Mark hulbert mentioned the pp

General Discussion on the Permanent Portfolio Strategy

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mathjak107
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Mark hulbert mentioned the pp

Post by mathjak107 » Sat Jan 15, 2022 5:07 am

I saw A brief mention of the pp by hulbert for those interested .

“immunize the bulk of your portfolio from any short-term speculative trading to which your daily obsessions might lead you. My preferred way of doing that was proposed decades ago by the late Harry Browne, editor of a newsletter called Harry Browne’s Special Reports. He recommended that we divide our investible assets into two portfolios—one Speculative and one Permanent. The former, which would contain only a small fraction of your assets, would constitute your “play” money with which you try to hit the ball out of the ballpark.

The Permanent Portfolio would contain the bulk of your assets and would be invested in index funds and held for the long term with little or no change other than periodic rebalancing. Odds are overwhelming that, over the long term, it will outperform your Speculative Portfolio. And its outperformance will not be dependent on closely following the market’s short-term gyrations.”



https://www.marketwatch.com/story/a-new ... 1640816894
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Re: Mark hulbert mentioned the pp

Post by murphy_p_t » Sat Jan 15, 2022 11:16 pm

Possibly very timely for the future, taking shelter in the Coming storm?
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mathjak107
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Re: Mark hulbert mentioned the pp

Post by mathjak107 » Sun Jan 16, 2022 2:45 am

I have all the shelter I want unless we show signs of sliding backwards from non transitory inflation and towards recession.

I won’t fight fed policy with inflation so much higher then bond rates currently are
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Re: Mark hulbert mentioned the pp

Post by seajay » Sun Jan 16, 2022 4:18 pm

mathjak107 wrote:
Sat Jan 15, 2022 5:07 am
I saw A brief mention of the pp by hulbert for those interested .

“immunize the bulk of your portfolio from any short-term speculative trading to which your daily obsessions might lead you. My preferred way of doing that was proposed decades ago by the late Harry Browne, editor of a newsletter called Harry Browne’s Special Reports. He recommended that we divide our investible assets into two portfolios—one Speculative and one Permanent. The former, which would contain only a small fraction of your assets, would constitute your “play” money with which you try to hit the ball out of the ballpark.

The Permanent Portfolio would contain the bulk of your assets and would be invested in index funds and held for the long term with little or no change other than periodic rebalancing. Odds are overwhelming that, over the long term, it will outperform your Speculative Portfolio. And its outperformance will not be dependent on closely following the market’s short-term gyrations.”

https://www.marketwatch.com/story/a-new ... 1640816894
Consider a new retiree opting to 30/70 stock/bonds, non rebalanced, spending bonds first. But where the bonds are replaced by the PP, more so given inflation bonds are more of a recent addition.

Drawing 3% SWR/year and if the bonds (PP) paces inflation the 70 lasts 23+ years. Enough to see a 65 year old retire to 88. With the PP maybe longer, with inflation bonds and negative real yields .. less.

With the 30 initial in small cap value accumulation even in bad historic 23+ year cases that did OK, inclined to not only grow in real terms to 100 of the original inflation adjusted start date portfolio value, but more often to several multiples of it. 30/70 that ends at 100/0 averages 67/33, not too conservative, not too aggressive. How well might that compare to if the initial 30 growth 'bucket' were invested in a PP i.e. a 100% holding of PP rather than a average 67/33 SCV/PP, and I would suspect that on average the SCV road is the one more inclined to serve better.

The demand upon the PP in that context is to be relatively safe/consistent and pace inflation (hopefully more). When so then early years sequence of returns risk is in effect eliminated, whilst the broader portfolio average 67/33 SCV/PP at the point that all of PP capital has been spent is aggressive enough to likely have rewarded reasonably well.

Since 2001 and the PP has been a better inflation bond than TIPS

Long dated treasuries continue to shorter term move counter direction to stocks, helps smooth shorter term volatility. stocks partnered with LTT, gold partnered with cash barbells continue to work as per the label on the tin. Yes at some point LTT's might be expected to endure a Bear period, but equally so have the other assets been expected to endure a Bear phase, 1980 gold when at Dow/Gold 1.0 type levels. Stocks 1999 when Dow/Gold was up at 40 levels and CAPE etc. at historic highs.

Will rising interest rates/yields be the exception, is the PP biased towards declining interest rates? I suspect not. It may not 4% real, but may very well still 0% real and subject to expectations still be a success in meeting ones objectives.
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Re: Mark hulbert mentioned the pp

Post by mathjak107 » Sun Jan 16, 2022 4:20 pm

The balance left is a big factor too not just the draw ….that is what carry’s you through the unexpected spending that can blow a budget .

It is also what your heirs get .

So meeting a draw is one thing , balanced left is another

4% is alReady very conservative .. a 3% draw to me is very inefficient use of ones money …I mean that is a pay cut of 25%.

We have had 121 rolling 30 year retirements ..60/40 has left you with more than you started 90% of the time and 2x what you started 67% of the time at 4% with a 95% success rate
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Re: Mark hulbert mentioned the pp

Post by seajay » Mon Jan 17, 2022 12:04 am

mathjak107 wrote:
Sun Jan 16, 2022 4:20 pm
4% is alReady very conservative .. a 3% draw to me is very inefficient use of ones money …I mean that is a pay cut of 25%.
Subjectively, for instance depends upon sequence of returns in the run up to retirement.

End of 2016 and a 60 year old with 20x accumulating in stocks versus 25x anticipated yearly retirement spending requirement. Without any further additions a year later and they're up to 24x, next year back down to 22x, next year up to 28x ... have hit/exceeded their target but still only 63 and hesitate to actually transition into retirement, another year later and now 64 year old with 34x (or if they waited yet another year until their planned 65 years of age 40x). At 40x they only need to employ a 2.5% SWR to provide the same income/spending as their planned 25x 4% SWR.
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Re: Mark hulbert mentioned the pp

Post by mathjak107 » Mon Jan 17, 2022 2:01 am

The proverbial safe withdrawal rate at 4% is already based on sequences that are so bad we have seen nothing like them over a retirement period since those who retired in 1966.

It takes a 2% real return over the first 15 years of a 30 year retirement to hold mathematically.

The same odds as ending with 6x what you started with is about the same odds as 4% failing , which is about 10%.

The whole idea is to make as much efficient use of our money as we can .

Personally while we actually end up drawing about 3.5% a year in practice we could spend more than 4% after 6 years of good markets and sequences so for my 70th birthday next year I will likely buy either a Maserati or another bmw
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