What are your thoughts on the "Golden Butterfly" portfolio?

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PecuniaryPeccary
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What are your thoughts on the "Golden Butterfly" portfolio?

Post by PecuniaryPeccary » Sun Apr 17, 2016 11:58 pm

Hail Bogleheads,

I don't post much, but follow these boards very closely, and was quite intrigued to read of the "Golden Butterfly" portfolio mentioned by @Tyler9000 in this thread: viewtopic.php?t=171019#p2811808

(Original description and analysis of the portfolio on portoliocharts.com here: https://portfoliocharts.com/portfolio/golden-butterfly/)

I'd be curious to know your collective thoughts.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by anoop » Mon Apr 18, 2016 1:22 am

That's an interesting site. It even allows testing various custom portfolios providing similar charts!

As far as the portfolio itself, it looks quite similar to the "permanent portfolio fund" -- 25% US stock or similar, 25% LTT, 25% cash (STT), 25% Gold.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by aj76er » Mon Apr 18, 2016 1:29 am

There have been long and contentious threads about using gold in a portfolio. You may want to search the forum for those. The rest of the portfolio uses conventional asset classes (stocks+bonds) with an aggressive SCV tilt. It may take a long, long time for gold and SCV to "play their roles" in a portfolio such as the GB so just be prepared to "stay the course". You'll have to endure significant tracking error for long periods of time, so make sure you are okay with this.

I will admit that, based on past data, gold is one asset class that is highly uncorrelated to equities but with similar stddev, and thus pairs very nicely with stocks in a portfolio. However, the value of gold is 100% speculative so it is unclear whether its past behavior will persist in the future. This is somewhat true of other asset classes too (in that no one can predict their future worth), but at least there are valuation metrics (e.g. earnings, coupon payments, dividends, etc..) that you can use to estimate the "worth" and near-term "future worth" of conventional assets (e.g. stocks and bonds).
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by sunnywindy » Mon Apr 18, 2016 3:34 am

It could be ok, but I think it's more of a back testers dream, i.e. 'Just keep torturing the data until you get what you want'.
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by oldzey » Mon Apr 18, 2016 8:36 am

sunnywindy wrote:It could be ok, but I think it's more of a back testers dream, i.e. 'Just keep torturing the data until you get what you want'.
Agreed.

I'd also add what Mr. Bogle calls "The Rowboat Syndrome" (i.e. looking back where you've been, but having no idea where you are headed).

And some humor from Mr. Buffett about gold: https://www.youtube.com/watch?v=3ncS59taPkg
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by weltschmerz » Mon Apr 18, 2016 12:35 pm

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by Tyler9000 » Mon Apr 18, 2016 1:53 pm

There sure have been lots of questions about the Golden Butterfly lately!

For anyone interested, I just published a new post discussing the portfolio in more detail.

https://portfoliocharts.com/2016/04/18/ ... butterfly/

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by AlohaJoe » Mon Apr 18, 2016 8:06 pm

PecuniaryPeccary wrote:I'd be curious to know your collective thoughts.
My general thoughts are that portfolios that only show data back to 1972 are of limited interest given the short history. My personal belief is that those asset classes, for historical reasons, happened to be very productive while also being uncorrelated during the time period in question. I am not 100% confident (who can be?), but I have little faith that it will repeat in the future.

There is a fair amount of disagreement about whether the small premium is gone. Or smaller than it was before. (For instance, AQR who are believers in it, says the size premium still exists as long as you subtract out junk: https://www.aqr.com/cliffs-perspective/ ... pectacular). Swedroe is another small-believer but thinks it outperformed relative to historical norms between 1962 and 1990: http://www.etf.com/sections/etf-strateg ... nopaging=1

I think the case is even stronger with long bonds and gold that that period may not be representative of long-term or future performance.

Image

Image

I could be wrong!

But I also think history is more likely to "rhyme" than "repeat" and the golden portfolio of the next 40-years is going to be something crazy (and unforeseeable) like 20% Emerging Bonds, 20% REIT, 20% Momentum, 20% TIPS, and 20% Large Value.

I think this kind of backtesting is a great starting point for thinking about portfolios. But I think you should want to see how they performed in other timeframes, since the start date can have so much impact on backtesting. For instance, the data exists for all of the assets in the Golden Butterfly back to 1900 and earlier. It would be interesting to see what returns were like across the full 20th century for the portfolio.

Edit: my criticisms of this type of portfolio are extremely common and far from unique. In the links provided above, another posted in the other forum made the same point with similar graphs: http://forum.mrmoneymustache.com/invest ... msg1048589

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by azanon » Mon Apr 18, 2016 10:00 pm

PecuniaryPeccary wrote:Hail Bogleheads,

I don't post much, but follow these boards very closely, and was quite intrigued to read of the "Golden Butterfly" portfolio mentioned by @Tyler9000 in this thread: viewtopic.php?t=171019#p2811808

(Original description and analysis of the portfolio on portoliocharts.com here: https://portfoliocharts.com/portfolio/golden-butterfly/)

I'd be curious to know your collective thoughts.
I think its great. I don't use it personally, but I'm following a somewhat similar concept. I'm reminded of a central point made by Meb Faber in his book Global asset allocation: A Survey of the World's Top asset Allocation Strategies, which is that there are a lot of great portfolios out there that will get the job done, and by job I mean more than acceptable risk-adjusted return. I believe it was this book that found that the long term returns of all of the portfolios he looked at were within one percentage point of each other. His take-home message was pick one and then go fishing...... or something like that. Just be sure and stick to whichever you pick though.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by art_org » Mon Apr 18, 2016 11:43 pm

I like the name ...
Does it meet the requirements of your Investment Policy Statement?

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by best2u » Tue Apr 19, 2016 1:47 am

Intuition tells me that the treasury positions are going to be laggards if the fed continues to move toward higher interest rates. The small caps typically under perform during a bear market and sometimes the last stages of a bull market. It appears one is adding increased segmented volatility in the hopes that in the long run an outsized exposure to gold and small caps and long term treasuries will enhance returns. A word of caution, just because one buys a category that has lagged or under performed there is no guarantee that it will out perform just because you own it. Sometimes these trends take years to play out.

If one is leaning toward adopting this strategy, by using the tools of the web site, there is some evidence that substituting a position in 10 year treasuries for the long term treasury position, could be beneficial. Just saying. I have probably done dummer things than the golden butterfly over the years. I think the 3 fund portfolio strategy is simpler. Jmo. :happy

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by azanon » Tue Apr 19, 2016 7:31 am

art_org wrote:I like the name ...
Does it meet the requirements of your Investment Policy Statement?
The portfolio has, at least in theory, both incredibly high return and incredibly low volatility. In other words, what IPS wouldn't it support, would be the better question.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by in_reality » Tue Apr 19, 2016 8:07 am

The average gold-CPI ratio since the early 1970s is 3.46-to-1
Currently, that ratio translates into a gold price of $824 an ounce.
Inflation would have to rise at a 9.4% annualized rate over the next five years for gold’s fair value to merely rise to where bullion currently trades.

At any rate, I believe that gold is a decent inflation hedge only when viewed over the very long term — measured over many decades, even centuries — rather than a few years.

***obviously talking about viewing gold over many decades or even centuries and quoting an estimate of current value since the 1970's doesn't make a lot of sense but that's financial news you know.

Anyway, gold and the portfolio isn't for me. I don't have that many decades in my investing timeline. If I was thinking about my great-great grandchildren then perhaps that's another story. But I am not.

http://www.marketwatch.com/story/golds- ... 2016-04-19

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by stemikger » Tue Apr 19, 2016 8:12 am

The only problem with these type of portfolios is most 401Ks don't give you these options, so you would have to invest on your own. It seems to be the same idea as the Permanent Portfolio and Ray Dailio's All Weather. I'll just stick with Jack's advance age in bonds or somewhere around there and two index funds for stocks and bonds but thanks for posting.
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by azanon » Tue Apr 19, 2016 8:23 am

stemikger wrote:The only problem with these type of portfolios is most 401Ks don't give you these options, so you would have to invest on your own. It seems to be the same idea as the Permanent Portfolio and Ray Dailio's All Weather.
That would stop me on this one too. My "401K" is the TSP so i have large cap blend (C fund), and STT proxy (G fund), but definitely not the other 3 choices. Now I also have 2 Roths (my wife's and mine), but annual contributions there still don't allow for a large enough amount to cover the other 60%.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by stemikger » Tue Apr 19, 2016 8:30 am

azanon wrote:
stemikger wrote:The only problem with these type of portfolios is most 401Ks don't give you these options, so you would have to invest on your own. It seems to be the same idea as the Permanent Portfolio and Ray Dailio's All Weather.
That would stop me on this one too. My "401K" is the TSP so i have large cap blend (C fund), and STT proxy (G fund), but definitely not the other 3 choices. Now I also have 2 Roths (my wife's and mine), but annual contributions there still don't allow for a large enough amount to cover the other 60%.
Yes, that is the other problem not being able to save enough. Once you are 50, you can contribute 24K in most 401Ks. These types of portfolios seem to have more appeal for people who are going to retire and do a direct transfer from their 410K to an IRA. When I was reading about Ray Dalio's All Weather I was very intrigued but I just don't get how it can do so well being so bond heavy. Having said that Ray Dalio believes in it and his track record speaks for itself. The bottom line is picking an AA you can stick with through bull and bear markets and that is the right one for you. As I have said a million times on this forum, the Vanguard Balanced Index Fund fits that description for me.
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by azanon » Tue Apr 19, 2016 8:46 am

stemikger wrote:Yes, that is the other problem not being able to save enough. Once you are 50, you can contribute 24K in most 401Ks. These types of portfolios seem to have more appeal for people who are going to retire and do a direct transfer from their 410K to an IRA. When I was reading about Ray Dalio's All Weather I was very intrigued but I just don't get how it can do so well being so bond heavy. Having said that Ray Dalio believes in it and his track record speaks for itself. The bottom line is picking an AA you can stick with through bull and bear markets and that is the right one for you. As I have said a million times on this forum, the Vanguard Balanced Index Fund fits that description for me.
I was more sold on the "MPT" approach these portfolios have, so I did want to use a similar strategy, but I just had to find one that would work with my limitations. As Tyler discusses on his site, the Dalio portfolio that he provided to Robbins was fairly decent, and is structured to work using similar offsetting correlations like this Golden Butterfly, its just that one can do quite a bit better than that one.

I ended up with: 15% S Fund (Mid cap blend), 10% I Fund (int Dev), 10% Emerging Market, 20% LTT (using VLGSX), 30% G fund (STT), 7.5% Gold (using IAU), and 7.5% Commodities (using USCI). Compared to Golden Butterfly, it had the same return, and 0.5% more volatility.... going on memory.

So I actually started from the Dalio portfolio, but was able to tweak it for considerably better results. I'm also more comfortable with this one because I'm not relying too heavily on, say, gold at a full 20%. The total cost of that is only 15 basis points (thanks to the low cost of TSP). And I think its clear my version is quite "all-weather"; its practically ready for just about anything.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by quantAndHold » Tue Apr 19, 2016 8:59 am

I was listening to The Investors' Podcast this week, and they were interviewing James Rickards, who wrote a book called The New Case For Gold. He came off as pretty much a financial Armageddon gold nutter. But (someone please correct me, I was on the treadmill and my brain was melting) I think he was only recommending 10% gold.

As far as 60% gold/treasuries in a portfolio? I think it's chasing yesterday's returns. After listening to Jim Rickards though, i might be willing to consider 5% gold in an otherwise diversified portfolio.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by azanon » Tue Apr 19, 2016 9:57 am

Regarding poor returns going forward, the same could be said for US stocks. Most forecasts Ive seen are equally dismal, relative to the extra risk vs treasuries. So I continue to be confused by the negative bond outlook as if to suggest stocks outlook is any better, again relative to the extra risk.

My other thought that goes with a few of the comments here are, what do bogleheads care about short-term outlooks anyway? A portfolio selection should be for one that could last 30 years or more. And we're not market timers. So should we really be trying to guess the direction of interest rates, for example? They may stay flat for the next 20 years for all we know. Or they could rise slow enough that the extra yield on LT bonds more than offsets the increase in rates.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by centrifuge41 » Tue Apr 19, 2016 10:57 am

No Swiss Francs? What kind of well-diversified portfolio is this! :D

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by miles monroe » Tue Apr 19, 2016 11:06 am

lol, i read this as the "golden butterfly position" and thot i was gonna learn something.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by lordmetroid » Wed Jul 06, 2016 12:21 pm

I have decided to go with 125% in my local index in Sweden, the OMXS30.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by invst65 » Wed Jul 06, 2016 5:04 pm

I transitioned into this portfolio from the straight Permanent Portfolio at the beginning of the year. This was mostly because I decided the vanilla version was going to be hard to stick with in times of prosperity when stocks are outperforming, as noted by William Bernstein in his foreword to the recent book about the strategy. And this was actually put to the test last year when the Permanent Portfolio was down 3% and lots of people were thinking the world was coming to an end after 2 negative return years out of the last 3 and abandoning the strategy altogether. A greater tilt towards the stock market just makes me feel a little more comfortable and the data bears out that in the past you would have gotten a slightly higher CAGR with the same volatility and maximum drawdown. And so far I'm loving the decision because I'm up 11.6% YTD (The straight permanent portfolio is one percent higher right now but I can live with that).

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by nisiprius » Wed Jul 06, 2016 5:55 pm

This seems to be the current 25/25/25/25 Permanent Portfolio plus the currently fashionable small-cap value tilt. In fact it is a mix of 80% Permanent Portfolio, 20% small-cap value.

Plus an awful lot of marketing. A catchy name, and the usual terb-tense problems (saying a certain portfolio "has" certain characteristics, when what is meant is that "in backtesting, in the past, it would have had" these characteristics.

It's hard to know what to say about it except that it's not hard to take some existing portfolio and change it. There's probably a 50% chance that the change backtests better than the original.
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by invst65 » Wed Jul 06, 2016 7:03 pm

nisiprius wrote:This seems to be the current 25/25/25/25 Permanent Portfolio plus the currently fashionable small-cap value tilt. In fact it is a mix of 80% Permanent Portfolio, 20% small-cap value.

Plus an awful lot of marketing. A catchy name, and the usual terb-tense problems (saying a certain portfolio "has" certain characteristics, when what is meant is that "in backtesting, in the past, it would have had" these characteristics.

It's hard to know what to say about it except that it's not hard to take some existing portfolio and change it. There's probably a 50% chance that the change backtests better than the original.
What marketing? I didn't know anybody was trying to sell this idea for profit, either here or anywhere else. "Experts" can pick it apart all they want and tell us it's the wrong portfolio because they are the ones who really know what the future holds and it won't do well despite what the back-testing shows but then who is the real marketeer and why should we believe them?

You are exactly right in saying it's the Permanent Portfolio with a small-cap value tilt, but the Permanent Portfolio strategy calls for doing the 25x4 split with all the money you can't afford to lose for safety but also having a "Variable Portfolio" with the rest of your assets. So if you consider the small cap value portion your variable portfolio it still fits the strategy perfectly and isn't that big of a change.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by itstoomuch » Thu Jul 07, 2016 11:35 am

OP, Do you mean something like this, as in a portfolio that will perform as an long call, Butterfly Spread?
http://www.theoptionsguide.com/butterfly-spread.aspx
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by itstoomuch » Thu Jul 07, 2016 11:36 am

OP, Do you mean something like this, as in a portfolio that will perform as an long call, Butterfly Spread?
http://www.theoptionsguide.com/butterfly-spread.aspx
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by azanon » Thu Jul 07, 2016 3:30 pm

nisiprius wrote:This seems to be the current 25/25/25/25 Permanent Portfolio plus the currently fashionable small-cap value tilt. In fact it is a mix of 80% Permanent Portfolio, 20% small-cap value.
Are you suggesting the superiority of small-cap value tilting is potentially dubious? I've personally found the research on higher (expected) performance for both small cap investing, and value investing, to be quite compelling, and certainly not anything new. My takeaway from both, is the risk of both (beta) is higher, when viewed in isolation, but so is the expected return. And when you add that to a portfolio of other mostly uncorrelated assets, then some real risk-adjusted return magic starts to happen.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by Engineer250 » Thu Jul 07, 2016 3:54 pm

azanon wrote:
art_org wrote:I like the name ...
Does it meet the requirements of your Investment Policy Statement?
The portfolio has, at least in theory, both incredibly high return and incredibly low volatility. In other words, what IPS wouldn't it support, would be the better question.
I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge. I think my house has more real value than gold, but I never consider the value of my house as part of my net worth, it's only an asset I'm paying down and get use out of (like a car) with an unknown future value on the market that should be relative to other houses. I have a conspiracy theory gold is a value people are deliberately trying to turn into a bubble and that all the smart money is already out of gold. I've heard a lot of commercials about silver lately so wonder if the market riggers have already sold out of gold, expecting a drop, and moved on to hopefully create a new bubble in silver.
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by czeckers » Thu Jul 07, 2016 5:56 pm

I think I need to come up with a catchier name for my portfolio and write a book. :sharebeer
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by technovelist » Thu Jul 07, 2016 6:06 pm

centrifuge41 wrote:No Swiss Francs? What kind of well-diversified portfolio is this! :D
Unfortunately Swiss franc deposit accounts pay no interest, and US Americans (at least) can no longer buy Swiss annuities. :(
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by technovelist » Thu Jul 07, 2016 6:10 pm

Engineer250 wrote: I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge.
I'm not sure why you put "haha" in your comment. By definition, gold is the gold standard for currency hedging.
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by azanon » Thu Jul 07, 2016 8:30 pm

Engineer250 wrote:
azanon wrote:
art_org wrote:I like the name ...
Does it meet the requirements of your Investment Policy Statement?
The portfolio has, at least in theory, both incredibly high return and incredibly low volatility. In other words, what IPS wouldn't it support, would be the better question.
I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge. I think my house has more real value than gold, but I never consider the value of my house as part of my net worth, it's only an asset I'm paying down and get use out of (like a car) with an unknown future value on the market that should be relative to other houses. I have a conspiracy theory gold is a value people are deliberately trying to turn into a bubble and that all the smart money is already out of gold. I've heard a lot of commercials about silver lately so wonder if the market riggers have already sold out of gold, expecting a drop, and moved on to hopefully create a new bubble in silver.
Nothing in my IPS will make reference to what I think, unless what I think is supported by evidence. To that end, we have hard investment data back to the early 70s as to how modest amounts of gold performs in a portfolio, and so far gold has done outstanding. I don't believe in 46 year long flukes. Now can I necessarily explain exactly why it has done so well? I can take a decent stab at it, but it is really all that relevant in the end? It apparently works, is the inevitable conclusion, even if I cannot figure out exactly why.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by technovelist » Thu Jul 07, 2016 8:38 pm

azanon wrote:
Engineer250 wrote:
azanon wrote:
art_org wrote:I like the name ...
Does it meet the requirements of your Investment Policy Statement?
The portfolio has, at least in theory, both incredibly high return and incredibly low volatility. In other words, what IPS wouldn't it support, would be the better question.
I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge. I think my house has more real value than gold, but I never consider the value of my house as part of my net worth, it's only an asset I'm paying down and get use out of (like a car) with an unknown future value on the market that should be relative to other houses. I have a conspiracy theory gold is a value people are deliberately trying to turn into a bubble and that all the smart money is already out of gold. I've heard a lot of commercials about silver lately so wonder if the market riggers have already sold out of gold, expecting a drop, and moved on to hopefully create a new bubble in silver.
Nothing in my IPS will make reference to what I think, unless what I think is supported by evidence. To that end, we have hard investment data back to the early 70s as to how modest amounts of gold performs in a portfolio, and so far gold has done outstanding. I don't believe in 46 year long flukes. Now can I necessarily explain exactly why it has done so well? I can take a decent stab at it, but it is really all that relevant in the end? It apparently works, is the inevitable conclusion, even if I cannot figure out exactly why.
Well, you have to have some reason for believing that it isn't a fluke, i.e., some connection between certain economic situations and the price of gold. Otherwise it is no better than the "Superbowl indicator" that people used to point to as indicating whether the stock market would go up or down.

I think there is some validity in Harry Browne's explanation of why gold reacts violently to certain economic events, namely that while the US dollar is the world's favorite currency, gold is the world's second favorite. So if there are widespread economic problems that don't involve the depreciation of the dollar, the dollar will be very strong, but if the dollar is depreciating (for whatever reason) at such times, gold will be strong.

The current situation seems to be a race to the bottom in the form of competitive monetary depreciation, and in such cases, gold shows strength as the only widely accepted money that cannot be printed.
In theory, theory and practice are identical. In practice, they often differ.

spammagnet
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by spammagnet » Thu Jul 07, 2016 10:23 pm

nisiprius wrote:... [It's] not hard to take some existing portfolio and change it. There's probably a 50% chance that the change backtests better than the original.
This is great.

Engineer250
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by Engineer250 » Fri Jul 08, 2016 3:27 pm

technovelist wrote:
Engineer250 wrote: I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge.
I'm not sure why you put "haha" in your comment. By definition, gold is the gold standard for currency hedging.
Just amusing to use the phrase we use for such things in exactly the place it originated from and is defined by.

I understand why a lot of people would be convinced gold would be a really good hedge and diversification against investments in the USD. Past performance has shown this to be true. I'm just not convinced investing in a single asset like that isn't incredibly risky, no moreso than a single stock. And as people like to point out on here, past performance is no indicator of future results. I would never have more than 5% of my portfolio invested in a single stock or a single commodity. And I would consider that the riskiest 5% of my portfolio. Obviously all these folks investing in gold could turn out to be right. It's perfectly reasonable to expect it to continue to be a relatively safe hedge and it's possible people who invest in it will do better in their portfolios than I will in mine. I just don't see why it's any different than having 5% of my portfolio in platinum, oil, coffee, or frozen concentrated orange juice. I understand it had historic connotations to currency. So does Bitcoin today. Maybe Bitcoin is a safe investment for the next 500 years, I don't know. Hopefully those who are pro-Gold will excuse my risk aversion in this case.
Where the tides of fortune take us, no man can know.

soboggled
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by soboggled » Fri Jul 08, 2016 3:48 pm

Any portfolio with 20% in gold is idiotic and a tribute to the power of superstition. Why not bitcoins? At least you can buy stuff with them.
If the world comes to an end what value is metal that can only be used to make jewelry?

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by technovelist » Fri Jul 08, 2016 3:55 pm

Engineer250 wrote:
technovelist wrote:
Engineer250 wrote: I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge.
I'm not sure why you put "haha" in your comment. By definition, gold is the gold standard for currency hedging.
Just amusing to use the phrase we use for such things in exactly the place it originated from and is defined by.

I understand why a lot of people would be convinced gold would be a really good hedge and diversification against investments in the USD. Past performance has shown this to be true. I'm just not convinced investing in a single asset like that isn't incredibly risky, no moreso than a single stock. And as people like to point out on here, past performance is no indicator of future results. I would never have more than 5% of my portfolio invested in a single stock or a single commodity. And I would consider that the riskiest 5% of my portfolio. Obviously all these folks investing in gold could turn out to be right. It's perfectly reasonable to expect it to continue to be a relatively safe hedge and it's possible people who invest in it will do better in their portfolios than I will in mine. I just don't see why it's any different than having 5% of my portfolio in platinum, oil, coffee, or frozen concentrated orange juice. I understand it had historic connotations to currency. So does Bitcoin today. Maybe Bitcoin is a safe investment for the next 500 years, I don't know. Hopefully those who are pro-Gold will excuse my risk aversion in this case.
What about having 20% of your portfolio in US dollar-denominated debt securities? Is that too concentrated a risk?

Because that is what having 20% of your portfolio in gold is like.

Gold is money that isn't reliant on government.
In theory, theory and practice are identical. In practice, they often differ.

soboggled
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by soboggled » Fri Jul 08, 2016 4:32 pm

technovelist wrote:
Engineer250 wrote:
technovelist wrote:
Engineer250 wrote: I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge.
I'm not sure why you put "haha" in your comment. By definition, gold is the gold standard for currency hedging.
Just amusing to use the phrase we use for such things in exactly the place it originated from and is defined by.

I understand why a lot of people would be convinced gold would be a really good hedge and diversification against investments in the USD. Past performance has shown this to be true. I'm just not convinced investing in a single asset like that isn't incredibly risky, no moreso than a single stock. And as people like to point out on here, past performance is no indicator of future results. I would never have more than 5% of my portfolio invested in a single stock or a single commodity. And I would consider that the riskiest 5% of my portfolio. Obviously all these folks investing in gold could turn out to be right. It's perfectly reasonable to expect it to continue to be a relatively safe hedge and it's possible people who invest in it will do better in their portfolios than I will in mine. I just don't see why it's any different than having 5% of my portfolio in platinum, oil, coffee, or frozen concentrated orange juice. I understand it had historic connotations to currency. So does Bitcoin today. Maybe Bitcoin is a safe investment for the next 500 years, I don't know. Hopefully those who are pro-Gold will excuse my risk aversion in this case.
What about having 20% of your portfolio in US dollar-denominated debt securities? Is that too concentrated a risk?

Because that is what having 20% of your portfolio in gold is like.

Gold is money that isn't reliant on government.
Absolutely ridiculous. Gold is NOT money.

soboggled
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by soboggled » Fri Jul 08, 2016 4:34 pm

technovelist wrote:
Engineer250 wrote:
technovelist wrote:
Engineer250 wrote: I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge.
I'm not sure why you put "haha" in your comment. By definition, gold is the gold standard for currency hedging.
Just amusing to use the phrase we use for such things in exactly the place it originated from and is defined by.

I understand why a lot of people would be convinced gold would be a really good hedge and diversification against investments in the USD. Past performance has shown this to be true. I'm just not convinced investing in a single asset like that isn't incredibly risky, no moreso than a single stock. And as people like to point out on here, past performance is no indicator of future results. I would never have more than 5% of my portfolio invested in a single stock or a single commodity. And I would consider that the riskiest 5% of my portfolio. Obviously all these folks investing in gold could turn out to be right. It's perfectly reasonable to expect it to continue to be a relatively safe hedge and it's possible people who invest in it will do better in their portfolios than I will in mine. I just don't see why it's any different than having 5% of my portfolio in platinum, oil, coffee, or frozen concentrated orange juice. I understand it had historic connotations to currency. So does Bitcoin today. Maybe Bitcoin is a safe investment for the next 500 years, I don't know. Hopefully those who are pro-Gold will excuse my risk aversion in this case.
What about having 20% of your portfolio in US dollar-denominated debt securities? Is that too concentrated a risk?

Because that is what having 20% of your portfolio in gold is like.

Gold is money that isn't reliant on government.
Absolutely ridiculous. Gold is NOT money. It's a colored metal with little intrinsic value and backed by no authority.

technovelist
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by technovelist » Fri Jul 08, 2016 5:00 pm

soboggled wrote:
technovelist wrote:
Engineer250 wrote:
technovelist wrote:
Engineer250 wrote: I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge.
I'm not sure why you put "haha" in your comment. By definition, gold is the gold standard for currency hedging.
Just amusing to use the phrase we use for such things in exactly the place it originated from and is defined by.

I understand why a lot of people would be convinced gold would be a really good hedge and diversification against investments in the USD. Past performance has shown this to be true. I'm just not convinced investing in a single asset like that isn't incredibly risky, no moreso than a single stock. And as people like to point out on here, past performance is no indicator of future results. I would never have more than 5% of my portfolio invested in a single stock or a single commodity. And I would consider that the riskiest 5% of my portfolio. Obviously all these folks investing in gold could turn out to be right. It's perfectly reasonable to expect it to continue to be a relatively safe hedge and it's possible people who invest in it will do better in their portfolios than I will in mine. I just don't see why it's any different than having 5% of my portfolio in platinum, oil, coffee, or frozen concentrated orange juice. I understand it had historic connotations to currency. So does Bitcoin today. Maybe Bitcoin is a safe investment for the next 500 years, I don't know. Hopefully those who are pro-Gold will excuse my risk aversion in this case.
What about having 20% of your portfolio in US dollar-denominated debt securities? Is that too concentrated a risk?

Because that is what having 20% of your portfolio in gold is like.

Gold is money that isn't reliant on government.
Absolutely ridiculous. Gold is NOT money. It's a colored metal with little intrinsic value and backed by no authority.
Does saying it twice make it more believable?
In theory, theory and practice are identical. In practice, they often differ.

Engineer250
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by Engineer250 » Fri Jul 08, 2016 5:27 pm

technovelist wrote:
Engineer250 wrote:
technovelist wrote:
Engineer250 wrote: I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge.
I'm not sure why you put "haha" in your comment. By definition, gold is the gold standard for currency hedging.
Just amusing to use the phrase we use for such things in exactly the place it originated from and is defined by.

I understand why a lot of people would be convinced gold would be a really good hedge and diversification against investments in the USD. Past performance has shown this to be true. I'm just not convinced investing in a single asset like that isn't incredibly risky, no moreso than a single stock. And as people like to point out on here, past performance is no indicator of future results. I would never have more than 5% of my portfolio invested in a single stock or a single commodity. And I would consider that the riskiest 5% of my portfolio. Obviously all these folks investing in gold could turn out to be right. It's perfectly reasonable to expect it to continue to be a relatively safe hedge and it's possible people who invest in it will do better in their portfolios than I will in mine. I just don't see why it's any different than having 5% of my portfolio in platinum, oil, coffee, or frozen concentrated orange juice. I understand it had historic connotations to currency. So does Bitcoin today. Maybe Bitcoin is a safe investment for the next 500 years, I don't know. Hopefully those who are pro-Gold will excuse my risk aversion in this case.
What about having 20% of your portfolio in US dollar-denominated debt securities? Is that too concentrated a risk?

Because that is what having 20% of your portfolio in gold is like.

Gold is money that isn't reliant on government.
I think others here have put this better than I can, but I'll try to explain.

In trying to imagine a scenario in which US Govt backed securities completely lose value, I imagine a complete SHTF scenario in which my investment in stocks, my home price, my income, my savings, are all now worthless as well. In fact for me personally, my income is directly dependent upon the US Govt but even if I were to change industries, I can't imagine being successful in say, pharmaceuticals, if US backed debt is determined worthless and presumably the dollar also worthless. So under these sorts of scenarios, "holding" gold through some US brokerage that is now also worthless under this scenario (bye bye FDIC as well) seems pretty pointless. I do have some small investment in the things people suggest for these scenarios. If you truly think US backed debt could possibly collapse I suggest you own property far away from population areas, invest in lead, invest in self defense, have a good supply of fresh water and food. Have the skills that you could either directly provide for you and your family's sustenance and preferably some other skills you could barter while we all struggle to survive in the post-apocalyptic world. No one is going to want your gold if the USD is worthless and no one has jobs and food.

That said, if you want to "bet" on gold as a hedge against fluctuations in the dollar, that's fine. But it is definitely a bet that is less diversified than any of the bets most people would suggest on these boards.
Where the tides of fortune take us, no man can know.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by itstoomuch » Fri Jul 08, 2016 6:17 pm

engineer250 wrote:
In trying to imagine a scenario in which US Govt backed securities completely lose value, I imagine a complete SHTF scenario in which my investment in stocks, my home price, my income, my savings, are all now worthless as well. In fact for me personally, my income is directly dependent upon the US Govt but even if I were to change industries, I can't imagine being successful in say, pharmaceuticals, if US backed debt is determined worthless and presumably the dollar also worthless. So under these sorts of scenarios, "holding" gold through some US brokerage that is now also worthless under this scenario (bye bye FDIC as well) seems pretty pointless. I do have some small investment in the things people suggest for these scenarios. If you truly think US backed debt could possibly collapse I suggest you own property far away from population areas, invest in lead, invest in self defense, have a good supply of fresh water and food. Have the skills that you could either directly provide for you and your family's sustenance and preferably some other skills you could barter while we all struggle to survive in the post-apocalyptic world. No one is going to want your gold if the USD is worthless and no one has jobs and food.

That said, if you want to "bet" on gold as a hedge against fluctuations in the dollar, that's fine. But it is definitely a bet that is less diversified than any of the bets most people would suggest on these boards.
+1 Engineer250

My older bro had a hand in moving USD$ off the gold standard. Be glad he was able to make the argument. Because now you can own and sell gold at whatever price that makes you happy. :mrgreen:

disclaimer: Bought 200IAU on Tues at opening @13.00 Discretionary acct. Everything in the Discretionary is at risk and discretionary, even the 60% that's in cash. :greedy
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

spammagnet
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by spammagnet » Fri Jul 08, 2016 6:29 pm

Engineer250 wrote:... If you truly think US backed debt could possibly collapse I suggest you own property far away from population areas, invest in lead, invest in self defense, have a good supply of fresh water and food. Have the skills that you could either directly provide for you and your family's sustenance and preferably some other skills you could barter while we all struggle to survive in the post-apocalyptic world. ...
Agree, but why bother? Life would be short, and not happy.

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by technovelist » Fri Jul 08, 2016 6:29 pm

Engineer250 wrote:
technovelist wrote:
Engineer250 wrote:
technovelist wrote:
Engineer250 wrote: I haven't written out my IPS formally...but it would definitely include "do not invest in Gold." I don't think gold has any more value than Bitcoin, stained glass, or African parrots. I acknowledge the market currently thinks it has a value, and there are some industrial uses for it, I just think most of the value attributed to gold by the market has nothing to do with its current role in commerce. I'm not sure why it has become the "gold standard" (haha) as a currency hedge.
I'm not sure why you put "haha" in your comment. By definition, gold is the gold standard for currency hedging.
Just amusing to use the phrase we use for such things in exactly the place it originated from and is defined by.

I understand why a lot of people would be convinced gold would be a really good hedge and diversification against investments in the USD. Past performance has shown this to be true. I'm just not convinced investing in a single asset like that isn't incredibly risky, no moreso than a single stock. And as people like to point out on here, past performance is no indicator of future results. I would never have more than 5% of my portfolio invested in a single stock or a single commodity. And I would consider that the riskiest 5% of my portfolio. Obviously all these folks investing in gold could turn out to be right. It's perfectly reasonable to expect it to continue to be a relatively safe hedge and it's possible people who invest in it will do better in their portfolios than I will in mine. I just don't see why it's any different than having 5% of my portfolio in platinum, oil, coffee, or frozen concentrated orange juice. I understand it had historic connotations to currency. So does Bitcoin today. Maybe Bitcoin is a safe investment for the next 500 years, I don't know. Hopefully those who are pro-Gold will excuse my risk aversion in this case.
What about having 20% of your portfolio in US dollar-denominated debt securities? Is that too concentrated a risk?

Because that is what having 20% of your portfolio in gold is like.

Gold is money that isn't reliant on government.
I think others here have put this better than I can, but I'll try to explain.

In trying to imagine a scenario in which US Govt backed securities completely lose value, I imagine a complete SHTF scenario in which my investment in stocks, my home price, my income, my savings, are all now worthless as well. In fact for me personally, my income is directly dependent upon the US Govt but even if I were to change industries, I can't imagine being successful in say, pharmaceuticals, if US backed debt is determined worthless and presumably the dollar also worthless. So under these sorts of scenarios, "holding" gold through some US brokerage that is now also worthless under this scenario (bye bye FDIC as well) seems pretty pointless. I do have some small investment in the things people suggest for these scenarios. If you truly think US backed debt could possibly collapse I suggest you own property far away from population areas, invest in lead, invest in self defense, have a good supply of fresh water and food. Have the skills that you could either directly provide for you and your family's sustenance and preferably some other skills you could barter while we all struggle to survive in the post-apocalyptic world. No one is going to want your gold if the USD is worthless and no one has jobs and food.

That said, if you want to "bet" on gold as a hedge against fluctuations in the dollar, that's fine. But it is definitely a bet that is less diversified than any of the bets most people would suggest on these boards.
I think this is getting too far into political territory, so I'll stop there.
In theory, theory and practice are identical. In practice, they often differ.

invst65
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by invst65 » Mon Jul 11, 2016 8:36 pm

technovelist wrote:
Engineer250 wrote:
technovelist wrote:
Engineer250 wrote:
technovelist wrote: I think this is getting too far into political territory, so I'll stop there.
I don't know how this discussion got political but I transitioned into the Golden Butterfly from the Permanent Portfolio at the beginning of the year and now I plan to stick with it as my long term strategy going into retirement.

The bottom line for me is that the historical data doesn't lie. This portfolio has a proven track record of providing returns equal or better than other portfolios that are more stock heavy with less volatility and a shorter draw-down duration. The only arguments I've heard against it at are that gold and LT bonds are risky investments and aren't likely to do well in the future. Fool that I am, I have no way of evaluating whether this is true or not. If somebody wants to lend me the crystal ball that is telling them how the future is about to diverge from the past, I'm more than willing to take a look.

sunflash
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by sunflash » Fri Sep 23, 2016 8:42 pm

in_reality wrote:The average gold-CPI ratio since the early 1970s is 3.46-to-1
Currently, that ratio translates into a gold price of $824 an ounce.
Inflation would have to rise at a 9.4% annualized rate over the next five years for gold’s fair value to merely rise to where bullion currently trades.

At any rate, I believe that gold is a decent inflation hedge only when viewed over the very long term — measured over many decades, even centuries — rather than a few years.

***obviously talking about viewing gold over many decades or even centuries and quoting an estimate of current value since the 1970's doesn't make a lot of sense but that's financial news you know.

Anyway, gold and the portfolio isn't for me. I don't have that many decades in my investing timeline. If I was thinking about my great-great grandchildren then perhaps that's another story. But I am not.

http://www.marketwatch.com/story/golds- ... 2016-04-19
The biggest thing is sticking with any system (including BH). BH is just a trend following system with a very long-to-infinite look back period.

You are making a massive all in bet on this:

http://humblestudentofthemarkets.blogsp ... y-and.html

People who did the same in Russia, China, Germany, Argentina... the list is long (and includes dominant world powers) went to zero. So yeah - putting 10-20% of my money in portable format and keeping a portion outside the country seems like a perfectly good choice. Black swans are just that - they are completely unpredictable and have massively asymmetric payoffs. Jews who successfully got of out Germany were happy they were not 100% long German equities.

The gold in the PP and GB is there b/c of low correlation (even zero real returns can benefit an allocation if correlations are low or negative) and because it is a portable and permanent store of wealth. Why do you think the central banks all hold it? Maybe it is speculative, but there are few ways to be able to have a few 10k in my pocket in the event of a disaster or dislocation. Also easy to store in other countries for geographic diversification.

sunflash
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by sunflash » Fri Sep 23, 2016 8:44 pm

invst65 wrote:
technovelist wrote:
Engineer250 wrote:
technovelist wrote:
Engineer250 wrote:
I don't know how this discussion got political but I transitioned into the Golden Butterfly from the Permanent Portfolio at the beginning of the year and now I plan to stick with it as my long term strategy going into retirement.

The bottom line for me is that the historical data doesn't lie. This portfolio has a proven track record of providing returns equal or better than other portfolios that are more stock heavy with less volatility and a shorter draw-down duration. The only arguments I've heard against it at are that gold and LT bonds are risky investments and aren't likely to do well in the future. Fool that I am, I have no way of evaluating whether this is true or not. If somebody wants to lend me the crystal ball that is telling them how the future is about to diverge from the past, I'm more than willing to take a look.
The back test really doesn't impress me as much as the theoretical underpinnings. Have you read The Perm Portfolio book? I love how the portfolio is a top down design from most possible economic environments and risk factors (including things like geographic diversification)?

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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by APB » Fri Sep 23, 2016 9:37 pm

Agreed that back testing to find portfolios doesn't convince me of future results. It's the investing form of P-hacking. The 3-fund portfolio has the best rationale of any portfolio I've ever seen. If the golden butterfly outperformed the 3-fund historically, I believe that to have occurred due to random chance.

I believe purchasing gold is speculating, not investing, as it has no intrinsic rate of return. Perhaps, MAYBE, gold could be viewed as insurance against global collapse. But, in that event, I believe guns, defensible / arable land, and years worth of powdered food would be better insurance. (I have not purchased any of these items, in case you are wondering).

Perhaps gold will prove a valuable portfolio addition over future decades. Outcomes are generally somewhat random. :D
My posts represent my own opinion and do not constitute financial advice. I am simply a hobbyist. :)

Theoretical
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Re: What are your thoughts on the "Golden Butterfly" portfolio?

Post by Theoretical » Fri Sep 23, 2016 9:41 pm

mcgugrah wrote:
in_reality wrote:The average gold-CPI ratio since the early 1970s is 3.46-to-1
Currently, that ratio translates into a gold price of $824 an ounce.
Inflation would have to rise at a 9.4% annualized rate over the next five years for gold’s fair value to merely rise to where bullion currently trades.

At any rate, I believe that gold is a decent inflation hedge only when viewed over the very long term — measured over many decades, even centuries — rather than a few years.

***obviously talking about viewing gold over many decades or even centuries and quoting an estimate of current value since the 1970's doesn't make a lot of sense but that's financial news you know.

Anyway, gold and the portfolio isn't for me. I don't have that many decades in my investing timeline. If I was thinking about my great-great grandchildren then perhaps that's another story. But I am not.

http://www.marketwatch.com/story/golds- ... 2016-04-19
The biggest thing is sticking with any system (including BH). BH is just a trend following system with a very long-to-infinite look back period.

You are making a massive all in bet on this:

http://humblestudentofthemarkets.blogsp ... y-and.html

People who did the same in Russia, China, Germany, Argentina... the list is long (and includes dominant world powers) went to zero. So yeah - putting 10-20% of my money in portable format and keeping a portion outside the country seems like a perfectly good choice. Black swans are just that - they are completely unpredictable and have massively asymmetric payoffs. Jews who successfully got of out Germany were happy they were not 100% long German equities.

The gold in the PP and GB is there b/c of low correlation (even zero real returns can benefit an allocation if correlations are low or negative) and because it is a portable and permanent store of wealth. Why do you think the central banks all hold it? Maybe it is speculative, but there are few ways to be able to have a few 10k in my pocket in the event of a disaster or dislocation. Also easy to store in other countries for geographic diversification.
It's not so easy to do that when you're a US citizen or resident alien, due to the tax reporting laws.

Some place like Poland or South Korea has the risk of destruction or confiscation as a bit higher of a deep risk. With the US, I'd call it deep^2 risk, because we have by far the largest scope of financial and tax enforcement in the world and that reaches anywhere in the world. The reason deep is squared is because the political stability and financial incentives are such that it makes confiscation or destruction 1 stage lower than even is typical in a lot of other countries. The downside is that if it does trigger, most of us Bogleheads are extra hosed without somewhere else to go.

Gold alone is speculative, but I see the virtue of in conjunction with taking more term risk in bonds, for example. That's why the Permanent Portfolio isn't a disaster even when gold goes all over the place and has no long term rate of return.

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