolio could maintain the purchasing power of the invested funds?"

Well, Jim, the fact of the matter is that the Portfolio did very well during the 1970s. And I don't know if you're old enough to remember the '70s first hand, but inflation was really out of hand in the '70s. And it seemed as though we just kept bouncing back and forth between inflation and recession. And the inflation rate hit something like about 8% in the early '70s, backed off a bit. Then it went up to 12% later in the decade, backed off a little bit. And then went up to 14% in 1981. And stocks were not doing well. Bonds of course were doing terribly, because interest rates kept rising and rising. We finally hit a prime rate of 20% and a T-Bill rate of 15%. And I believe the rate on Treasury Bonds finally hit about 12% or 13%. And so, bonds were really in the tank, as they say. And of course, cash was not any help at all during such an inflation. But the fact of the matter is that the Portfolio kept growing during that period. Because gold went up 20-times over.

Now, I don't think we could count on gold going up 20-times over in the next run-up in inflation and gold. And the reason we can't count on the same result is because that result of the '70s was partly from the great inflation of the '70s and also partly from the fact that gold had been price controlled at $35 an ounce for a period of 35 years, that finally ended in 1968. And after a period of market time, gold really took off in the early '70s. And it was making up for lost time for those 35 years that it had been held down in price. That always happens when you lift price controls. Whatever was price controlled goes up much faster than the rate of inflation.

But, gold goes up much faster than the rate of inflation anyway, simply because its a powerful, leveraged investment — leveraged in itself, not leveraged by borrowing money. And I would think that in the next inflation — if we had something similar to the '70s — you could count on gold going up at least five or ten times over. In other words, gold would wind up at somewhere around $2,000 and possibly as high as $4,000. Right now that seems...that's in the stratosphere, that just seems impossible. But, I have to tell you that when I wrote my first book, How You Can Profit From the Coming Devaluation, published in the 1970s, I made the asounding forecast in that book...it wasn't really a forecast, but I talked about the idea of gold going to $70 or even $100 an ounce — when it was at $35. And that seemed astounding.

But, the truth is, that gold actually went to $800 before the period of inflation was over. Now $800 was way over the mark. And so it came back down again, and it finally bounced off at about $300, and came back up a little bit. But, there was quite a period there where gold was in the $300 to $400 range, and we have to think that that's probably the equilibrium where it belonged. And that was 10-times over the point where it had started in the early '70s.

So, yes, I do believe that gold is very, very powerful. Powerful enough to pull the entire portfolio upward during a period of turmoil caused by inflation.

And that's the point of the Portfolio. We have to remember that investments that are rising have a bigger impact than investments that are falling. In investment that is falling goes down 15, 20, 25, 30, 40 percent during a bad, bad bear market. But, investments that are rising, in a bull market, go up 100%, 200%, 300%, or in the case of gold, 1,000%. So, that investment that is rising, a single investment, can be strong enough to carry the whole portfolio upwards. Gold during inflation. Bonds during a deflation, ought to be able to carry the whole portfolio upward, while stocks and gold are falling. And, during the prosperity we have the benefit of two investments that pull the portfolio upward — stocks and bonds — why gold may be falling. And cash is relatively neutral. So, the whole concept of the Portfolio is built around the idea that the winning investment will have a bigger impact on the outcome than the losing investments.

Now, if you don't think that's true, what are you going to do?

The only alternative to the Permanent Portfolio concept is to speculate. To say, 'I think this is what's about to happen and I'm going to put all, or most, of my money in that.' In other words, during a period you think inflation is here to stay for awhile, you put 70% of your assets in gold. Well, if you're wrong, if the gold price goes up a little, inflation goes up a little, and then comes falling back down, you might take an enormous loss, because you won't have a strong other investment in there to carry the portfolio upward and offset the losses in gold — which is maybe three times the impact on the portfolio as the winning investments because there's three times as much gold as the winning investment.

So, I hope that clears this up. If not, give me a call and let's talk about what's on your mind, about your money...
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Post by Noobvestor »

MediumTex wrote: They say that as long as some people still hate an asset, it probably still has some room to run. Since at any given time lots of people will be hating at least one of the PP assets, that suggests that at least one of the PP assets will always have room to run. Frankly, if a day ever came when people started liking all three of the PP's volatile assets, that would be of great concern to me. People are SUPPOSED to hate at least one PP asset at all times. That's sort of one of the implicit premises.
Well put. I find it really interesting that, for example, people have been really worried about bonds and gold peaking and crashing ... but sure enough, when the market took its recent little nose-dive correction, long treasuries and gold bounced up to balance it out. And you're right: I rarely (perhaps never) see the same person raving about those three assets at the same time: gold, LTTs and stocks.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
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Post by snowman9000 »

I heard that today is supposed to be a wild day in the markets. I don't really care. My PP has been weathering the storms quite well. Maybe I'm just kidding myself, but I'm not interested in the market that much any more.
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Post by MediumTex »

snowman9000 wrote:I heard that today is supposed to be a wild day in the markets. I don't really care. My PP has been weathering the storms quite well. Maybe I'm just kidding myself, but I'm not interested in the market that much any more.
PP is up .28% so far today.

Just another day.
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Post by Joe S. »

Lbill wrote: Holding gold is not necessary to reduce portfolio volatility, so that doesn't provide a rationale. You can do that by having a large allocation to bonds and a smaller allocation to stocks. In fact, from 1972-2010 a portfolio with 25% stocks and 75% 5-year treasuries had an annualized standard deviation of 7.1% compared to 8% for 25% stocks, 50% treasuries, 25% gold (the PP). And this is true for most any particular time period within the 1972-2010 framework.

That means that an allocation to gold really only makes sense if you expect it to improve your portfolio returns and/or risk-adjusted returns. As I've pointed out this result is time-period dependent and is determined by the performance of gold. Since no-one can know what that will be in the future, a large allocation to gold in one's portfolio (as opposed to a larger allocation to bonds) is a bet that the gold price is going up,
This is an excellent excerpt from the post by Lbill, and I hope people will read all his post. The permanent portfolio is not a horrible portfolio, but you can lower your volatility by decreasing the amount of gold and increasing your bonds, possibly with the Vanguard Total Bond Fund. For reason, I stated in previous posts, I don't expect gold to outperform inflation in the future, so buying gold for its appreciation doesn't make sense either. (Gold is so volatile, it may substantial rise or drop below inflation, but a good midline estimate is that it will match inflation.) If you are young and willing to take on more risk, you also might benefit from a higher stock allocation.

If you are worried about the possibility of disasterous economic times, like a nuclear war, communist takeover, British invasion, or "French revolution," it might be helpful to have a hidden stock of 1/10 ounce gold coins, as well as food and guns. Survivalist sites give lists of barter items you might use, that would work better than the 1 ounce gold coins recommended by Harry Browne. It's hard to buy small items with 1 ounce gold coins, and no one might have change.
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Post by MediumTex »

Joe S. wrote:
Lbill wrote: Holding gold is not necessary to reduce portfolio volatility, so that doesn't provide a rationale. You can do that by having a large allocation to bonds and a smaller allocation to stocks. In fact, from 1972-2010 a portfolio with 25% stocks and 75% 5-year treasuries had an annualized standard deviation of 7.1% compared to 8% for 25% stocks, 50% treasuries, 25% gold (the PP). And this is true for most any particular time period within the 1972-2010 framework.

That means that an allocation to gold really only makes sense if you expect it to improve your portfolio returns and/or risk-adjusted returns. As I've pointed out this result is time-period dependent and is determined by the performance of gold. Since no-one can know what that will be in the future, a large allocation to gold in one's portfolio (as opposed to a larger allocation to bonds) is a bet that the gold price is going up,
This is an excellent excerpt from the post by Lbill, and I hope people will read all his post. The permanent portfolio is not a horrible portfolio, but you can lower your volatility by decreasing the amount of gold and increasing your bonds, possibly with the Vanguard Total Bond Fund. For reason, I stated in previous posts, I don't expect gold to outperform inflation in the future, so buying gold for its appreciation doesn't make sense either. (Gold is so volatile, it may substantial rise or drop below inflation, but a good midline estimate is that it will match inflation.) If you are young and willing to take on more risk, you also might benefit from a higher stock allocation.

If you are worried about the possibility of disasterous economic times, like a nuclear war, communist takeover, British invasion, or "French revolution," it might be helpful to have a hidden stock of 1/10 ounce gold coins, as well as food and guns. Survivalist sites give lists of barter items you might use, that would work better than the 1 ounce gold coins recommended by Harry Browne. It's hard to buy small items with 1 ounce gold coins, and no one might have change.
What you are suggesting is the PP equivalent of drawing a mustache on the Mona Lisa.

The total bond fund doesn't give you the protection you need in PP terms (i.e., it is neither cash-like, nor long term treasury-like). Back in 2008, a lot of total bond fund's holdings were about 15 minutes away from defaulting. That's not anything I would want to hold within a PP where I was seeking safety and stability.

No one has to use the PP. It's definitely not right for everyone. For those who do use it, however, the one thing I see OVER AND OVER AND OVER is the innocent tweaks here and there based upon the sincere belief that the tweak is making the strategy safer, when in reality that tweak exposes the portfolio to far more risk.

The PP is what you might call "pre-optimized". There are few owner-serviceable parts inside. When a well-intentioned shade tree mechanic starts moving parts around, the effectiveness of the entire package is compromised.

I would say to conduct your market experiments within the confines of the variable portfolio. Let your PP provide you with the safety and stability that drew you to it in the first place. If you can't handle the PP structure because you don't like it, don't understand it or it just bugs you, then by all means find an allocation that does make sense to you.

On the subject of gold, it is NOT necessary for there to be Armageddon for gold to do its job just fine. Gold provided huge gains in the 1970s and has provided huge gains in the 2000s, and in neither case was there ever a whiff of what I would consider an Armageddon event. Just to cite a couple of examples, Armageddon normally involves unemployment that is higher than 10% or so, and the Four Horsemen create more than single digit drops in GDP.
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Post by SSSS »

Joe S. wrote:If you are worried about the possibility of disasterous economic times, like a nuclear war, communist takeover, British invasion, or "French revolution," it might be helpful to have a hidden stock of 1/10 ounce gold coins, as well as food and guns.
Still no love for silver?

1/10-ounce gold coins tend to have a disproportionate markup over spot price. Also, being dime-sized, they're a choking hazard for young children. I don't have a citation for that last fact because I just made it up, but it's probably true.
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Post by Lbill »

The main point of my post was to point out that one of the benefits of the PP is that it has shown itself to be a low-volatility portfolio allocation. None of the wild ride you get from equity-tilted allocations that are often touted. But the main source of that low volatility is the high bond allocation relative to equities. There is a 50% allocation to U.S. treasurys with an averaged intermediate term duration, and U.S. treasurys have been a "safe haven" during times when stocks don't do well so they've done a good job of diversifying equity risk. If it's a smoother ride you're after, then moving that 25% gold allocation to treasurys will do a better job of that, simply because treasury bonds "dampen" portfolio volatility. The moves of a stock + treasurys portfolio are almost perfectly correlated to the moves of the stock market, but the moves are less extreme because the lower-volatility bonds dampen them out.

When you add an asset like gold, the moves of the portfolio are no longer as highly correlated with the moves of the stock market. For example, for 1972-2010 the correlation of a portfolio that was 25% stocks + 75% treasurys with the stock market was 94%; whereas the correlation of the PP (25% stocks, 50% treasurys, 25% gold) with the stock market was 40%. This is just another way of saying that the success of the PP vs. a bond-tilted allocation such as 25% stocks + 75% treasurys rests heavily with the performance of gold itself - it is effectively a "gold-tilted" allocation instead of an "equity-tilted" allocation. If gold does well, the PP will do well, and if it does poorly the PP will do poorly. Over the period 1972-2010 the correlation of the returns of the PP with the returns of gold was 71%, the correlation with stocks was 40%, and the correlation with treasuries was 26%
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Post by Gumby »

SSSS wrote:
Joe S. wrote:If you are worried about the possibility of disasterous economic times, like a nuclear war, communist takeover, British invasion, or "French revolution," it might be helpful to have a hidden stock of 1/10 ounce gold coins, as well as food and guns.
Still no love for silver?

1/10-ounce gold coins tend to have a disproportionate markup over spot price. Also, being dime-sized, they're a choking hazard for young children. I don't have a citation for that last fact because I just made it up, but it's probably true.
Gold is a relatively tiny market, so it responds to inflationary demand much more strongly than any other asset. It goes up much faster than inflation. HB explained this, above. We don't hold gold to use at the supermarket or as payment for goods. We just sell it when we need to, for rebalancing. It's a currency without a government. Simple as that.
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Post by Roy »

Since 1972, Gold had 17 down years averaging -7.84%. In those years, the portfolio averaged +6.75%.

• The worst Gold loss was -32.8% (1981). In that year the portfolio returned -3.9%.
• The second worst Gold loss was -22.7% (1975). In that year the portfolio returned +8.3%.
• The third worst Gold loss was -21.5% (1997). In that year the portfolio returned +7.5%.

So, I'm not sure the belief that the portfolio will do poorly if Gold does poorly is supported by these data. Now, Stocks (S&P) sometimes did well in Gold's worst years, but not always. And LT Bonds did very well, on average, in those years, thus partly explaining why the portfolio still posted positive returns.

For sure, the portfolio did worse than its own historical average return when Gold was down. But one must decide if the portfolio nonetheless met its prime objective of never losing big, which seems at least part of the reason why Harry called it a "bulletproof portfolio".
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Post by Lbill »

Roy - the statement I made that the PP will do "poorly" when gold is down was perhaps a mis-statement, as you point out. It's all relative. It will do "less well" than a portfolio that is less leveraged to gold when gold does poorly, and vice versa. In any event, the PP is not a volatile portfolio mix so you're not going to get breathtaking swings either way. If you want to smooth out the already smooth gyrations of the PP by leveraging equally to stocks and gold, my futzing around suggests that the ratio between stocks and gold should be about 60/40 rather than 50/50. If you want 50% in Treasurys, that would suggest an allocation of 30% stocks and 20% gold. This particular allocation had better returns and risk-adjusted returns during the 20-year drought for gold from 1981-2000, and it didn't give up much during the "golden years" of 1972-1981 and 2001-2011. Over the entire period of 1972-2010, it had the same compound return as the classic PP, with somewhat lower volatility. So, I'd first determine the % to allocate to Treasury bonds based on the annual volatility you can tolerate, and then split the balance 60/40 between stocks and gold.
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Post by Roy »

Lbill: I agree with your general take on this—regarding the Treasuries—they being the primary stabilizing force in many portfolio types, providing the allocation to them is significant. It is true for conventional portfolios and also for the PP.

My comment was less directed at you vs. a prevalent perception that the PP tanks if Gold does not do well. The data clearly do not support that assertion—at least in the Harry Browne version.
Last edited by Roy on Thu Aug 18, 2011 5:32 pm, edited 1 time in total.
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Post by Joe S. »

MediumTex wrote:
Joe S. wrote:
Lbill wrote: Holding gold is not necessary to reduce portfolio volatility, so that doesn't provide a rationale. You can do that by having a large allocation to bonds and a smaller allocation to stocks. In fact, from 1972-2010 a portfolio with 25% stocks and 75% 5-year treasuries had an annualized standard deviation of 7.1% compared to 8% for 25% stocks, 50% treasuries, 25% gold (the PP). And this is true for most any particular time period within the 1972-2010 framework.

That means that an allocation to gold really only makes sense if you expect it to improve your portfolio returns and/or risk-adjusted returns. As I've pointed out this result is time-period dependent and is determined by the performance of gold. Since no-one can know what that will be in the future, a large allocation to gold in one's portfolio (as opposed to a larger allocation to bonds) is a bet that the gold price is going up,
This is an excellent excerpt from the post by Lbill, and I hope people will read all his post. The permanent portfolio is not a horrible portfolio, but you can lower your volatility by decreasing the amount of gold and increasing your bonds, possibly with the Vanguard Total Bond Fund. For reason, I stated in previous posts, I don't expect gold to outperform inflation in the future, so buying gold for its appreciation doesn't make sense either. (Gold is so volatile, it may substantial rise or drop below inflation, but a good midline estimate is that it will match inflation.) If you are young and willing to take on more risk, you also might benefit from a higher stock allocation.

If you are worried about the possibility of disasterous economic times, like a nuclear war, communist takeover, British invasion, or "French revolution," it might be helpful to have a hidden stock of 1/10 ounce gold coins, as well as food and guns. Survivalist sites give lists of barter items you might use, that would work better than the 1 ounce gold coins recommended by Harry Browne. It's hard to buy small items with 1 ounce gold coins, and no one might have change.
...The total bond fund doesn't give you the protection you need in PP terms (i.e., it is neither cash-like, nor long term treasury-like). Back in 2008, a lot of total bond fund's holdings were about 15 minutes away from defaulting. That's not anything I would want to hold within a PP where I was seeking safety and stability...
According to Harry Browne's reasoning equal amount of gold, stocks, bonda, and money markets ought to have a low volatility. But mathematical analysis shows that 25% stocks and 75% bonds has lower volatility. This is using the post 1971 data. Harry Browne makes a good argument, but when you do the math, the math suggests that 75% bonds is the better allocation, if you are considering volatility only.

The comment about the French Revolution was referring to your previous post where you invoked the French Revolution.

The total bond index fund holds next to no junk bonds, it is a gross exaggeration to say a lot of the bonds were 15 minutes from defaulting in 2008.
Last edited by Joe S. on Thu Aug 18, 2011 5:37 pm, edited 1 time in total.
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Post by craigr »

Roy wrote:My comment was less directed at you vs. a prevalent perception that the PP tanks if Gold does not do well. The data clearly does not support that assertion—at least in the Harry Browne version.
This is a point I've mentioned repeatedly. The portfolio holds four 25% blocks of assets. If one asset takes a large loss (say -50%?) that would mean a -12.5% loss to the portfolio. Not great, but not a disaster. This also assumes that no other asset moves up in value to offset those losses which is not likely to be a long-term situation.
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Post by Joe S. »

Gumby wrote:
SSSS wrote:
Joe S. wrote:If you are worried about the possibility of disasterous economic times, like a nuclear war, communist takeover, British invasion, or "French revolution," it might be helpful to have a hidden stock of 1/10 ounce gold coins, as well as food and guns.
Still no love for silver?

1/10-ounce gold coins tend to have a disproportionate markup over spot price. Also, being dime-sized, they're a choking hazard for young children. I don't have a citation for that last fact because I just made it up, but it's probably true.
Gold is a relatively tiny market, so it responds to inflationary demand much more strongly than any other asset. It goes up much faster than inflation. HB explained this, above. We don't hold gold to use at the supermarket or as payment for goods. We just sell it when we need to, for rebalancing. It's a currency without a government. Simple as that.
Actually one P.P. person started talking about how stocks would have fared in the French Revolution, or when the British burned Washington D.C. This paragraph was in response to that comment.
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Post by MediumTex »

Joe S. wrote: The total bond index fund holds next to no junk bonds, it is a gross exaggeration to say a lot of the bonds were 15 minutes from defaulting in 2008.
I never said anything about junk bonds.

It was Fannie and Freddie bonds that were days away from default in 2008 if the federal government hadn't intervened and explicitly guaranteed them.

This is exactly the sort of risk that Harry Browne was trying to avoid by buying only treasuries for the PP.

PP tweaks can have unanticipated consequences and that is why I am urging people to resist the urge to tinker.

A portfolio of 75% bonds and 25% stocks would have wilted next to the PP in the 1970s. There is no PP-like safety in that approach, though it might be a fine portfolio for someone who is not as interested in the PP's safety and stability.

The PP fills a certain niche, and for those who like the safety and stability it offers, it's a great strategy. For others, it can be endlessly frustrating, because it doesn't match up with most of what we think we know about investing.
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Post by Lbill »

I see that Marc Faber is advising investors to steer clear of U.S. Treasury bonds entirely, calling them "junk bonds" that it is suicidal to invest in. He was asked about the rally in USTs as a result of economic weakness and their role as "safe haven" investments. His response: what does financial weakness mean? It means declining tax revenues and the issuance of more government bonds further diluting credit quality and risks to the dollar. He likes stocks better than bonds or cash, but not U.S. stocks - advising that emerging market equities will be the place to be. He does like gold - but physical gold held outside the U.S. and not gold ETFs like GLD or IAU. Boy, his view is certainly not supportive of the PP, with 50% in USTs and 25% in U.S. stocks, is it? Can't say I disagree with what he's saying. I know we've been down this road in discussions of the PP before, but I wonder if even Harry Browne would be having some doubts about having such a heavy emphasis on U.S. securities in the PP these days. It really does seem like a tipping point is fast approaching regarding the future of this country. I wonder how a British PP based on UK stocks and U.K. sovereign bonds would have fared when that empire came to an end? Maybe we should take a look.
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Post by MediumTex »

Lbill wrote:I wonder how a British PP based on UK stocks and U.K. sovereign bonds would have fared when that empire came to an end? Maybe we should take a look.
The PP would not have been relevant in that world, which was based on a gold standard.

The PP is designed for the modern world of fiat money.

As far as the future of treasuries, remember that Marc Faber's job is to go on TV and say provocative things. If he doesn't say provocative things, he won't sell as many subscriptions to "The Gloom, Boom & Doom Report".

Remember last year when Nassim Taleb said every human being should short treasuries? The timing of that "obvious" trade would have been disastrous.

None of these market commentators know anything more than the rest of us. Their job is just to come up with entertaining market narratives.
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Post by Lbill »

Tex - what was Browne's reason for basing the PP on U.S. government securities and U.S. equities only? Are those reasons still valid today or should they be re-examined? What would Browne himself have to say do you think?
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Post by MediumTex »

Lbill wrote:Tex - what was Browne's reason for basing the PP on U.S. government securities and U.S. equities only? Are those reasons still valid today or should they be re-examined? What would Browne himself have to say do you think?
He said to invest in your home country stocks and bonds.

U.S. investors are fortunate to live in the world's largest economy with the world's reseerve currency and most liquid bond market. The PP works great in the U.S.

People have modeled PPs in many other countries, and the results are similar, assuming you are starting with a stable western democracy. OTOH, a Zimbabwean or Venezuelan PP might not work very well.
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Post by hazlitt777 »

SSSS wrote:
Joe S. wrote:If you are worried about the possibility of disasterous economic times, like a nuclear war, communist takeover, British invasion, or "French revolution," it might be helpful to have a hidden stock of 1/10 ounce gold coins, as well as food and guns.
Still no love for silver?

1/10-ounce gold coins tend to have a disproportionate markup over spot price. Also, being dime-sized, they're a choking hazard for young children. I don't have a citation for that last fact because I just made it up, but it's probably true.
Michael Kosares recommends not buying bullion pieces smaller than one quarter ounces. These are the best small pieces for barter. He doesn't encourage the purchase of 1/10th or smaller pieces because they can be easily lost and because of the markup. His book is, The ABCs of Investing in Gold. Worth a read.
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Post by hazlitt777 »

Lbill wrote:I see that Marc Faber is advising investors to steer clear of U.S. Treasury bonds entirely, calling them "junk bonds" that it is suicidal to invest in. He was asked about the rally in USTs as a result of economic weakness and their role as "safe haven" investments. His response: what does financial weakness mean? It means declining tax revenues and the issuance of more government bonds further diluting credit quality and risks to the dollar. He likes stocks better than bonds or cash, but not U.S. stocks - advising that emerging market equities will be the place to be. He does like gold - but physical gold held outside the U.S. and not gold ETFs like GLD or IAU. Boy, his view is certainly not supportive of the PP, with 50% in USTs and 25% in U.S. stocks, is it? Can't say I disagree with what he's saying. I know we've been down this road in discussions of the PP before, but I wonder if even Harry Browne would be having some doubts about having such a heavy emphasis on U.S. securities in the PP these days. It really does seem like a tipping point is fast approaching regarding the future of this country. I wonder how a British PP based on UK stocks and U.K. sovereign bonds would have fared when that empire came to an end? Maybe we should take a look.
You know, I follow Marc Faber and respect him. But he never talks about developing a portfolio and rebalancing etc. I wonder what his thoughts would be on that. Regardless, I am kicking myself a bit because a rolled my Vanguard Long term treasury bond index fund into the intermediate term bond index around a year ago. I've done only half as well...around 9% for the year instead of 18%. I'm also disappointed in myself because I didn't trust the Harry Browne philosophy nor the Bogle philosophy and ended up trying to time the market. I figured...any time now bonds are going to take a beating so I want to lower my exposure. I should have left it alone.
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Post by hazlitt777 »

MediumTex wrote:
Lbill wrote:Tex - what was Browne's reason for basing the PP on U.S. government securities and U.S. equities only? Are those reasons still valid today or should they be re-examined? What would Browne himself have to say do you think?
He said to invest in your home country stocks and bonds.

U.S. investors are fortunate to live in the world's largest economy with the world's reseerve currency and most liquid bond market. The PP works great in the U.S.

People have modeled PPs in many other countries, and the results are similar, assuming you are starting with a stable western democracy. OTOH, a Zimbabwean or Venezuelan PP might not work very well.
But imagine what the gold portion would have done for them in such a country...
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Post by MediumTex »

hazlitt777 wrote:
MediumTex wrote:
Lbill wrote:Tex - what was Browne's reason for basing the PP on U.S. government securities and U.S. equities only? Are those reasons still valid today or should they be re-examined? What would Browne himself have to say do you think?
He said to invest in your home country stocks and bonds.

U.S. investors are fortunate to live in the world's largest economy with the world's reseerve currency and most liquid bond market. The PP works great in the U.S.

People have modeled PPs in many other countries, and the results are similar, assuming you are starting with a stable western democracy. OTOH, a Zimbabwean or Venezuelan PP might not work very well.
But imagine what the gold portion would have done for them in such a country...
If you could keep it.

I assume you saw that Chavez is nationalizing the gold industry in Venezuela.
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Post by Joe S. »

Roy wrote:Since 1972, Gold had 17 down years averaging -7.84%. In those years, the portfolio averaged +6.75%.

• The worst Gold loss was -32.8% (1981). In that year the portfolio returned -3.9%.
• The second worst Gold loss was -22.7% (1975). In that year the portfolio returned +8.3%.
• The third worst Gold loss was -21.5% (1997). In that year the portfolio returned +7.5%.

So, I'm not sure the belief that the portfolio will do poorly if Gold does poorly is supported by these data. Now, Stocks (S&P) sometimes did well in Gold's worst years, but not always. And LT Bonds did very well, on average, in those years, thus partly explaining why the portfolio still posted positive returns.

For sure, the portfolio did worse than its own historical average return when Gold was down. But one must decide if the portfolio nonetheless met its prime objective of never losing big, which seems at least part of the reason why Harry called it a "bulletproof portfolio".
The worst year of the permanent portfolio was 1981, because of gold. Your quote of -3.9% looks like it is from the Crawling Road website which uses a modified portfolio, but the Harry Browne website gives a figure of -6.2% using the original porfolio. However, you have to also consider there was 10.95% inflation that year. That makes an inflation adjusted return of -17.1% for the original portfolio in 1981. Below are links to all the data I quote:

http://crawlingroad.com/blog/2008/12/22 ... l-returns/
http://harrybrowne.org/PermanentPortfolioResults.htm
http://inflationdata.com/inflation/Infl ... rentPage=2

Now I want to compare that to the 25%stock, 75% bond portfolio I suggest as a substitute. So I go to the Crawling Rock site, take their data from 1971-2008 and throw out the gold and construct a portfolio of 25%stocks, 37.5% short term bonds and 37.5% long bonds. (This is kind of crude, but it's the only data I have.) Now from the Crawling Rock site I estimate the worst year for this portfolio is 1994 where the portfolio lost 4.8%. That's better than the Harry Browne portfolio, but worse than the Crawling Rock Modified Portfolio. When we adjust for inflation, I note than 1994 had only 2.67 inflation. However my portfolio had a 3.4% return in 1974, which had an inflation rate of 11.3%. So inflation adjusted, my portfolio's worst year was -7.9% in 1974. Someone may want to check my math.

So whether you use nominal returns or inflation adjusted returns, my portfolio's worse year was not as bad as Harry Browne's worst year. The Crawling Rock portfolio nominal worst year was better than mine, but I still beat Crawling Rock when you adjust for inflation.

I propose that 25% stocks, 75% bonds seems slightly superior to the Harry Browne permanent portfolio, when it comes to comparing worst years. So my portfolio is more "bullet proof." For other ways of comparing them, see my previous posts.
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Post by MediumTex »

Joe S. wrote:The worst year of the permanent portfolio was 1981, because of gold. Your quote of -3.9% looks like it is from the Crawling Road website which uses a modified portfolio, but the Harry Browne website gives a figure of -6.2% using the original porfolio. However, you have to also consider there was 10.95% inflation that year. That makes an inflation adjusted return of -17.1% for the original portfolio in 1981.
Let's open the historical aperture just a bit.

1980 PP Return: 13.4%
1981 PP Return: -3.9%
1982 PP Return: 23.3%

Average 3 year return: 10.93%

That looks a little different, doesn't it? And that's the PP at its worst. I could hang on for that ride, I think.
I propose that 25% stocks, 75% bonds seems slightly superior to the Harry Browne permanent portfolio, when it comes to comparing worst years. So my portfolio is more "bullet proof." For other ways of comparing them, see my previous posts.
Calling anything "bulletproof" that relies on the sovereign debt of one nation for 75% of its returns is, IMHO, a little farfetched.

If, however, that allocation makes you sleep better, I say use it and never look back.

Without the gold holdings, the PP's 50% allocation to the sovereign debt of one nation would also be inappropriate for someone seeking all-season safety. With the gold, however, it's just right. :)
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Post by Lbill »

Joe S. - Your post prompted me to look at the PP vs. 25/75 in real (inflation-adjusted) dollars. I get somewhat different figures looking at the drawdown years in real dollars (inflation adjusted) for the PP vs. 25/75. The PP I looked at was 25% in Long Treasuries, 25% in T-Bills, 25% in TSM and 25% in Gold for 1972-2010. The worst year for the PP was 1981, with a real loss of 12.9%. In that year, the 25/75 (25% TSM, 37.5% in each of Long Treasuries and TBills) had a real loss of 3.6%. Over the entire time period, the PP had a real loss of at least 1% in 8 years, with the average loss being 3.7%.

However, the 1970s were not kind to Treasuries. The 25/75 had its largest real loss in 1973 (13.1%). It lost ground to inflation in 5 of the 10 years between 1972 and 1981. Over the entire 39-year period it had negative real returns of greater than 1% in 11 years, with an average real loss of 4.9% over those years.

What this suggests is that the 25/75 was actually a little more volatile than the PP as far as real returns are concerned. And, indeed it is. The real annualized standard deviation for 1972-2010 for 25/75 was 7.6%, while it was 7.1% for the PP. This is at odds with the data for nominal returns: for 25/75 the nominal annualized SD is 6.8%, while it was 8% for the PP. Offhand, I can't think of any explanation for the discrepancy between real and nominal returns data, but there it is. If I figure it out or made a mistake I'll post a followup.
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Post by MediumTex »

That data is very interesting and helpful Lbill.

Thanks for posting.

Ultimately, we are probably splitting hairs here. The PP is a good allocation for all-season safety, and there are other allocations that also provide safe and reliable returns.

I do not mean to suggest that the PP is the only game in safetytown.
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Post by gabylon »

Lbill wrote:What this suggests is that the 25/75 was actually a little more volatile than the PP as far as real returns are concerned. And, indeed it is.
So, without checking the figures, I would assume that if you were using TIPS the 25/75 would do much better. Of course, then the discussion would switch to the safety of TIPS, that the past data is synthetic, the CPI can't be trusted and so on. Without implying that these latter objections are not valid, for someone who trusts the CPI and believes that the chances of the US defaulting on TIPS are negligible, am I correct to assume that (for this person) the 25/75 TSM/TIPS would be the safest and less volatile in real returns?
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Post by Joe S. »

MediumTex wrote:
Joe S. wrote:The worst year of the permanent portfolio was 1981, because of gold. Your quote of -3.9% looks like it is from the Crawling Road website which uses a modified portfolio, but the Harry Browne website gives a figure of -6.2% using the original porfolio. However, you have to also consider there was 10.95% inflation that year. That makes an inflation adjusted return of -17.1% for the original portfolio in 1981.
Let's open the historical aperture just a bit.

1980 PP Return: 13.4%
1981 PP Return: -3.9%
1982 PP Return: 23.3%

Average 3 year return: 10.93%

That looks a little different, doesn't it? And that's the PP at its worst. I could hang on for that ride, I think.
I propose that 25% stocks, 75% bonds seems slightly superior to the Harry Browne permanent portfolio, when it comes to comparing worst years. So my portfolio is more "bullet proof." For other ways of comparing them, see my previous posts.
Calling anything "bulletproof" that relies on the sovereign debt of one nation for 75% of its returns is, IMHO, a little farfetched.
As I specifically stated in my post, I was ONLY discussing the "worst years" argument in that post. For your current argument, "you should see my previous posts," as I say in the quote above.

I do not believe the 25-75% portfolio is bulletproof. I said it was more "bulletproof" using the previous definition of "bulletproof" offered by Roy who quotes Harry Browne.

I also say that the original Harry Browne portfolio shows a -17.1% inflation-adjusted return in 1981. I read Harry Browne's 1970 book, and he seemed to me to always be a believer in adjusting for inflation.

However, Lbill seems to have done a more comprehensive analysis than me and the 25-75% seems to have done slightly worst in worst year analysis than the Crawling Rock Permanent Portfolio. He didn't do an analysis of the Original Harry Browne Portfolio. I have to back away from my original suggestion that 25-75 is better for 1971-2008.
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Post by Joe S. »

Lbill wrote:Joe S. - Your post prompted me to look at...
Thanks for another excellent post. Some people like to look at volatility, and some people like to look at "worst year" analysis, and you do both.

I would ideally like to compare a Boglehead portfolio to the Permanent Portfolio. Since they are a low risk bunch, 25% Total Stock Market and 75% Total Bond Market would seem a good comparison. (Some might argue I should add 7.5% foreign stocks.) Since I didn't have figures, I cobbled together a 25-37.5-37.5% portfolio from the Crawling Rock site.
There are also problems where there are multiple Permanent Portfolios out there. Harry Browne seems to have used the S&P 500 for stocks, while the Crawling Rock site uses 1-2 year bonds for cash.

However, I think all the portfolios have volatilities that are probably not statistically significantly better, so I can't argue that Bogleheads are less volatile.
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Post by Gumby »

Joe S. wrote:I also say that the original Harry Browne portfolio shows a -17.1% inflation-adjusted return in 1981. I read Harry Browne's 1970 book, and he seemed to me to always be a believer in adjusting for inflation.
He was. However, he never believed in limiting yourself to a 12 month timeline when comparing investments.

John Chandler, who was instrumental in helping Harry Browne research the Permanent Portfolio, said the following about 12-month returns:
JOHN CHANDLER: The world doesn't really work according to the calendar...A lot, a lot of harm has been done because of the calendar. And one of the harms is trying to make everything fit neatly into a 12 month, or four week, or seven day pattern. The idea of the Permanent Portfolio is is that it invests in asset classes, which respond differently in different economic conditions. The economic conditions that makes one thing goes down, is the same condition that makes another asset go up. But, here is the key and that is that it does not happen overnight. It does take time for these economic forces to take hold. And I rememember back in the seventies, early eighties when we were doing research on the Permanent Portfolio, we found periods as long as 18 months where the portfolio could lose money. But, now that was about the longest we found. Now bear in mind that this is not a promise. It's not a guarantee without — saying that with only 18 months it can work. I can simply say, during the periods when it was being tested. The prices... doing tests on the Permanent Portfolio and what would happen in the different situations over long, long, long periods of time — about 18 months is the maximum we found where the portfolio could lose money before the economic forces took hold and balanced the portfolio out.
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Post by Lbill »

So, without checking the figures, I would assume that if you were using TIPS the 25/75 would do much better.
gabylon - you would think so, and I've tried to look at this. The reasoning is that TIPS should do well during inflation while nominal Treasurys do not - therefore the TIPS would not have tanked in the 1970s when we had high inflation. The problem is that TIPS didn't exist in the U.S. in the 1970s. The best we can do is to use a proxy for TIPS, called "synthetic TIPS". When you do this, it appears that "synthetic TIPS" don't do any better than nominal Treasurys in the 1970s. 5-Yr Treasurys lost an annualized average of 2.5% from 1972 through 1980, while synthetic TIPS lost 2.7%. There's not a lot of confidence in synthetic TIPS to begin with.

A second problem is that you have to do these analyses using the returns from mutual funds. A TIPS fund won't provide the same inflation protection as TIPS that are held to maturity and redeemed at their inflation-adjusted value. That's because the value of your shares in a fund can be dramatically affected by the market value of the TIPS that are held in the fund. In an environment of rapidly rising real interest rates (as in the 1970s) the market value of existing TIPS will drop, just as will nominal Treasurys. That's what happened to both TIPS funds and nominal Treasury funds in the 1970s.

If you want the inflation protection of TIPS, I think you have to use a ladder of TIPS so that you can hold them to maturity. A fund will help, but there's a lot of market price volatility in there - as I've discussed. One could argue that a TIPS ladder will do as well as Gold in offsetting inflation. However, Gold is also a "safe haven" investment. It shot up a lot more than the inflation rate in the 1970s due to the financial and economic crises that were occurring during that time.
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Post by Roy »

Bonds did well from 1972-present, so any approach (conventional or PP) that had a large allocation to Treasuries (60%-75%, say) had reasonable returns and a smooth ride. Vanguard's Total Bond Index was started in 1986. I suppose before that, one could have bought individual Intermediate Treasuries from 1972, til the funds became available.

Overall, the PP had positive yearly returns (not Real Returns) when Gold declined, partly due to its 50% Treasuries averaging about a 15-year maturity. But that was using the data from Crawlingroad, with ST Bonds (VFISX equivalent, which began in 1991). So, while Gold was clearly a drag on the PP in some years relative to its historical performance, the portfolio did seem to compensate with its other asset classes.

Joe's point is fair about looking at the original HB portfolio. I don't know if Harry later suggested in his radio broadcasts or other works to use Short Term Bonds (about 2+ years maturity) as a substitute for the Cash/Money Market funds he cites in his book, on pages 159-160 of "Fail Safe Investing". If he did not suggest longer bonds, perhaps it is best to make arguments based only on his intended design (though, I think using TSM or the S&P 500 is fine, even as those funds weren't around then and not listed in his book). Otherwise, one could also choose to make other hypothetical tweaks (like slicing/dicing the equities) as has been discussed many times, which introduces confounding variables. And PRPFX is already extensively tweaked and actively managed, so while it is a convenient one-stop proxy, it seems to complicate things too.
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Post by rbowling »

I'd also point out that even though the 25% TSM, 37.5% LTT, 37.5% STT portfolio has a lower standard deviation than the HBPP, the HBPP has a higher Up SD and a lower Down SD. I think most people are okay with "volatility" on the upside and are only concerned about large drawdowns.
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Post by Call_Me_Op »

rbowling wrote:I'd also point out that even though the 25% TSM, 37.5% LTT, 37.5% STT portfolio has a lower standard deviation than the HBPP, the HBPP has a higher Up SD and a lower Down SD. I think most people are okay with "volatility" on the upside and are only concerned about large drawdowns.
Indeed. I have a problem with the "volatility = risk" assertion. It is sometimes reasonably true but other times completely wrong, depending upon return distribution symmetry.
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Post by investnoob »

SSSS wrote:
MediumTex wrote:Something tells me that people who invested in U.S. stocks in 1802 would have probably sold a lot of them along about 1812 when the British were burning Washington D.C. (I probably would have). They say you should buy when there is blood in the streets, but I don't know if it's time to buy when the most powerful nation in the world (Great Britain) has invaded your country and set your capital on fire.
The real question is why modern-day Canadians take credit for doing this.
Heck, our constitution wasn't "patriated" until 1982. That was only 30 years ago! Old ties die hard, maybe?

http://en.wikipedia.org/wiki/Canada_Act_1982
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by Redstorm »

Thanks

Great thread and enjoyable read
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by letsgobobby »

Any updates on the PP? eyeballing, it looks like a -7% YOY return.
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by Browser »

letsgobobby wrote:Any updates on the PP? eyeballing, it looks like a -7% YOY return.
No, only down about 2.4%, which is something like 4% real (inflation adjusted).
We don't know where we are, or where we're going -- but we're making good time.
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by letsgobobby »

Browser wrote:
letsgobobby wrote:Any updates on the PP? eyeballing, it looks like a -7% YOY return.
No, only down about 2.4%, which is something like 4% real (inflation adjusted).
what's the math?

gold: -30%
long treasuries: -12%
cash: +1%
stocks: +30%

How is that only -2.4%?
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by Leeraar »

letsgobobby wrote:Any updates on the PP? eyeballing, it looks like a -7% YOY return.
Image

I believe these are prices, not total return.

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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by letsgobobby »

PRPFX is not equivalent to the original PP, at least as I understood?
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by ThinkingRunner »

letsgobobby wrote:
Browser wrote:
letsgobobby wrote:Any updates on the PP? eyeballing, it looks like a -7% YOY return.
No, only down about 2.4%, which is something like 4% real (inflation adjusted).
what's the math?

gold: -30%
long treasuries: -12%
cash: +1%
stocks: +30%

How is that only -2.4%?
Assuming $100 invested at beginning of the year, and using the above figures, you would have:

25*0.7 + 25*0.88 + 25*1.01 + 25*1.3 = 97.25

So, about 2.75% down.
Leeraar
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Re: Permanent Portfolio - A Sympathetic Boglehead's Perspect

Post by Leeraar »

letsgobobby wrote:PRPFX is not equivalent to the original PP, at least as I understood?
I believe so.

I think the idea of the PP has been refined (calibrated?) to better fit the new data since it was first proposed.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
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