whereskyle wrote: ↑Fri Mar 26, 2021 7:31 pm
watchnerd wrote: ↑Thu Mar 25, 2021 6:27 pm
OohLaLa wrote: ↑Thu Mar 25, 2021 5:47 pm
I truly find it hard to believe that watchnerd, closing in on 7k posts after many years, does not understand that there are interactions between different assets of a portfolio. What I was saying is that if he does not trust the behavior of gold to be consistent, or guaranteed to be consistent by its very nature, then whether it's alone or within a portfolio does not matter. People see it as a proper hedge... he stated he does not, for XYZ reasons.
I've actually owned gold in the past, as well as commodity futures, so I'm well aware, both on a personal experience level and from data, on the trade offs in a portfolio.
Roles gold can play in portfolio construction and my current alternative preferences, all of which are visible in my sig:
--Negative correlation with equities / flight to safety: LTT (bonus, also helps in deflation)
--Inflation protection: TIPS
--Dollar decline relative to other currencies: ~50% of my stocks (30% of my port, market weight fluctuates) are unhedged foreign equities
Roles gold plays that I don't solve for:
--Total financial apocalypse / Mad Max scenarios / fleeing the country / refugee status
Chiming in late on this after backtesting the permanent portfolio. The one historical period that all of your preferred assets (all of which I think are reasonable to hold) would have struggled in by comparison is the late 70s and early 80s, unless ex-us stocks did well. I don't have data on that. TIPS might have netted a 0% real return, but gold didn't merely keep up with inflation, it kicked its butt, earning 12% real from the beginning of 77 until the end of 81. Not that I expect that period to reoccur. I just wanted to disregard the gold portion myself and fashion a modified permanent portfolio excluding it. But I failed. Let me know if ex-us stocks performed well during that period (if you know).
A lot of people really, really, really believe in gold. Perhaps that has to count for something in our irrationally exuberant world.
That's a weird period of history, as it's the period right after the US came off the gold standard, which obviously was a 1 time event.
You can try to throw generic commodities into the mix, but it doesn't help as much as gold. I held commodities futures indexes circa 2001-2008, along with MLPs, but you have to be willing to get out of them quickly when the economic regime changes; commodities are not buy and hold forever, as recent performance since has shown. I'm reluctant to hold commodities again as, in the long run, they're zero real return.
I admit, 70's style stagflation is a case that my current port doesn't deal with very well.
Then again, I don't think the standard BH/Vanguard ports would, either.
And TIPS didn't exist back then......so when you test the 1970s, there is no data on how TIPS would have done.
The only asset class I can think of that I might be willing to add to my port to deal with stagflation might be EM bonds -- but I'm not so sure that would work as well as it might have in the past, either, given general changes in the economy that have reduced commodity consumption relative to GDP since the 1970s.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% crypto & securitized gold || LMP TIPS/STRIPS || RSU + ESPP