Important News: A New Permanent Portfolio Book Is On The Way!

[bigamish]

One topic that I think that has not been covered in detail to my satisfation is tax loss harvesting. Every book Boogleheads etc just touches the surface. For a mostly taxable investor in the PP It would be interesting to explore set tax loss harvest rebalance bands and replacement funds that could stand IRS challenges.

I second this request.

I look forward to the book!

[pershing83]

I think a lot of readers would be saying, OK, but what mutual fund can I buy? I'd address that, think you are(PRPFX), but with gold flat and LTT's can't make anymore money, surely the PP can't do any better; many readers would be saying they have figured it out and no longer will HB-PP work so well. The combo of VWINX plus some GLD, maybe some cash, a bit of China and India. I think a lot of ordinary investors (me) need to keep their hands busy and want to be doing something more complicated than 1999 HB. A psychological thing, maybe. The need to be doing something, thinking etc, see what I mean? 

[craigr]

I think a lot of readers would be saying, OK, but what mutual fund can I buy? I'd address that, think you are(PRPFX), but with gold flat and LTT's can't make anymore money, surely the PP can't do any better; many readers would be saying they have figured it out and no longer will HB-PP work so well. The combo of VWINX plus some GLD, maybe some cash, a bit of China and India. I think a lot of ordinary investors (me) need to keep their hands busy and want to be doing something more complicated than 1999 HB. A psychological thing, maybe. The need to be doing something, thinking etc, see what I mean?  

I can make a case that LT bonds will still work just fine.

Bonds fell to today's level in 2008 pulling in 30%+ gains when the markets crashed saving the portfolio. Then they fell -20% or so in 2009 as interest rates went back up but stocks posted +30% gains along with big gains in gold. The portfolio pulled in +10% that year. Then in 2010 the markets swerved all over and the portfolio still pulled in nearly +10% as rates dropped again. Then in 2011 the rates fell more after going up some and LT bonds pulled in +30% again.

So an investor that has followed the strategy and ignored the interest rate movements and/or rebalanced has done perfectly fine. And I suspect they will continue to do fine even with LT rates at 3% today as they were back in 2008. If they go up, then chances are the stocks are going to be rebounding along with it.

Only total portfolio value matters! Not assets in isolation.

Yes I know I sound like a broken record. But that will also be said in the book again and again.

But yes the tinker instinct is always there. But I continue to find that the less I tinker, the more money I make.

I will tell everyone right now that the best way I've found to maximize investment profits with the Permanent Portfolio (and all passive investing strategies) is very simple. I will reveal this secret strategy right now before the book is published:

Apathy.

I'm not being facetious. I'm dead serious. Doing nothing with this portfolio is the best strategy. IMO.

And yes I understand your concern. It is a constant battle. But the addition of the Variable Portfolio is there for people that want to gamble their hunches.

[l82start]

I think a lot of ordinary investors (me) need to keep their hands busy and want to be doing something more complicated than 1999 HB. A psychological thing, maybe. The need to be doing something, thinking etc, see what I mean?  

one good outlet for the "tinkering need" is figuring out how to be tax efficient W/O changing the 4x25 basic (best) plan, there are plenty of areas the book can cover on that topic, and a near infinite variation of personal and financial circumstances that will influence those decisions.. i am looking forward to seeing how craigr and medtex tackle the topic, i know i don't have a very clear overview or much understanding of the specifics outside my own relatively simple tax situation...

BTW congratulations on the book...

[craigr]

I think a lot of ordinary investors (me) need to keep their hands busy and want to be doing something more complicated than 1999 HB. A psychological thing, maybe. The need to be doing something, thinking etc, see what I mean?  

one good outlet for the "tinkering need" is figuring out how to be tax efficient W/O changing the 4x25 basic (best) plan, there are plenty of areas the book can cover on that topic, and a near infinite variation of personal and financial circumstances that will influence those decisions.. i am looking forward to seeing how craigr and medtex tackle the topic, i know i don't have a very clear overview or much understanding of the specifics outside my own relatively simple tax situation...

BTW congratulations on the book...

This is an excellent point. Something that I discovered long ago as well. I see investors get tied up in this mentality of scraping for extra returns with all sorts of trading schemes. But the easiest way to get guaranteed higher returns is to cut costs. Buy cheaper funds. Make few trades. Etc. This is all low hanging fruit.

I wrote about it here a while back as a result of personal research I had done:

https://web.archive.org/web/20160324133 ... ty-matter/

[MediumTex]

I think a lot of ordinary investors (me) need to keep their hands busy and want to be doing something more complicated than 1999 HB. A psychological thing, maybe. The need to be doing something, thinking etc, see what I mean? 

I see what you mean, but it may be different from what you see.

What you are describing sounds to me like a recipe for disaster.  When average small investors "keep their hands busy" with their accounts they tend to lose money.

To me, the key is not to keep my hands busy with my investments, but rather to find a way to consistently invest successfully on a risk adjusted basis.  If I happen to find something like the PP that requires almost no work for my hands, I should just find something else to do with my hands (maybe type forum posts).

One point that I cannot overstate is the degree of sophistication possessed by the parties in the investment world that would like to separate you from your money.  I think that people often imagine that they are simply "keeping their hands busy" when the truth is their hands are attached to strings being expertly manipulated by some supercomputer owned by a Wall Street firm.  Think about it--when you see the way small investors behave, is it really rational?  They consistently buy at the top of the market and sell at the bottom.  Why do they do this?  It is clearly not rational behavior with respect to the small investor's self-interest, but it is perfectly rational from the perspective of the parties who would like to profit from the poor decision making of the average small investor.  In other words, the average small investor is often basically a tool for the realization of someone else's rational self-interest, sort of like a host's relationship to a virus.

Don't let idle hands wanting something to tinker with lead you into a trap expertly set by the fiendishly clever people on Wall Street.

[smurff]

I cranked up my iPod when we checked  into  this Illinois hotel room only to read such fantastic news!  Congratulations to MedTex and Craigr. I hope you guys do a signing when the book is ready. I want my copies signed.

As for what to include:  Much has already been suggested so I don't have much to add. It would be great to show that the HBPP is not some crank portfolio dreamed up by a weed-smoking geezer. (Not that there's anything wrong with that.) It would be nice to have a bit of background about how Harry Browne got his start in the investment business years ago. In addition it would be great to refer readers to other esteemed expert writers in personal finance who have had good things to say about the PP.  It would help show that the PP has been studied over the years and is sound.  Bernstein comes to mind immediately as one such writer but there are others.

For the newbies who don't know who Medium Tex is:  He reveals himself in one of the early podcasts by craigr.  It's the second or third episode.  I think Bruce Campbell really is one of his aliases, though.

[stone]

Reading Craigr's posts on bogleheads just now has made me realize just how excellent this book is likely to be. It does leave me stunned though that despite that, the obviously sensible and clued up people there didn't take to the PP idea There is "nowt as queer as folk" as they say .

I did notice the query from zeugmite, "So again I ask, has the PP really performed "as expected" or merely performed?"

Perhaps it is just me but that came accross as someone grasping towards but missing the volatility capture concept. Especially as that poster thought stocks could be valued on the basis of a future stream of dividends. Clearly in these days of stocks that don't pay dividends and distribute earnings as buybacks that way of valuing stocks is nonsense. BUT you have to comprehend that the share buybacks manifest as volatility that if not actively captured will slip by. Same with volatility of whole asset classes.

[craigr]

I split off Clive's discussion into a new thread to keep this one focused:

http://gyroscopicinvesting.com/forum/ht ... ic.php?t=0

[craigr]

I have created a mailing list for announcements about the upcoming book. You can sign up for it here and we won't use it to spam you:

Permanent Portfolio Book Announcement List

Thanks!

[jay]

I've been a long time reader but this is my first post. Thanks so much for all the good work.

Craigr/Medium, the new book is exciting news. Do you think you can include some related info in the book for Canadian investors, like whether Canadians should own US equities and/or long term US bonds.

Thanks

[craigr]

We will definitely cover international options. The basic advice is to own the bonds/cash of your own government as you spend your money in that currency. As for equity, I differ from Browne a little. In that if your live in a very small economy (like Iceland), I would definitely consider owning a wider stock index. Canada is large enough that having most of the allocation to Canadian stock index funds will not likely be a problem. I'd feel pretty comfortable with a 100% Canadian Permanent Portfolio. Canadian companies do so much business with the US that buying US stocks is not as likely to help or hurt. IMO. If the US is having a bad economy, Canadian companies are probably going to feel it and vice versa.

[craigr]

This thread is only to discuss the upcoming book and questions or comments about it. Please keep on topic. If you have unrelated comments, start a new thread.


Thanks.

[Reub]

Clive, I sent you a personal message.

[Coffee]

I'm too lazy to read through the six pages of this thread, but in case it hasn't been mentioned already: A short section in your book that includes the information on buying insurance for the gold portion of your portfolio that you may store in your home, would be good.

[Reub]

I haven't read through everything either, but how about some info on withdrawal rates and how best to withdraw assets from the PP in one's retirement years?

[MachineGhost]

There really should be a chapter on stress-testing the PP in historical risk scenarios and the limitations and concerns.  The PP cheerleaders seem to love to gloss over the actual risks that would be experienced by the PP owner intrayear.  So I would suggest stress testing in as many post-gold standard environments as possible: Argentina, Russia, Asian Currency crisis, Mexico Peso default, Zimbabwe, Romania, etc.  I understand this may be next to impossible due to the difficult in acquiring the data.

MG

[craigr]

There really should be a chapter on stress-testing the PP in historical risk scenarios and the limitations and concerns.  The PP cheerleaders seem to love to gloss over the actual risks that would be experienced by the PP owner intrayear.  So I would suggest stress testing in as many post-gold standard environments as possible: Argentina, Russia, Asian Currency crisis, Mexico Peso default, Zimbabwe, Romania, etc.  I understand this may be next to impossible due to the difficult in acquiring the data.

MG

We do intend to cover some worse case scenarios. No portfolio is perfect and I feel investors should be armed with all the data on risks and rewards to make an informed decision. However the structure of the Permanent Portfolio I feel provides investors with many more options to deal with emergencies than other strategies I've studied.

[Wonk]

Just a suggestion, but I'd like to see a more accurate representation of why gold is held in the permanent portfolio.  The old maxim is "to protect you from inflation."  But that isn't entirely accurate and it leads to all sorts of kooks like Ferri to point out periods like 1981-1999 where gold did not protect an investor from inflation.  That plants seeds of doubt in an investor's mind regarding gold's role in a well diversified portfolio.

Gold's real use is a default hedge: both hard and soft default.  A soft default would be persistent negative real interest rates.  In periods where real interest rates are positive, gold falls.  In periods where real interest rates are negative, gold rises.  Simple as that and entirely accurate.

Congrats to you both and good luck with the new book!

[craigr]

Absolutely. This will be covered.

In terms of these criticisms, we have three decades of empirical evidence at this point that gold is not the lead brick many think in a portfolio.

[metta2006]

Hi Craig,

When do you expect your book to be published? I would rather wait for your book before I take the plunge into a full pp.

[craigr]

The publishing process is long. Although the manuscript will be done shortly, the book will take another six months to hit the shelves. Contrary to my original thought, the publication is likely going to be the Fall.

[metta2006]

Oh no..I can't wait that long. Are you planning to publish an e-book version earlier?

[craigr]

Oh no..I can't wait that long. Are you planning to publish an e-book version earlier?

Uncertain if that will happen earlier. We are working on the publisher's schedule.

But you can post a general "This is my portfolio and I want to implement the PermPort, what should I do?" question in the main forum and we will help you.

[dualstow]

But I've been building up the stocks and cash parts of the PP, so that would actually be great. I know there's always a "but" .....  but.....at this time it just really seems that gold and TLT have been runup, and it's really hard to purposely ignore my "spidey sense" and purchase large quantities of these assets right now.

How about today?