Ready to make switch but not sure where to begin...

General Discussion on the Permanent Portfolio Strategy

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Ad Orientem
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Re: Ready to make switch but not sure where to begin...

Post by Ad Orientem » Sat Sep 01, 2012 8:18 pm

Unless you are extremely wealthy with most of your assets in taxable accounts, the PP is incredibly tax efficient.
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Re: Ready to make switch but not sure where to begin...

Post by Storm » Sun Sep 02, 2012 12:20 am

Another thing that should be taken into account is trading fees.  It's
less expensive to keep one giant sprawling PP than to keep lots of smaller ones.  I will agree, however, that when I do retire (hopefully early) I plan on converting my taxable and non taxable to 2 PPs so that I can drawdown before age 65.  This might not be the most tax efficient thing to do...
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Re: Ready to make switch but not sure where to begin...

Post by Pointedstick » Sun Sep 02, 2012 12:53 am

Storm wrote: Another thing that should be taken into account is trading fees.  It's
less expensive to keep one giant sprawling PP than to keep lots of smaller ones.
In my experience, it's not been as bad as I'd feared. In my taxable (TDAmeritrade) and Roth IRA (Vanguard) PPs, the only asset that isn't commission-free is gold, and if you were 100% physical bullion in taxable, it could be an entirely commission-free PP. My 401k PP (Schwab) has only two commission-free assets but I'm just happy to have been blessed with a 401k that I could make a PP out of at all!

In any event, it's rarely an issue since I do the buy-the-lagging-asset strategy. As a result, in some months I pay no commissions.
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Re: Ready to make switch but not sure where to begin...

Post by dualstow » Sun Sep 02, 2012 6:15 pm

MangoMan wrote:
Pointedstick wrote: In my experience, it's not been as bad as I'd feared. In my taxable (TDAmeritrade) and Roth IRA (Vanguard) PPs, the only asset that isn't commission-free is gold, and if you were 100% physical bullion in taxable, it could be an entirely commission-free PP.
I have seen this statement in several posts, and I do not understand the logic: If you buy physical gold, there is always a markup over spot, is there not? What is that, if not an effective commission?
You are of course correct. I think the general idea is that although you pay commission (mark-up) up front, you're done after that. You don't have the expense ratios of ETFs or other gold funds. Then again, if you can sell GTU and have gains taxed at a max of 15% instead of 28% or any gold holding in tax-deferred, you might save big-time. The debate continues...
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Re: Ready to make switch but not sure where to begin...

Post by AgAuMoney » Sun Sep 02, 2012 7:07 pm

MangoMan wrote:If you buy physical gold, there is always a markup over spot, is there not? What is that, if not an effective commission?
It is probably more accurate to consider that markup (and the discount on sale) as part of the bid/ask spread just like for any asset.

Of course, some dealers are actually brokers and do charge a commission.  For example, Don Stott of ColoradoGold.com.  (No connection, but I do recommend them.)  You pay the amark (I think that was his supplier) dealer ask price or receive their bid price for a sale.  Then ColoradoGold adds 1.5% commission (or less depending on the size of your order) to cover their costs including shipping and float, and the goods are drop shipped.
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Re: Ready to make switch but not sure where to begin...

Post by Ad Orientem » Sun Sep 02, 2012 7:47 pm

MangoMan wrote:
AgAuMoney wrote:
MangoMan wrote:If you buy physical gold, there is always a markup over spot, is there not? What is that, if not an effective commission?
It is probably more accurate to consider that markup (and the discount on sale) as part of the bid/ask spread just like for any asset.
Even on a smallish $10,000 purchase of a gold ETF with a typical discount broker commission of $8, you are talking about .08% of the purchase price with a negligible bid/ask spread on GLD/IAU/GTU. The costs of the purchase and sale of the physical gold are substantially higher. Why does everyone continue to ignore [or downplay] this issue?
To my mind the argument for physical gold has never been based on either cost or convenience. The argument for physical comes down to insurance. Gold is financial disaster insurance and it is one of the last forms of portable wealth that's still out there.  In a pinch you could probably smuggle it across the border if you ever had to make a run for it. No, I'm not one of those people who thinks we are on the verge of some great catastrophe. But I am a student of history. Sometimes really bad things do happen, and they rarely make appointments beforehand.

My bottom-line is that if you own physical gold you aren't broke no matter if the stock market has crashed or bonds are worthless.
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Re: Ready to make switch but not sure where to begin...

Post by rickb » Sun Sep 02, 2012 10:51 pm

MangoMan wrote: Even on a smallish $10,000 purchase of a gold ETF with a typical discount broker commission of $8, you are talking about .08% of the purchase price with a negligible bid/ask spread on GLD/IAU/GTU. The costs of the purchase and sale of the physical gold are substantially higher. Why does everyone continue to ignore [or downplay] this issue?
If you have a handful of gold in your hand, there is no nightmare scenario where you end up with a handful of worthless paper instead.
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Re: Ready to make switch but not sure where to begin...

Post by BearBones » Mon Sep 03, 2012 5:50 am

MangoMan wrote: Even on a smallish $10,000 purchase of a gold ETF with a typical discount broker commission of $8, you are talking about .08% of the purchase price with a negligible bid/ask spread on GLD/IAU/GTU. The costs of the purchase and sale of the physical gold are substantially higher. Why does everyone continue to ignore [or downplay] this issue?
Implied but not yet explicitly stated: we get your point, MangoMan. Yes, true, it is better to use ETF or CEF if you are doing a lot of buying/selling. One should not downplay this issue.
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Re: Ready to make switch but not sure where to begin...

Post by MachineGhost » Mon Sep 03, 2012 4:39 pm

BearBones wrote: Implied but not yet explicitly stated: we get your point, MangoMan. Yes, true, it is better to use ETF or CEF if you are doing a lot of buying/selling. One should not downplay this issue.
I'm sure the spread of the Good Delivery Bars is built-into the ETF expenses.
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Re: Ready to make switch but not sure where to begin...

Post by Ad Orientem » Mon Sep 03, 2012 5:01 pm

If you are paying anything close to a few hundred a year for a safe deposit box you need to switch banks.
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Re: Ready to make switch but not sure where to begin...

Post by AgAuMoney » Mon Sep 03, 2012 9:43 pm

MangoMan wrote: Even on a smallish $10,000 purchase of a gold ETF with a typical discount broker commission of $8, you are talking about .08% of the purchase price with a negligible bid/ask spread on GLD/IAU/GTU. The costs of the purchase and sale of the physical gold are substantially higher. Why does everyone continue to ignore [or downplay] this issue?
Cannot lump GLD/IAU with GTU.  Ever paid attention to the premiums on GTU?  I don't consider 7% to be "negligible."  But unlike a bid/ask spread (which also exists) the premium varies drastically and sometimes can be to your advantage.

Also note that the Bid/Ask spread has historically been much higher for IAU than GLD.  But as you point out, the bid/ask on physical is much higher.  Of course it is.  Checked out real estate or cars lately?  Physical is always higher.  And if you want to take delivery from GLD or deposit into GLD you'll find the same large spread.

Now, let's talk cost...

GTU: 0.35%
GLD: 0.40%
IAU: 0.25%
Physical: 0% (minimum, the max is up to you)

How long are you going to keep your Permanent Portfolio?
How much gold are you going to have (in dollars)?

If you have $10,000 in GLD for one year it will cost you $40.  It will cost you whatever they decide to charge you, and it is based on the dollar amount you have.  $10,000 is less than 10 1oz coins.  I purchased my coins opportunistically at an average markup under $20 per each, or $200 for 10.  Since I was purchasing physical and had established a relationship, I was able to dicker.
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Re: Ready to make switch but not sure where to begin...

Post by AgAuMoney » Mon Sep 03, 2012 9:46 pm

MangoMan wrote:Even a safe deposit box large enough to hold a pile of coins will probably set you back a few hundred $ /year.
Uh, just how big a pile do you have?

You can easily fit at least one hundred thousand dollars worth of gold coins into a toilet tissue tube.  You had better not be paying $100+ to store a toilet tissue tube.  But you will be paying $400 per year if you have it in GLD.
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Re: Ready to make switch but not sure where to begin...

Post by Ad Orientem » Mon Sep 03, 2012 10:27 pm

AgAuMoney wrote:
MangoMan wrote:Even a safe deposit box large enough to hold a pile of coins will probably set you back a few hundred $ /year.
Uh, just how big a pile do you have?

You can easily fit at least one hundred thousand dollars worth of gold coins into a toilet tissue tube.  You had better not be paying $100+ to store a toilet tissue tube.  But you will be paying $400 per year if you have it in GLD.
Storage costs for physical will generally be lower, especially over the long term, than using ETFs as long as you are using safe deposit boxes. Rent for SDBs is surprisingly cheap. Is there a point where an ETF might make more sense? Sure. If you are very wealthy and your gold holdings would go beyond convenient storage in say two or at most three SDBs then you might want to start thinking about things like allocated gold accounts or an ETF. Storage fees for allocated bullion accounts can can get pretty stiff. So if I had two SDBs (at different banks) that were filled with coins or small bars then yes, I might start thinking about IAU from the perspective of convenience and cost for everything that didn't fit in the two boxes.

Would that I had that problem.
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Re: Ready to make switch but not sure where to begin...

Post by AgAuMoney » Wed Sep 05, 2012 12:00 am

Ad Orientem wrote:Storage costs for physical will generally be lower, especially over the long term, than using ETFs as long as you are using safe deposit boxes. Rent for SDBs is surprisingly cheap. Is there a point where an ETF might make more sense? Sure. If you are very wealthy and your gold holdings would go beyond convenient storage in say two or at most three SDBs then you might want to start thinking about things like allocated gold accounts or an ETF. Storage fees for allocated bullion accounts can can get pretty stiff. So if I had two SDBs (at different banks) that were filled with coins or small bars then yes, I might start thinking about IAU from the perspective of convenience and cost for everything that didn't fit in the two boxes.

Would that I had that problem.
Me too.  :)

(For some reason Tevya singing "If I Were a Rich Man" just started going thru my head...)

Wasn't there a large gold investor (hedge fund or money manager large) that "took delivery" from GLD a few years ago because storing the physical in a secure warehouse was so much cheaper than the ETF?  Seems like it was a $150million position or something like that...
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Re: Ready to make switch but not sure where to begin...

Post by vnatale » Fri Jan 10, 2020 6:15 pm

Pointedstick wrote:
Sat Sep 01, 2012 12:58 pm
BearBones wrote: This is more than a tax issue, of course. I bet that the discussions on this forum are more helpful than 99% of most "professionals."
That's the biggest reason I love hanging out here. I feel like I gain a few fractions of an IQ point every time I read the wisdom regularly handed out for free by MT, craigr, Gumby, stone, moda, MG, and many others. The concentration of intelligence and knowledge here is staggering.
Which is EXACTLY why I am scouring these old Topics for any information I've not previously acquired. The people in this forum do have intelligence, knowledge, and, most importantly, EXTREME motivation to minutely analyze all things Permanent Portfolio! Of course, in the process, I'm continuing to allow myself to get sidetracked by all the other interesting Topics that have been discussed.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Ready to make switch but not sure where to begin...

Post by vnatale » Wed Sep 01, 2021 6:43 pm

Ad Orientem wrote:
Mon Sep 03, 2012 10:27 pm

AgAuMoney wrote:
MangoMan wrote:Even a safe deposit box large enough to hold a pile of coins will probably set you back a few hundred $ /year.


Uh, just how big a pile do you have?

You can easily fit at least one hundred thousand dollars worth of gold coins into a toilet tissue tube.  You had better not be paying $100+ to store a toilet tissue tube.  But you will be paying $400 per year if you have it in GLD.


Storage costs for physical will generally be lower, especially over the long term, than using ETFs as long as you are using safe deposit boxes. Rent for SDBs is surprisingly cheap. Is there a point where an ETF might make more sense? Sure. If you are very wealthy and your gold holdings would go beyond convenient storage in say two or at most three SDBs then you might want to start thinking about things like allocated gold accounts or an ETF. Storage fees for allocated bullion accounts can can get pretty stiff. So if I had two SDBs (at different banks) that were filled with coins or small bars then yes, I might start thinking about IAU from the perspective of convenience and cost for everything that didn't fit in the two boxes.

Would that I had that problem.


Both of the two advocates of holding gold in physical form make persuasive cases here...
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Ready to make switch but not sure where to begin...

Post by vnatale » Thu Sep 09, 2021 12:17 pm

BearBones wrote:
Sat Sep 01, 2012 10:36 am

Storm wrote:
Personally I prefer the giant sprawling one.  I can buy the tax advantaged asset in each account and eventually end up with a little in all of my accounts for rebalancing purposes.  I think the PP works best in this manner, with tax heavy assets like Treasury bonds doing best in your 401k, while tax deferred assets like gold doing best in your taxable accounts.


I have a feeling that this consistent recommendation is because so many of us are new to the PP. I have a feeling that having unbalanced assets between taxable and tax deferred acts will eventually lead to difficulties, as discussed before. This might occur, for example, in the event of LTTs taking a long term dive in a tax deferred act, and there is eventually little else to rebalance from (i.e., you cannot just move some cash or stocks in from your taxable space). In this scenario, your "little in all accounts" gets used up, you end up with a shrinking 401k, and you are forced to buy LTTs in your taxable act.

I have a feeling that 10 years from now the recommendation will be just to keep a PP in each act. Think I am off base?


It's not yet "10 years from now" but it is 9+ years!

Was BearBones correct or not in his "feeling"?

Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Ready to make switch but not sure where to begin...

Post by vnatale » Sun Oct 17, 2021 12:03 pm

MangoMan wrote:
Mon Sep 03, 2012 4:48 pm

MachineGhost wrote:
BearBones wrote:
Implied but not yet explicitly stated: we get your point, MangoMan. Yes, true, it is better to use ETF or CEF if you are doing a lot of buying/selling. One should not downplay this issue.


I'm sure the spread of the Good Delivery Bars is built-into the ETF expenses.



Perhaps. But I'm guessing they get a much better deal due to the huge volume than a retail investor can get buying coins.

Also, there are ongoing storage costs, unless you are hiding it under your floorboards. Even a safe deposit box large enough to hold a pile of coins will probably set you back a few hundred $ /year. My point is: contrary to the persistent implications in many of the threads, buying and holding physical gold is not free, initially or over time. It certainly may be preferable for true protection, but there are still costs involved.


From doing further research today it seems that a small security deposit box costing about $30 a year could hold almost $400,000 in coins (valuing the coins about $1,900).

Yes not free...but if my above numbers are true that is an expense ratio attributed to safety deposit costs of only 0.008%...which is still only a total of 0.08 over ten years. Not free....but fairly close to free.

Of course if you are renting that safety deposit box strictly for your gold coin storage and you only hold 1/2, 1/4, 1/10 of the $400,000 then multiply that "expense ratio" by 2, 4, or 10.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Ready to make switch but not sure where to begin...

Post by johnnywitt » Wed Nov 03, 2021 5:39 pm

badbally wrote:
Fri Aug 24, 2012 6:34 pm
Just started implementing PP strategy.  Thanks for the feedback.

Instead of plunking a huge amount of $ into TLT and IAU at one time, wouldn't it make sense to buy on dips or dollar avg cost into each investment?
It's a bit like a parachute jump my friend. ;)
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Re: Ready to make switch but not sure where to begin...

Post by mathjak107 » Thu Nov 04, 2021 1:56 am

johnnywitt wrote:
Wed Nov 03, 2021 5:39 pm
badbally wrote:
Fri Aug 24, 2012 6:34 pm
Just started implementing PP strategy.  Thanks for the feedback.

Instead of plunking a huge amount of $ into TLT and IAU at one time, wouldn't it make sense to buy on dips or dollar avg cost into each investment?
It's a bit like a parachute jump my friend. ;)
If dollar cost averaging worked better we would all reach our desired allocation , sell everything And start buying in from zero again …you can see over time that would not have worked well with most assets.

We dollar cost average in when we have no choice and accumulate money over time to invest but as far as performance you need to be a great market timer to have dollar cost averaging do better then just lump sum
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Re: Ready to make switch but not sure where to begin...

Post by johnnywitt » Thu Nov 04, 2021 4:24 pm

mathjak107 wrote:
Thu Nov 04, 2021 1:56 am
johnnywitt wrote:
Wed Nov 03, 2021 5:39 pm
badbally wrote:
Fri Aug 24, 2012 6:34 pm
Just started implementing PP strategy.  Thanks for the feedback.

Instead of plunking a huge amount of $ into TLT and IAU at one time, wouldn't it make sense to buy on dips or dollar avg cost into each investment?
It's a bit like a parachute jump my friend. ;)
If dollar cost averaging worked better we would all reach our desired allocation , sell everything And start buying in from zero again …you can see over time that would not have worked well with most assets.

We dollar cost average in when we have no choice and accumulate money over time to invest but as far as performance you need to be a great market timer to have dollar cost averaging do better then just lump sum
Wow, that's a really excellent logical breakdown and an excellent way to illustrate lump sum vs. DCA.
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