I'm Done!

General Discussion on the Permanent Portfolio Strategy

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MediumTex
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Re: I'm Done!

Post by MediumTex » Fri Nov 02, 2012 12:30 pm

buddtholomew wrote:
MediumTex wrote: Once you are satisfied that the strategy is a good fit for you over the longer term, I would ignore these daily movements.

Watching the intraday movements will just suck up your time and energy.

If you don't monitor the value of your house on a daily basis, why monitor your investments that way?  They are both long term commitments.
I monitor the performance of the PP on a daily basis because I am not convinced that it will continue to perform as it has historically. Yesterday and today's performance solidifies my decision to diversify across several investment strategies. The equity markets were up 130+ points on 11/1 and as of this writing, flat on 11/2. The PP was slightly lower on 11/1 (tracking error is difficult psychologically) and substantially lower on 11/2 (GLD down 2%). Over the month of October and YTD, the PP portion of my investments has been a drag on overall portfolio performance.

I have additional funds to invest at this time and have decided not to increase my PP holdings.
I would say do what makes you comfortable.  The PP clearly doesn't provide you with a durable sense of comfort.

For me, the PP is a low risk strategy that does make me comfortable (7% returns YTD are quite acceptable to me).  While I appreciate everyone's temptation to look in on the PP regularly, I honestly would probably almost never look in on it myself if it weren't for the discussions here about performance during different intervals.  I just don't feel that pulled to look in on it.  I used to be, but I'm not anymore.  It's like the trees in my yard--I appreciate them and I enjoy them, but I have no temptation to dig them up to see how their roots are doing.
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Re: I'm Done!

Post by buddtholomew » Fri Nov 02, 2012 12:31 pm

Gumby wrote:
buddtholomew wrote:I monitor the performance of the PP on a daily basis because I am not convinced that it will continue to perform as it has historically. Yesterday and today's performance solidifies my decision to diversify across several investment strategies. The equity markets were up 130+ points on 11/1 and as of this writing, flat on 11/2. The PP was slightly lower on 11/1 (tracking error is difficult psychologically) and substantially lower on 11/2 (GLD down 2%). Over the month of October and YTD, the PP portion of my investments has been a drag on overall portfolio performance.

I have additional funds to invest at this time and have decided not to increase my PP holdings.
To each his own... But, why would you base your decisions on how the PP performs over blocks of hours rather than blocks of weeks??

That would be like making all your health decisions by just reading your pulse.
I have been invested in the PP for some time now and my decision to diversify across investment strategies is nothing new. I am merely highlighting specific examples that support this decision.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: I'm Done!

Post by MediumTex » Fri Nov 02, 2012 12:32 pm

buddtholomew wrote:
Gumby wrote:
buddtholomew wrote:I monitor the performance of the PP on a daily basis because I am not convinced that it will continue to perform as it has historically. Yesterday and today's performance solidifies my decision to diversify across several investment strategies. The equity markets were up 130+ points on 11/1 and as of this writing, flat on 11/2. The PP was slightly lower on 11/1 (tracking error is difficult psychologically) and substantially lower on 11/2 (GLD down 2%). Over the month of October and YTD, the PP portion of my investments has been a drag on overall portfolio performance.

I have additional funds to invest at this time and have decided not to increase my PP holdings.
To each his own... But, why would you base your decisions on how the PP performs over blocks of hours rather than blocks of weeks??

That would be like making all your health decisions by just reading your pulse.
I have been invested in the PP for some time now and my decision to diversify across investment strategies is nothing new. I am merely highlighting specific examples that support this decision.
Are you not satisfied with the returns it has provided during the period you have been using it?
Only strength can cooperate. Weakness can only beg.
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Re: I'm Done!

Post by Pointedstick » Fri Nov 02, 2012 12:34 pm

buddtholomew wrote: I monitor the performance of the PP on a daily basis because I am not convinced that it will continue to perform as it has historically.
I'm curious to know why you think the PP will underperform and what you think will beat it, especially because I remember reading that your goals are fairly short-term and your appetite for volatility is very low. It's awfully hard to find a high-performance, low-volatility portfolio that's not the PP, which is what you seem to be looking for.
buddtholomew wrote: Over the month of October and YTD, the PP portion of my investments has been a drag on overall portfolio performance.
Interesting; my PP was down 0.33% in October compared to the broad market declining about 2%. If your PP was a drag on your overall portfolio in October, I'd be curious to know what you're invested in that fell less than the PP.

I think you need to figure out what you want: low volatility, or high returns. Every day the PP declines, you seem to have a minor heart attack, yet you're also worried that it doesn't have enough upside. Anything that beats the PP is likely to be hugely more volatile. There ain't no free lunch in investing.  :)
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Re: I'm Done!

Post by buddtholomew » Fri Nov 02, 2012 12:37 pm

MediumTex wrote:
buddtholomew wrote:
Gumby wrote: To each his own... But, why would you base your decisions on how the PP performs over blocks of hours rather than blocks of weeks??

That would be like making all your health decisions by just reading your pulse.
I have been invested in the PP for some time now and my decision to diversify across investment strategies is nothing new. I am merely highlighting specific examples that support this decision.
Are you not satisfied with the returns it has provided during the period you have been using it?
Yes, I am satisfied with the returns over the period I have been invested. What disturbs me the most is when an asset tumbles 2.25% in a single day. No other asset in my portfolio fluctuates with the same vigor as either GLD or TLT do.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: I'm Done!

Post by hpowders » Fri Nov 02, 2012 12:38 pm

Admittedly, today is not a good day for the PP. But I'm only down 0.5% since investing in it a little over a week ago. No big deal today. Just a short term reaction to the job report being better than expected and perhaps the realization, "Hey, this Obama guy just may win after all!!!"  :o

My plan is to hold it for 3 years, re-balancing as necessary, and then withdraw a pittance as the Feds insist.

What's in YOUR safe?? 8)
Last edited by hpowders on Fri Nov 02, 2012 12:46 pm, edited 1 time in total.
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Re: I'm Done!

Post by buddtholomew » Fri Nov 02, 2012 12:48 pm

Pointedstick wrote:
buddtholomew wrote: I monitor the performance of the PP on a daily basis because I am not convinced that it will continue to perform as it has historically.
I'm curious to know why you think the PP will underperform and what you think will beat it, especially because I remember reading that your goals are fairly short-term and your appetite for volatility is very low. It's awfully hard to find a high-performance, low-volatility portfolio that's not the PP, which is what you seem to be looking for.
buddtholomew wrote: Over the month of October and YTD, the PP portion of my investments has been a drag on overall portfolio performance.
Interesting; my PP was down 0.33% in October compared to the broad market declining about 2%. If your PP was a drag on your overall portfolio in October, I'd be curious to know what you're invested in that fell less than the PP.

I think you need to figure out what you want: low volatility, or high returns. Every day the PP declines, you seem to have a minor heart attack, yet you're also worried that it doesn't have enough upside. Anything that beats the PP is likely to be hugely more volatile. There ain't no free lunch in investing.  :)
I'm not motivated to find an investement strategy that will outperform the PP over time. I do however dislike underperforming the equity markets when they enjoy an up day like yesterday and a flat day like today (I guess I am not a contrarian by nature). 
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: I'm Done!

Post by melveyr » Fri Nov 02, 2012 12:57 pm

buddtholomew wrote:
Pointedstick wrote:
buddtholomew wrote: I monitor the performance of the PP on a daily basis because I am not convinced that it will continue to perform as it has historically.
I'm curious to know why you think the PP will underperform and what you think will beat it, especially because I remember reading that your goals are fairly short-term and your appetite for volatility is very low. It's awfully hard to find a high-performance, low-volatility portfolio that's not the PP, which is what you seem to be looking for.
buddtholomew wrote: Over the month of October and YTD, the PP portion of my investments has been a drag on overall portfolio performance.
Interesting; my PP was down 0.33% in October compared to the broad market declining about 2%. If your PP was a drag on your overall portfolio in October, I'd be curious to know what you're invested in that fell less than the PP.

I think you need to figure out what you want: low volatility, or high returns. Every day the PP declines, you seem to have a minor heart attack, yet you're also worried that it doesn't have enough upside. Anything that beats the PP is likely to be hugely more volatile. There ain't no free lunch in investing.  :)
I'm not motivated to find an investement strategy that will outperform the PP over time. I do however dislike underperforming the equity markets when they enjoy an up day like yesterday and a flat day like today (I guess I am not a contrarian by nature). 
You have to ask yourself what your goal is. Once you identify what your goal is, you put that goal in the denominator when calculating your performance.

My goal is to be able to purchase more goods and services over time, so the CPI is a decent candidate for my denominator. For me, putting equities in my denominator is pointless because equities have nothing to do with my goals. If my goal end goal was to eventually purchase equities then that might make sense, but that isn't my goal.

What is your goal budd? That is a question you have to answer before crafting a portfolio.
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Re: I'm Done!

Post by MediumTex » Fri Nov 02, 2012 12:58 pm

buddtholomew wrote: Yes, I am satisfied with the returns over the period I have been invested. What disturbs me the most is when an asset tumbles 2.25% in a single day. No other asset in my portfolio fluctuates with the same vigor as either GLD or TLT do.
You understand, though, that this is what the PP is designed to do, right?  Each asset is supposed to be volatile.  If each asset wasn't so volatile, the whole portfolio wouldn't be so stable.

I think that this is where people often get into trouble with the PP--they will seek to reduce volatility in certain asset classes that they may not personally like that much, and the asset that they trim their exposure to always seems to be the asset that they need in the very next market shift.  In recent years, it has repeatedly been LT treasuries that have surprised people with their performance.
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Re: I'm Done!

Post by Pointedstick » Fri Nov 02, 2012 12:58 pm

I understand that feeling, Budd. It sucks to watch stocks go up faster than your portfolio. But enjoying the full upside to the equity markets also means you have to suffer the full force of the down days as well. Gold is down 2.25% today so far, but that's not at all uncommon for the stock market to fall that much or more on a daily basis:

https://en.wikipedia.org/wiki/List_of_l ... ge_changes

With the PP, gold is only 1/4 of your portfolio, so it being down 2.25% today means that even if everything else stayed still, you'd only be down 0.56%, which is really a very mild single-day movement. If your 100% stock portfolio (again, which is what you would need to never underperform the equity markets) declined 2.25% in a day, then your whole portfolio is down 2.25%.
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Re: I'm Done!

Post by MediumTex » Fri Nov 02, 2012 1:01 pm

buddtholomew wrote: I'm not motivated to find an investement strategy that will outperform the PP over time. I do however dislike underperforming the equity markets when they enjoy an up day like yesterday and a flat day like today (I guess I am not a contrarian by nature). 
Would you be satisfied outperforming the equity markets over the last 5, 10 and 15 years?

That's what the PP has done.
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Re: I'm Done!

Post by iwealth » Fri Nov 02, 2012 1:26 pm

Nothing wrong with splitting your assets amongst different portfolios, one for each of your investing personalities, and I don't mean that to be insulting. I'm probably going to do the same myself. Maybe half and half with a PP and a combo of Vanguard funds like Wellington and Wellesley. They invest in large cap dividend paying stocks and high quality bonds (so I'd be tilted large cap value). I have no idea how that or any other portfolio will perform in the future. My guess is that it'll outperform a full-PP some years and underperform others, as would any other portfolio in existence.

On another note, days like today are mentally brutal and tend to frighten me. Not because the PP itself dropped, but because it becomes painfully obvious each asset class is propped up right now by the fed's QE. A relatively good jobs report increases the likelihood QE will end sooner rather than later, and gold's reaction looks like there's a deflationary fear. But then long bonds are also down. Who knows, just feels ugly.
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