Harry Browne Permanent Portfolio Discussion (Cont'd)

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linenfort
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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by linenfort » Sat Jun 16, 2018 10:21 am

linenfort wrote:
Thu Jun 14, 2018 8:55 pm
Ok, I’ll pm you tomorrow. Please get a free Telegram account. You can always get rid of it afterwards.
No? Well, I'll check in once a day.
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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by CULater » Sat Jun 16, 2018 11:22 am

willthrill81 wrote:
Fri Jun 15, 2018 10:16 am
CULater wrote:
Fri Jun 15, 2018 10:10 am
Today the DOW is down 250, while gold is down and long term treasuries are up even though interest rates are going up. Over the last 9 years, the correlation between stocks and gold is .04 and between stocks and long treasuries is -0.47. Seems to me that if you want a diversifying asset for stocks it would be long treasuries, not gold.
Long-term nominal bonds get hammered by unexpected inflation. Long-term treasuries lost a whopping 46.5% of their real value between Jan., 1977, and Oct., 1981. Stocks had a real CAGR of 3.24% over that period but had a cumulative real loss of 12% from 1972-1981. Diversification through nominal bonds didn't 'save the day'. TIPS can certainly help, but I don't see many Bogleheads putting 25% or more of their portfolio into TIPS.
Don't know why you wouldn't if you want a bond-heavy allocation and a small stock allocation. Over last 10 years, the returns from 25/50/25 (stock, intermediate treasuries, TIPS) have been indistinguishable from 25/75 (stock, intermediate treasury) and cum return has matched PP with lower volatility. Plus TIPS actually provide inflation protection, which is what gold is supposed to do but really doesn't.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

columbia
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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by columbia » Sat Jun 16, 2018 11:31 am

Here’s a comparison of PRPFX and Wellesley Income:
https://www.portfoliovisualizer.com/bac ... ion2_2=100

I know which one i would rather have owned since 1985.

All Seasons
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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by All Seasons » Sun Jun 17, 2018 3:30 pm

That sounds like more cherry-picking. In any event, the chart I posted shows what happened for those years too. Gold definitely did much worse than stocks and bonds.
NiceUparticularMan, you are disregarding the entire decade of the 70s in terms of gold's performance and only counting the times when it has done poorly.. and you are accusing Smith of cherry picking? That's seems.. unreasonable. :?

This whole "gold wasn't free floating until the 80s" thing is kind of bunk, too. If you want to discount the period up to 1975, sure, but the entire decade of the 70s? I don't think that's reasonable at all.
The market portfolio is always a legitimate portfolio.

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by Dancer » Sun Jun 17, 2018 4:12 pm

columbia wrote:
Sat Jun 16, 2018 11:31 am
Here’s a comparison of PRPFX and Wellesley Income:
https://www.portfoliovisualizer.com/bac ... ion2_2=100

I know which one i would rather have owned since 1985.
PRPFX isn't current PP / what most folks mention when talking about the Permanent Portfolio. Used to have the PERM ETF that was 4x25 and using index funds for stocks, but that didn't take off and is closed.

AFAIK, no single fund option for PP anymore.

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by nisiprius » Sun Jun 17, 2018 4:28 pm

invst65 wrote:
Tue Jun 12, 2018 9:50 am
Not looking to get into a discussion about gold so I'll just leave it with the comment that "extra benefit" isn't the point of holding it.
Even though I don't implement the PP, nor do I intend to, the point of the PP seems to be to have an allocation that is at least theoretically likely to provide some stability in a wide variety of market conditions (i.e. deflationary, inflationary, growing, stable).
During the period from 1981 through the present, which included a severe global financial crisis, where do you see that the Permanent Portfolio provided any more safety or stability than the gold-free, traditional-securities Wellesley? The worst year for Wellesley was -9.84% compared to -12.93%... that is to say, about -10% versus -13%. The maximum drawdown was virtually identical.

From 1981 through the present, Wellesley gave you just as much stability and a heck of a lot higher return.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by columbia » Sun Jun 17, 2018 5:53 pm

Dancer wrote:
Sun Jun 17, 2018 4:12 pm
columbia wrote:
Sat Jun 16, 2018 11:31 am
Here’s a comparison of PRPFX and Wellesley Income:
https://www.portfoliovisualizer.com/bac ... ion2_2=100

I know which one i would rather have owned since 1985.
PRPFX isn't current PP / what most folks mention when talking about the Permanent Portfolio. Used to have the PERM ETF that was 4x25 and using index funds for stocks, but that didn't take off and is closed.

AFAIK, no single fund option for PP anymore.
In that one can’t even invest a fund/ETF represention of the “current” PP is telling.

All Seasons
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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by All Seasons » Sun Jun 17, 2018 6:21 pm

columbia wrote:
Sun Jun 17, 2018 5:53 pm
Dancer wrote:
Sun Jun 17, 2018 4:12 pm
columbia wrote:
Sat Jun 16, 2018 11:31 am
Here’s a comparison of PRPFX and Wellesley Income:
https://www.portfoliovisualizer.com/bac ... ion2_2=100

I know which one i would rather have owned since 1985.
PRPFX isn't current PP / what most folks mention when talking about the Permanent Portfolio. Used to have the PERM ETF that was 4x25 and using index funds for stocks, but that didn't take off and is closed.

AFAIK, no single fund option for PP anymore.
In that one can’t even invest a fund/ETF represention of the “current” PP is telling.
Can't argue with you on that one. :P
The market portfolio is always a legitimate portfolio.

petulant
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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by petulant » Sun Jun 17, 2018 7:36 pm

CULater wrote:
Fri Jun 15, 2018 10:10 am
Today the DOW is down 250, while gold is down and long term treasuries are up even though interest rates are going up. Over the last 9 years, the correlation between stocks and gold is .04 and between stocks and long treasuries is -0.47. Seems to me that if you want a diversifying asset for stocks it would be long treasuries, not gold.
All things being equal, wouldn't 0 correlation be better than -.5 correlation?

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by CULater » Mon Jun 18, 2018 9:00 am

nisiprius wrote:
Sun Jun 17, 2018 4:28 pm
invst65 wrote:
Tue Jun 12, 2018 9:50 am
Not looking to get into a discussion about gold so I'll just leave it with the comment that "extra benefit" isn't the point of holding it.
Even though I don't implement the PP, nor do I intend to, the point of the PP seems to be to have an allocation that is at least theoretically likely to provide some stability in a wide variety of market conditions (i.e. deflationary, inflationary, growing, stable).
During the period from 1981 through the present, which included a severe global financial crisis, where do you see that the Permanent Portfolio provided any more safety or stability than the gold-free, traditional-securities Wellesley? The worst year for Wellesley was -9.84% compared to -12.93%... that is to say, about -10% versus -13%. The maximum drawdown was virtually identical.

From 1981 through the present, Wellesley gave you just as much stability and a heck of a lot higher return.
You did about the same with 35% stocks and 65% intermediate treasuries, which I think is about the stock/bond ratio of Wellesley. It's been a long time since the PP outperformed a simple fat-tail stock/bond allocation, even though there was a pretty good run for gold from 2001-2008.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

All Seasons
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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by All Seasons » Mon Jul 02, 2018 1:14 pm

NiceUnparticularMan wrote:
Thu Apr 27, 2017 9:57 pm
sophie1 wrote:You can't leave out the 1970s. It was the last era of serious inflation & stagflation, and this is why gold was doing so well. That's kind of the point. It is a bit of a drag on the portfolio otherwise, but it's there because the 1970s could happen again. Not saying it will, just that it might.
Well, you really have to, because free-floating gold and pegged gold aren't the same thing, and the transition from one to the other isn't going to happen again.

Fortunately, we have another test. In 1986, inflation had declined all the way to about 1.94%. In then rose to about 5.4% in 1990. Not as dramatic as the 1970s, but this was a good moderate test of the gold as inflation hedge idea in the free-floating era.

So what happened? Gold declined in real value by about 12.5%. The supposed inflation hedge never showed up.

1998, inflation was 1.55%. By 2000, this increased to 3.4%. Gold declined in real value by about 15%. Again, no hedge.

By the way, this concept that gold is only ever a "bit of a drag" is again a legacy of the pegged era. Losing 80% of its real value over 20 years is more than a "bit of a drag".
Neither you, Smith, or anyone else knows whether the 70s style inflation could happen again. You are simply asserting that is so because of the removal of the peg, but asserting something doesn't automatically make it true. There are other reasons other than the removal of the peg that could cause inflation. Besides, gold is also useful for general SHTF situations, not just inflation.

Good luck collecting on your digital stocks and bonds if the exchanges are being attacked for instance: http://money.cnn.com/2014/07/17/technol ... index.html

And, are you under the impression that transitory 5.4% and 3.4% inflation spikes are large? You are being willfully ignorant here.

Be that as it may, Browne specifically says in Fail-Safe Investing: "Once U.S. inflation becomes more than a minor irritant (that is, once inflation reaches 6% or so), gold usually starts moving upward--and when the inflation rate gets into double digits, gold's rise accelerates."

Coincidentally, neither of your "tests" actually meets that threshold.
The market portfolio is always a legitimate portfolio.

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by willthrill81 » Mon Jul 02, 2018 4:03 pm

nisiprius wrote:
Sun Jun 17, 2018 4:28 pm
invst65 wrote:
Tue Jun 12, 2018 9:50 am
Not looking to get into a discussion about gold so I'll just leave it with the comment that "extra benefit" isn't the point of holding it.
Even though I don't implement the PP, nor do I intend to, the point of the PP seems to be to have an allocation that is at least theoretically likely to provide some stability in a wide variety of market conditions (i.e. deflationary, inflationary, growing, stable).
During the period from 1981 through the present, which included a severe global financial crisis, where do you see that the Permanent Portfolio provided any more safety or stability than the gold-free, traditional-securities Wellesley? The worst year for Wellesley was -9.84% compared to -12.93%... that is to say, about -10% versus -13%. The maximum drawdown was virtually identical.

From 1981 through the present, Wellesley gave you just as much stability and a heck of a lot higher return.
Just to play devil's advocate a bit (even though I do hold a portion of my emergency fund in Wellesley), most of that period was very solid for the bonds that represent two-thirds of the fund. A repeat of that performance over the next decade or two seems unlikely though admittedly possible. I believe that Wellesley will continue to be comparatively stable, but I'm less optimistic about the returns.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by GRP » Mon Jul 02, 2018 6:08 pm

All Seasons wrote:
Mon Jul 02, 2018 1:14 pm
NiceUnparticularMan wrote:
Thu Apr 27, 2017 9:57 pm
sophie1 wrote:You can't leave out the 1970s. It was the last era of serious inflation & stagflation, and this is why gold was doing so well. That's kind of the point. It is a bit of a drag on the portfolio otherwise, but it's there because the 1970s could happen again. Not saying it will, just that it might.
Well, you really have to, because free-floating gold and pegged gold aren't the same thing, and the transition from one to the other isn't going to happen again.

Fortunately, we have another test. In 1986, inflation had declined all the way to about 1.94%. In then rose to about 5.4% in 1990. Not as dramatic as the 1970s, but this was a good moderate test of the gold as inflation hedge idea in the free-floating era.

So what happened? Gold declined in real value by about 12.5%. The supposed inflation hedge never showed up.

1998, inflation was 1.55%. By 2000, this increased to 3.4%. Gold declined in real value by about 15%. Again, no hedge.

By the way, this concept that gold is only ever a "bit of a drag" is again a legacy of the pegged era. Losing 80% of its real value over 20 years is more than a "bit of a drag".
Neither you, Smith, or anyone else knows whether the 70s style inflation could happen again. You are simply asserting that is so because of the removal of the peg, but asserting something doesn't automatically make it true. There are other reasons other than the removal of the peg that could cause inflation. Besides, gold is also useful for general SHTF situations, not just inflation.

Good luck collecting on your digital stocks and bonds if the exchanges are being attacked for instance: http://money.cnn.com/2014/07/17/technol ... index.html

And, are you under the impression that transitory 5.4% and 3.4% inflation spikes are large? You are being willfully ignorant here.

Be that as it may, Browne specifically says in Fail-Safe Investing: "Once U.S. inflation becomes more than a minor irritant (that is, once inflation reaches 6% or so), gold usually starts moving upward--and when the inflation rate gets into double digits, gold's rise accelerates."

Coincidentally, neither of your "tests" actually meets that threshold.
Totally agree. It's also worth pointing out that while yes, gold did do poorly for a 20 year period, it's not like gold is alone in experiencing such a phenomenon. Would you tell Japanese investors to quit investing in their economy just because their stock market has done poorly for a generation?

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by All Seasons » Wed Jul 04, 2018 3:58 pm

Totally agree. It's also worth pointing out that while yes, gold did do poorly for a 20 year period, it's not like gold is alone in experiencing such a phenomenon. Would you tell Japanese investors to quit investing in their economy just because their stock market has done poorly for a generation?
What's really interesting to me is the question of how the psyche of U.S. investors might change (and the world's attitudes towards equities in general) if something similar were to happen in America today.

I remember once reading about how a huge wave of U.S. investors after the 1929 crash only considered bonds to be for investment, and that stocks were de facto speculations. :twisted:
The market portfolio is always a legitimate portfolio.

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by nisiprius » Wed Sep 12, 2018 4:34 pm

I just noticed the Global X Permanent ETF, PERM, ceased trading on 10/06/17. I guess it was only a temporary ETF, after all.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by linenfort » Wed Sep 12, 2018 7:21 pm

nisiprius wrote:
Wed Sep 12, 2018 4:34 pm
I just noticed the Global X Permanent ETF, PERM, ceased trading on 10/06/17. I guess it was only a temporary ETF, after all.
😂 Well, the strategy is supposed to be unchanging. Some ETFs will come and go.
bogleheads, don't knock state lotteries. They helped defund the mafia.

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by permport » Sun Sep 16, 2018 9:39 pm

linenfort wrote:
Wed Sep 12, 2018 7:21 pm
nisiprius wrote:
Wed Sep 12, 2018 4:34 pm
I just noticed the Global X Permanent ETF, PERM, ceased trading on 10/06/17. I guess it was only a temporary ETF, after all.
😂 Well, the strategy is supposed to be unchanging. Some ETFs will come and go.
Given how passive the PP is, and given how having separate securities for each portion of the portfolio allows for greater control, it doesn't surprise me. (Although I'm sure there were other factors.)

Having one security per portion of the PP is probably ideal.
Buy right and hold tight.

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by willthrill81 » Sun Sep 16, 2018 9:46 pm

permport wrote:
Sun Sep 16, 2018 9:39 pm
linenfort wrote:
Wed Sep 12, 2018 7:21 pm
nisiprius wrote:
Wed Sep 12, 2018 4:34 pm
I just noticed the Global X Permanent ETF, PERM, ceased trading on 10/06/17. I guess it was only a temporary ETF, after all.
😂 Well, the strategy is supposed to be unchanging. Some ETFs will come and go.
Given how passive the PP is, and given how having separate securities for each portion of the portfolio allows for greater control, it doesn't surprise me. (Although I'm sure there were other factors.)

Having one security per portion of the PP is probably ideal.
For the type of person interested in the PP, I would think that creating their own through four funds wouldn't be a problem over buying an all-in-one fund.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Harry Browne Permanent Portfolio Discussion (Cont'd)

Post by permport » Sun Sep 16, 2018 9:51 pm

willthrill81 wrote:
Sun Sep 16, 2018 9:46 pm
permport wrote:
Sun Sep 16, 2018 9:39 pm
linenfort wrote:
Wed Sep 12, 2018 7:21 pm
nisiprius wrote:
Wed Sep 12, 2018 4:34 pm
I just noticed the Global X Permanent ETF, PERM, ceased trading on 10/06/17. I guess it was only a temporary ETF, after all.
😂 Well, the strategy is supposed to be unchanging. Some ETFs will come and go.
Given how passive the PP is, and given how having separate securities for each portion of the portfolio allows for greater control, it doesn't surprise me. (Although I'm sure there were other factors.)

Having one security per portion of the PP is probably ideal.
For the type of person interested in the PP, I would think that creating their own through four funds wouldn't be a problem over buying an all-in-one fund.
Agreed -- especially since this allows one to put each security in the "correct" account for tax purposes and such.
Buy right and hold tight.

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