PP investors--stay the course

[rocketdog]

Miners.  They go broke all the time.  Very volatile industry--which is why I play the sector and not individual companies.  Although, look at the largest miner in the world--Barrick.  5x earnings?  Absurd.  As a sector, the miners are nearing single digit PEs--levels we've only seen in the midst of an "end of the world" scenario.  I can't possibly imagine a more attractive risk/reward equation at the moment(aside from investing in my own business ;-)

Miners also tend to be heavily leveraged, magnifying their volatility. 

[blackomen]

I have a feeling that people who are new to investing and try out the PP will likely be disappointed and leave, no matter how convincing the case is for PP..  while those who lived through 2008 (with the PP or not at the time) are a lot more likely to stick it through this storm.

[dragoncar]

I have a feeling that people who are new to investing and try out the PP will likely be disappointed and leave, no matter how convincing the case is for PP..  while those who lived through 2008 (with the PP or not at the time) are a lot more likely to stick it through this storm.

So a bunch of 5-year-olds have been liquidating their PP?

http://youtu.be/AYrpROr9Gmk

[blackomen]

I have a feeling that people who are new to investing and try out the PP will likely be disappointed and leave, no matter how convincing the case is for PP..  while those who lived through 2008 (with the PP or not at the time) are a lot more likely to stick it through this storm.

So a bunch of 5-year-olds have been liquidating their PP?

http://youtu.be/AYrpROr9Gmk

Please elaborate.

[Khisanth]

I have a feeling that people who are new to investing and try out the PP will likely be disappointed and leave, no matter how convincing the case is for PP..  while those who lived through 2008 (with the PP or not at the time) are a lot more likely to stick it through this storm.

So a bunch of 5-year-olds have been liquidating their PP?

http://youtu.be/AYrpROr9Gmk

Please elaborate.

A snarky response to the comment about those who lived through 2008. The ones who didn't live through 2008 are currently around 5 years of age, or dead.

[dragoncar]

Yeah, I just wanted an excuse to post a funny video

[MediumTex]

So a bunch of 5-year-olds have been liquidating their PP?

http://youtu.be/AYrpROr9Gmk

Please elaborate.

A snarky response to the comment about those who lived through 2008. The ones who didn't live through 2008 are currently around 5 years of age, or dead.

I feel very fortunate to have lived through 2008 in the prime of my investing career.  I experienced it fully and completely.  The trauma was comprehensive. 

You can't read about that kind of stuff and understand it.  You must live through it.

[Libertarian666]

Please elaborate.

A snarky response to the comment about those who lived through 2008. The ones who didn't live through 2008 are currently around 5 years of age, or dead.

I feel very fortunate to have lived through 2008 in the prime of my investing career.  I experienced it fully and completely.  The trauma was comprehensive. 

You can't read about that kind of stuff and understand it.  You must live through it.

I guess I'm unusual in that I didn't mind 2008 particularly, probably because I finished slightly ahead for the year. I also did get to buy a fair chunk of gold at $800 after the big drop.

2013 has been much more annoying so far, but if I'm not too far underwater at the end of the year, maybe I'll forget about that too!

[KevinW]

FWIW last week I was due to rebalance my Roth due to cash exceeding 35%. On Wed. I bought IAU @ 11.99 and TLT @ 108.29. Both are up a little as I write this. It will be interesting to see how that trade looks a year or so from now.

[christina]

I feel very fortunate to have lived through 2008 in the prime of my investing career.  I experienced it fully and completely.  The trauma was comprehensive. 

You can't read about that kind of stuff and understand it.  You must live through it.

Yes, I agree that you must live through the bad times to get an idea of who you are as an investor. You might think you're ready to take on a lot of risk, and then when you're net worth drops by 20%, you realize you're not that type of person. I'm definitely NOT somebody who can be all-in on stocks and take a 20% drop. I know this because I sold all my stocks at the bottom.

The PP feels so much safer to me that this 9% drop doesn't feel bad at all, really.

[gizmo_rat]

I'm definitely NOT somebody who can be all-in on stocks and take a 20% drop. I know this because I sold all my stocks at the bottom.

I think the more generally quoted figure is 50%, as in "If you can't handle a 50% loss you shouldn't be in stawks"  you kind of have to say it through the side of your mouth for the full effect.

Do remember that even the PP has taken a 20% hit at times. 

[cnh]

I'm definitely NOT somebody who can be all-in on stocks and take a 20% drop. I know this because I sold all my stocks at the bottom.

I think the more generally quoted figure is 50%, as in "If you can't handle a 50% loss you shouldn't be in stawks"  you kind of have to say it through the side of your mouth for the full effect.

Do remember that even the PP has taken a 20% hit at times. 

Yeah, seems to me a 20% drop in 2008 was doing pretty well.  My hit was about 35% and that was in a nice balanced fund appropriate to my age.

[george]

I'm quite surprised at the amount of disappointment with the recent performance of the pp. The recent underperformance of -5.5% ytd is really a drop in the bucket compared to the 50%+drops we have seen in the equity markets. Do people think there is one strategy that will always outperform? For those who wish to chase performance, I wish you luck. In the meantime, I am thrilled with the performance of the pp over the years and feel fortunate to be able to add funds to it while its down.
Richard Bernstein was so right when he praised the concept of the pp but also predicted that at its first sign of underperformance, so many followers of the strategy would drop like flies and that's exactly what is happening now. Human behavior in the markets is just too predictable.

Quote from Richard Bernstein:
"And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times. There?s nothing wrong with Harry?s portfolio?nothing at all?but there?s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."

[MediumTex]

Quote from Richard Bernstein:
"And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times. There's nothing wrong with Harry's portfolio, nothing at all, but there's everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."

I had no idea that only PP investors chased performance. 

[rickb]

Quote from Richard Bernstein:
"And therein lies the real problem with the TPP: because of its huge tracking error relative to more conventional portfolios, it attracts assets and adherents during crises, then sheds them in better times. There?s nothing wrong with Harry?s portfolio?nothing at all?but there?s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."

I think it's Wiiliam, not Richard.  The quote is from http://www.efficientfrontier.com/ef/0adhoc/harry.htm

[Xan]

I'm more of a fan of Elmer, although Leonard is more famous.  Elmer did the National Geographic theme, the theme for Stripes (really stirring), the Magnificent Seven, Airplane, and much more.

[frugal]

I see a lot of negativity on the permanent portfolio out there.  At this point, it looks like the portfolio is down about 8-9% off its highs.  Consider this a litmus test for your risk tolerance.  If you're sweating bullets right now, you either need to chill and stay the course, or you need to save dramatically more for retirement and move to a lower volatility portfolio.  I think you should do the former.  The portfolio has weathered many storms over the last 40 years--it will survive this one.  The worst thing you can do is abandon your convictions and sell near a bottom. 

If it helps you feel any better, I only hold about 20% of my investable assets in the permanent portfolio.  The remaining 70-80% is in gold, silver and miners.  I'm sitting on 35-70% drawdowns in that sector and wouldn't think for a second about abandoning those positions.  If anything, I'm reconsidering allocating more cash to add to those positions.  Although sentiment has changed over the last few years, nothing about the fundamentals has changed from what I see.  Perhaps if I needed that money any time soon, I would be nervous.  But I wouldn't hold such volatile positions if I were that close to retirement.

We should be thankful for times like these.  They test us and our convictions.  We either believe in the road we've chosen or we don't.  If you're in the permanent portfolio, just ride it out.  In a few years you'll look back and be glad you did.

thank you for the post.


I have a question:

the new money to be added shall be on cash until enough amount is saved to add to the 4 assets?

[6 Iron]

I feel very fortunate to have lived through 2008 in the prime of my investing career.  I experienced it fully and completely.  The trauma was comprehensive. 

You can't read about that kind of stuff and understand it.  You must live through it.

Truer words...

This last year has to have been tough sledding for those who began their perm port recently, particularly if they did not have much invested during 2008.  There is much comfort to be had from time and experience in this, allowing the market forces in the portfolio to direct your investments.

I noticed the gold scream thread, and I am of a different opinion. I have heard some prognosticators speculate that gold could go down to $700/oz, and I would love it. I could imagine if that were the case, that inflation was under control, and prosperity was the order of the day#. I like that world. But there may not be a lot of overlap in the Venn diagram of life for what I want, and what actually happens.

# (unless there is a depression, but with LT bonds, we have that covered as best we can)

[buddtholomew]

I feel very fortunate to have lived through 2008 in the prime of my investing career.  I experienced it fully and completely.  The trauma was comprehensive. 

You can't read about that kind of stuff and understand it.  You must live through it.

Truer words...

This last year has to have been tough sledding for those who began their perm port recently, particularly if they did not have much invested during 2008.  There is much comfort to be had from time and experience in this, allowing the market forces in the portfolio to direct your investments.

I noticed the gold scream thread, and I am of a different opinion. I have heard some prognosticators speculate that gold could go down to $700/oz, and I would love it. I could imagine if that were the case, that inflation was under control, and prosperity was the order of the day#. I like that world. But there may not be a lot of overlap in the Venn diagram of life for what I want, and what actually happens.

# (unless there is a depression, but with LT bonds, we have that covered as best we can)

Not depression, but rather deflation where LT treasuries and cash would rise in value as you could purchase more gold for the same amount of money.

[buddtholomew]

Its over for the PP investor. A perfect storm of rising interest rates and tumbling gold. The achilles heal has been exposed as equities cannot buoy the portfolio from further declines. My worst fear has been realized. Buy into an investing philosophy to watch it crash and burn.

[Khisanth]

Its over for the PP investor. A perfect storm of rising interest rates and tumbling gold. The achilles heal has been exposed as equities cannot buoy the portfolio from further declines. My worst fear has been realized. Buy into an investing philosophy to watch it crash and burn.

Too much prognostication for my taste.

[buddtholomew]

Im not predicting anything. Are yields rising, has gold plummeted and has the rise in equities failed to buoy the portfolio. Seems factual to me.

[Khisanth]

Im not predicting anything. Are yields rising, has gold plummeted and has the rise in equities failed to buoy the portfolio. Seems factual to me.

You've predicted it's over for the Permanent Portfolio investor. You are extrapolating the recent declines of gold and bond principals and extending them into the unforeseeable future. This is a common trait that is exploited by the markets again and again.

Is there something in the present that will keep you optimistic about this portfolio?

In a sense you've thrown in the towel for this portfolio. We have tried to offer you alternatives, such as the VP, or reducing the % of volatile assets and having a larger ratio of cash. We have offered optimistic viewpoints, and comforting sympathies. We have offered dismissive judgements of your viewpoints.

You've dug in your position, and so have we. What will you choose to change in your current portfolio? I believe even Bogleheads will say 3 years is not a long time from an investment perspective.

[frugal]

Im not predicting anything. Are yields rising, has gold plummeted and has the rise in equities failed to buoy the portfolio. Seems factual to me.

You've predicted it's over for the Permanent Portfolio investor. You are extrapolating the recent declines of gold and bond principals and extending them into the unforeseeable future. This is a common trait that is exploited by the markets again and again.

Is there something in the present that will keep you optimistic about this portfolio?

In a sense you've thrown in the towel for this portfolio. We have tried to offer you alternatives, such as the VP, or reducing the % of volatile assets and having a larger ratio of cash. We have offered optimistic viewpoints, and comforting sympathies. We have offered dismissive judgements of your viewpoints.

You've dug in your position, and so have we. What will you choose to change in your current portfolio? I believe even Bogleheads will say 3 years is not a long time from an investment perspective.

budd,

a) how old are you?

b) When will you need the money that you have now in PP?

c) How much % of your savings you have on PP?

d) What is the frequency of consulting your portfolio per week?


Regards.

[dualstow]

Im not predicting anything. Are yields rising, has gold plummeted and has the rise in equities failed to buoy the portfolio. Seems factual to me.

You've predicted it's over for the Permanent Portfolio investor. You are extrapolating the recent declines of gold and bond principals and extending them into the unforeseeable future. This is a common trait that is exploited by the markets again and again.

Is there something in the present that will keep you optimistic about this portfolio?

In a sense you've thrown in the towel for this portfolio. We have tried to offer you alternatives, such as the VP, or reducing the % of volatile assets and having a larger ratio of cash. We have offered optimistic viewpoints, and comforting sympathies. We have offered dismissive judgements of your viewpoints.

You've dug in your position, and so have we. What will you choose to change in your current portfolio? I believe even Bogleheads will say 3 years is not a long time from an investment perspective.

+1
Budd, I don't mind you saying it's over for *your* pp, but I'm mildly annoyed that you can declare that it's over for everyone.
Not everyone is sticking with it out of blindness or stubborness.
Some of us actually did our research and knew that there would be lean years, for whatever reason.
I expect even deeper drawdowns in the months to come. That doesn't mean I'm going to panic, scrap everything, and switch to all cash or 60/40.
Good luck.