Why do you use the PP?

[Tyler]

I invest in the PP because it's the best portfolio for my needs. 

My career accumulation phase was notably truncated by aggressive saving after only 14 years, so 30-year returns were irrelevant.  I chose to meet my wealth goals with greater certainty by maximizing my savings rather than maximizing average investment returns. Looking back, considering I graduated in 2000 and compound real stock market returns were negative for the next 12 years, I'm thankful I didn't follow the traditional path.  The long run is too long for my tastes.  I discovered the PP several years before retirement, and it was a godsend for my planning and security. 

Now in early retirement, the PP provides plenty of returns to support my lifestyle without the requisite market swings.  It protects both my nest egg and my sanity.  And thanks to the broad diversification and a strategy that focuses more on capital gains than other portfolios, the PP is also tremendously tax efficient for an early retiree with lots of levers to pull for tax management.  With multiple tools my chest, I will effectively pay no taxes most years even while living very comfortably.

If the portfolio ever stops meeting my needs, I'll look for other options.  However, based on the strong economic theory behind it I think that day will be a long time coming. 

[ochotona]

I hope it keeps on doing what it's supposed to do. It would be nice if the portfolio wasn't just a long-bond anomaly.

I invest in the PP because it's the best portfolio for my needs. 

My career accumulation phase was notably truncated by aggressive saving after only 14 years, so 30-year returns were irrelevant.  I chose to meet my wealth goals with greater certainty by maximizing my savings rather than maximizing average investment returns. Looking back, considering I graduated in 2000 and compound real stock market returns were negative for the next 12 years, I'm thankful I didn't follow the traditional path.  The long run is too long for my tastes.  I discovered the PP several years before retirement, and it was a godsend for my planning and security. 

Now in early retirement, the PP provides plenty of returns to support my lifestyle without the requisite market swings.  It protects both my nest egg and my sanity.  And thanks to the broad diversification and a strategy that focuses more on capital gains than other portfolios, the PP is also tremendously tax efficient for an early retiree with lots of levers to pull for tax management.  With multiple tools my chest, I will effectively pay no taxes most years even while living very comfortably.

If the portfolio ever stops meeting my needs, I'll look for other options.  However, based on the strong economic theory behind it I think that day will be a long time coming.

[mathjak107]

I invest in the PP because it's the best portfolio for my needs. 

My career accumulation phase was notably truncated by aggressive saving after only 14 years, so 30-year returns were irrelevant.  I chose to meet my wealth goals with greater certainty by maximizing my savings rather than maximizing average investment returns. Looking back, considering I graduated in 2000 and compound real stock market returns were negative for the next 12 years, I'm thankful I didn't follow the traditional path.  The long run is too long for my tastes.  I discovered the PP several years before retirement, and it was a godsend for my planning and security. 

Now in early retirement, the PP provides plenty of returns to support my lifestyle without the requisite market swings.  It protects both my nest egg and my sanity.  And thanks to the broad diversification and a strategy that focuses more on capital gains than other portfolios, the PP is also tremendously tax efficient for an early retiree with lots of levers to pull for tax management.  With multiple tools my chest, I will effectively pay no taxes most years even while living very comfortably.

If the portfolio ever stops meeting my needs, I'll look for other options.  However, based on the strong economic theory behind it I think that day will be a long time coming.

I wish I could get by with short term bonds ,tips, and an immediate annuity and not have to deal with markets at all. but our retirement wants require more income than that can safely spin off.

[LC475]

Having a VP and a separate PP is delusional?  To the contrary, putting funds in different buckets can be extremely valuable.  Drawing demarcation lines and making certain funds "off-limits" is of very high value to most people.  Look at automatic savings programs that transfer funds from one account to another.  One could accomplish the same thing by just leaving everything in the same account and not spending it... in theory.  But even then, you have to at least mentally segregate it.  This seems to be an almost universal psychological truth.  This is just how people deal with their money.  Humans like organizing things according to use, not just having everything in one big undifferentiated pile.

Regarding "doom and gloom about gold and bonds": gold is gold, and long-term dollar bonds are in some very important and real ways the anti-gold.  It stands to reason gold and anti-gold are not always going to be synchronized.  Gold will do well in inflation, and bonds will do well in deflation.  If one were really convinced that interest rates were going to go significantly up for many years to come, up to 5, then 10, then 15 percent, that would eventually be very good for gold.  Ditching gold would be the last thing one would want to do.  Sum up: if one has a certain predictive view about what the inflation rate is going to be in the future, it would make sense to sell off one of these two assets, either gold or long bonds: gold if you think rates will fall, bonds if you think rates will rise.  It doesn't really make sense (to me, personally) to sell off both.

[ochotona]

It appears that the story of gold is the story of the dollar. I don't know if the inflation narrative for gold still applies, or if it does, under what specific conditions. It's not anything I want to place an implicit, unquestioned bet on any longer.

Today, as inflation and interest rates slowly creep upwards, non-US investors flock to the "least dirty shirt and least low-yielding sort-of safe haven (for now) US Dollar". The rising US Dollar kills gold, all other metals, and oil (why I lost my job here in Texas in March. Yes, that got my attention). So gold and anti-gold can and have been falling simultaneously now... since February 1.

The mechanism of non-correlated trajectories that cancel out is broken for a while. When it comes back.. who knows?

Regarding "doom and gloom about gold and bonds": gold is gold, and long-term dollar bonds are in some very important and real ways the anti-gold.  It stands to reason gold and anti-gold are not always going to be synchronized.  Gold will do well in inflation, and bonds will do well in deflation.  If one were really convinced that interest rates were going to go significantly up for many years to come, up to 5, then 10, then 15 percent, that would eventually be very good for gold.  Ditching gold would be the last thing one would want to do.  Sum up: if one has a certain predictive view about what the inflation rate is going to be in the future, it would make sense to sell off one of these two assets, either gold or long bonds: gold if you think rates will fall, bonds if you think rates will rise.  It doesn't really make sense (to me, personally) to sell off both.

[buddtholomew]

Another one bites the dust...not surprised...aren't these the same people that were telling me just weeks ago that the PP was not for me!! Go figure...

As Bernstein said, there is nothing wrong with the PP portfolio, but rather the investors that cannot stick with the plan when equity markets are rising.

Here is the exact quote:

"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."

[mathjak107]

I think the combo of the crash of china's markets and everyone wondering if Greece was going to be the next Lehmann kind of made this the biggest  event in a while . kind of the one pp users have a vision of taking everything down.

but when gold didn't react and the surge in treasury's turned in to a fall  I think some kind of said "if not now , when?"  and became disheartened .

[Pointedstick]

I think the combo of the crash of china's markets and everyone wondering if Greece was going to be the next Lehmann kind of made this the biggest  event in a while . kind of the one pp users have a vision of taking everything down.

but when gold didn't react and the surge in treasury's turned in to a fall  I think some kind of said "if not now , when?"  and became disheartened .

Why would Greece potentially leaving the Euro cause the gold price in dollars to spike? Gold wasn't protecting dollar-denominated assets from anything.

Also, Greece didn't leave (yet).

[Cortopassi]

I think the combo of the crash of china's markets and everyone wondering if Greece was going to be the next Lehmann kind of made this the biggest  event in a while . kind of the one pp users have a vision of taking everything down.

but when gold didn't react and the surge in treasury's turned in to a fall  I think some kind of said "if not now , when?"  and became disheartened .

Why would Greece potentially leaving the Euro cause the gold price in dollars to spike? Gold wasn't protecting dollar-denominated assets from anything.

Also, Greece didn't leave (yet).

As I understand it, there are so many behind the scene derivatives, CDOs, etc. that even though you hear very often Greece is no big deal, everything is so inter-related and leveraged that a relatively "small" event could bring pain to many places outside Europe.

[atrus138]

Today, as inflation and interest rates slowly creep upwards, non-US investors flock to the "least dirty shirt and least low-yielding sort-of safe haven (for now) US Dollar". The rising US Dollar kills gold, all other metals, and oil (why I lost my job here in Texas in March. Yes, that got my attention). So gold and anti-gold can and have been falling simultaneously now... since February 1.

Wouldn't this mean that this is a great time to buy gold? The dollar won't remain as strong as it is currently.

[buddtholomew]

Today, as inflation and interest rates slowly creep upwards, non-US investors flock to the "least dirty shirt and least low-yielding sort-of safe haven (for now) US Dollar". The rising US Dollar kills gold, all other metals, and oil (why I lost my job here in Texas in March. Yes, that got my attention). So gold and anti-gold can and have been falling simultaneously now... since February 1.

Wouldn't this mean that this is a great time to buy gold? The dollar won't remain as strong as it is currently.

No one knows. That is the concise answer to your question. Gold/USD relationship is only one part of the equation. The other part is inflation expectations. There is no inflation in the US or any other part of the world (except Brazil).

[mathjak107]

I will say one thing , the recovery in equity's was just startling .

[dutchtraffic]

I will say one thing , the recovery in equity's was just startling .

Then i assume you are 100% equities, leveraged x 5. No....?

[mathjak107]

I wish I was this week but nope  only a 55/45 mix

[mathjak107]

I think the combo of the crash of china's markets and everyone wondering if Greece was going to be the next Lehmann kind of made this the biggest  event in a while . kind of the one pp users have a vision of taking everything down.

but when gold didn't react and the surge in treasury's turned in to a fall  I think some kind of said "if not now , when?"  and became disheartened .

Why would Greece potentially leaving the Euro cause the gold price in dollars to spike? Gold wasn't protecting dollar-denominated assets from anything.

Also, Greece didn't leave (yet).

it has been rumored gold thrives on fear and perception . but I have yet to see that .

[iwealth]

Mathjak, you've been investing since the 80's. Considering what you've seen, I'm shocked to hear you say anything going on in the equities market right now qualifies as "startling". You know the markets have been boring lately when these little mini-dips and rallies start to look interesting.

Equities plummeted a whopping 4% from all-time highs during this latest Greek crisis. They've retraced most of that and now sit down around 1% off all-time highs.

I can count 5 or 6 similar dips and recoveries just this year alone. Now, the October-November rally, that one was fun.

[iwealth]

it has been rumored gold thrives on fear and perception . but I have yet to see that .

When was the last time we've had something to truly be scared of? Certainly not Greece, I mean, it's been repeated over and over that there are plenty of US cities with larger economies.

[Pointedstick]

Exactly. There is nothing at all scary about the prospect of Greece leaving the Euro. They're an economically weak nation of 10 million with few significant exports and little military capacity. If some European hedge funds blow up, they blow up. But considering how long this crisis has been in the making, I would be exceptionally surprised if the institutions exposed to Greek debt hadn't set up significant firewalls to protect themselves from the possibility of a default. I'm guessing that's why the markets have had such a ho-hum response to the whole thing. Simply put, it's not that big of a deal. Unless you're Greek, of course.

[mathjak107]

Mathjak, you've been investing since the 80's. Considering what you've seen, I'm shocked to hear you say anything going on in the equities market right now qualifies as "startling". You know the markets have been boring lately when these little mini-dips and rallies start to look interesting.

Equities plummeted a whopping 4% from all-time highs during this latest Greek crisis. They've retraced most of that and now sit down around 1% off all-time highs.

I can count 5 or 6 similar dips and recoveries just this year alone. Now, the October-November rally, that one was fun.

it was the fact it did it in 3 sessions . when the outlook is still not so good and we have china weighing on things.

but  the market seems to always just love climbing that wall of  worry

[mathjak107]

Exactly. There is nothing at all scary about the prospect of Greece leaving the Euro. They're an economically weak nation of 10 million with few significant exports and little military capacity. If some European hedge funds blow up, they blow up. But considering how long this crisis has been in the making, I would be exceptionally surprised if the institutions exposed to Greek debt hadn't set up significant firewalls to protect themselves from the possibility of a default. I'm guessing that's why the markets have had such a ho-hum response to the whole thing. Simply put, it's not that big of a deal. Unless you're Greek, of course.

the fear in the market wasn't so much about Greece . heck their gdp is  the size of Louisiana . they also only owe 40 billion to banks . the rest is the imf.

the fear was it spreading to the other country's like Italy , spain , Portugal , etc.

[Cortopassi]

The fear was....?

If the Greek parliament passes this bailout, it will mean more misery for Greeks, and a simple kicking of the can yet again.  These can kicking events get closer and closer in time, and I suspect the next time will be very problematic because elections in Italy, Spain and Portugal all seem to lean the same direction Greece did, and I hope for their sakes they have leaders with more cahones to follow through.

I have no idea why Tsipras caved, but to think if the bailout passes that Greeks/Greece are all hunky dory is mistaken.

[iwealth]

The fear was....?

If the Greek parliament passes this bailout, it will mean more misery for Greeks, and a simple kicking of the can yet again.  These can kicking events get closer and closer in time, and I suspect the next time will be very problematic because elections in Italy, Spain and Portugal all seem to lean the same direction Greece did, and I hope for their sakes they have leaders with more cahones to follow through.

I have no idea why Tsipras caved, but to think if the bailout passes that Greeks/Greece are all hunky dory is mistaken.

Which is potentially great news if you hold your gold based in euros. I'd expect US treasuries to be the appropriate hedge against foreign economies crapping the bed.

[Cortopassi]

Good Point!

I wonder how all the angst we are hearing from people would be different if we were in Europe.  Or Japan.  Or Canada.  See below.

[flagator]

Exactly. There is nothing at all scary about the prospect of Greece leaving the Euro. They're an economically weak nation of 10 million with few significant exports and little military capacity. If some European hedge funds blow up, they blow up. But considering how long this crisis has been in the making, I would be exceptionally surprised if the institutions exposed to Greek debt hadn't set up significant firewalls to protect themselves from the possibility of a default. I'm guessing that's why the markets have had such a ho-hum response to the whole thing. Simply put, it's not that big of a deal. Unless you're Greek, of course.

the fear in the market wasn't so much about Greece . heck their gdp is  the size of Louisiana . they also only owe 40 billion to banks . the rest is the imf.

the fear was it spreading to the other country's like Italy , spain , Portugal , etc.

There are also trillions of $$ worth of derivatives written on Greek debt. When those blow up look for an event much worse than Lehman, whose derivatives blew up AIG and many other banks. Greece's derivatives are worth a heck of a lot more than Lehman's did.

It was a huge relief for Wall Street to not have all those derivatives blow up, and a stock rally ensued.

So all the angst and worries about Greek implosion have everything to do with derivatives, not the actual debt itself.

Gold should have seen a significant bid higher among all these threats but it it did not. The FED and other central banks are keeping a very close lid on it this time, unlike back in the late 2000s.

Which goes back to the whole question of the PP being suitable in 2015 as a hedge toward all uncertainties given that gold is so effectively suppressed.

[mathjak107]

spot on !

the credit default swap market is the biggest betting casino in the world. the amount of money that could be lost is insane .


imagine one of us loaning money to someone on prosper .  someone says i don't think joe blow is going to pay me my 1000 bucks .

we all go we know joe he will pay , you , want to bet ?

before you know it we all pool our money and have a 10k bet that joe will pay the 1k  he owes.

the default swaps ARE ISSUED IN 10 MILLION DOLLAR INCREMENTS .

Default swaps insuring $10 million of Greece’s debt for five years now cost $4.2 million in advance and $100,000 annually, according to CMA data. That’s up from $3.4 million in advance on Jan. 23, the last trading day before the election.

The amount of money in derivitives is over 600 trillion