PP / timed

General Discussion on the Permanent Portfolio Strategy

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seajay
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PP / timed

Post by seajay » Fri Feb 04, 2022 12:23 am

The PP will tend to have one asset that is out of favor, so I had a look at how a timer might have compared to a conventional PP.

1980's and Dow/Gold ratio was down at 1.0 type levels, seemingly gold was expensive, stocks were cheap, so drop gold from the PP and a third each in the remainder assets. That held through both the 1980's and 1990's.

1999 and the Dow/Gold ratio was up at historic high 40 levels, other valuations suggested stocks were expensive, so drop stocks and a third each in the remainder assets for the 2000's.

2009 and stocks were down, as were treasury yields, long dated treasury valuations seemingly high so for the 2010's drop LTT's, a third each in the remainder of assets.

Overall that worked out reasonably, however fundamentally the broad higher reward was solely down to the 1980/1990's exclusion of gold. The 2000/2010's differences were broadly insignificant.

A factor with timing, entirely dropping out one of the assets, is that you don't cost-average into that declining asset and are instead relying upon correctly/appropriately timing both exit and re-entry. Pretty much hit and miss. The above choices of timing are with hindsight, selection of existing down/up trends hitting trough/peaks that could equally have continued, near-as perfect timing.

LTT's are nowadays seen as the anticipated low reward shorter term (decade) likely poor asset, however by excluding LTT's you won't cost average into those as prices decline, you'd have to decide a point in time when they were more acceptably priced, and many miss out on such timing, more often missing the boat. Continuing to hold gold across the 1980/1990's for instance saw multiple more ounces of gold being accumulated as other up-assets were reduced to add to gold. When gold soared in the post 2000 years many didn't benefit from the substantial gains having averaged into gold provided. Likely the same might occur for LTT's in forward time, those following the conventional PP are more inclined to be holding a big wad of LTT's following their bottoming-out and where the subsequent rewards from those more than offset the cost of having averaged in.
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