Why the PP is better in accumulation than you think

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dutchtraffic
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Re: Why the PP is better in accumulation than you think

Post by dutchtraffic » Tue Nov 03, 2015 2:02 pm

You keep assuming things always recover within a year or so, clearly this is nonsense.

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Now what..? US is replaying this scenario now.
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Re: Why the PP is better in accumulation than you think

Post by Tyler » Tue Nov 03, 2015 2:06 pm

mathjak107 wrote: not quite true about steep drops , michael kitces did a paper on this . it is only the duration . a steep drop like 2008  was a non event to its success rate .. a modest drop over an extended duration has far more serious consequences .
From the Kitces paper (empahsis added):
The viability of a 2008 retiree following the 4% rule is especially notable, and reflects a key (but often ignored or misunderstood) tenet of managing sequence-of-return risk in retirement: it’s actually not just about having a severe market crash in the early years of retirement, but a crash that doesn’t recover quickly.
He doesn't say the severity of the drop does not matter.  Only that the recovery time also matters.  I don't disagree with that at all.  Also note that he's discussing the survival of a stock/bond portfolio (that I do not dispute), while I'm comparing performance of two different portfolios.  Other portfolios he does not consider also do quite well while avoiding both the sharp and long declines. 
Last edited by Tyler on Tue Nov 03, 2015 2:10 pm, edited 1 time in total.
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Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Nov 03, 2015 2:10 pm

well the 40% drop in 2008 was a non event , he says it . the fast recovery made it such .

on the other hand the y2k retiree is the one in possible trouble .
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Re: Why the PP is better in accumulation than you think

Post by Tyler » Tue Nov 03, 2015 2:12 pm

mathjak107 wrote: well the 40% drop in 2008 was a non event , he says it . the fast recovery made it such .

on the other hand the y2k retiree is the one in possible trouble .
The 0.8% PP drop in 2008 was the true non-event.  And a Y2k PP retiree is doing just fine.  ;)
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mathjak107
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Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Nov 03, 2015 2:13 pm

dutchtraffic wrote: You keep assuming things always recover within a year or so, clearly this is nonsense.

Image

Now what..? US is replaying this scenario now.
clearly we are not japan and have not been anything like japan in 30 years .
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Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Nov 03, 2015 2:15 pm

Tyler wrote:
mathjak107 wrote: well the 40% drop in 2008 was a non event , he says it . the fast recovery made it such .

on the other hand the y2k retiree is the one in possible trouble .
The 0.8% PP drop in 2008 was the true non-event.  And a Y2k PP retiree is doing just fine.  ;)
Tyler wrote:
mathjak107 wrote: well the 40% drop in 2008 was a non event , he says it . the fast recovery made it such .

on the other hand the y2k retiree is the one in possible trouble .
The 0.8% PP drop in 2008 was the true non-event.  And a Y2k PP retiree is doing just fine.  ;)
correct but so is the conventionally invested retiree fine  , it was the same non event  for them as it was for the pp retiree ..
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Re: Why the PP is better in accumulation than you think

Post by dutchtraffic » Tue Nov 03, 2015 2:16 pm

mathjak107 wrote: clearly we are not japan and have not been anything like japan in 30 years .
This is not an argument whatsoever.
But you keep saying this, you really do believe americans are 'special' don't you..?
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Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Nov 03, 2015 2:19 pm

until our markets aren't , yes , we have been special and we are still one of the best places to invest in the world today - at least for now .
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Re: Why the PP is better in accumulation than you think

Post by Tyler » Tue Nov 03, 2015 2:20 pm

mathjak107 wrote: correct but so is the conventionally invested retiree fine  , it was the same non event  for them as it was for the pp retiree ..
Yes, they both were non-events in the sense that a 4% WR is working fine for both.  The difference is that the low volatility (paired with reasonably high real returns) allows the PP to support a higher WR than the 60/40 portfolio over identical timeframes.  That's what I mean about volatility making a difference.  It's a big factor of what determines the SWR in the first place. 
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Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Nov 03, 2015 2:20 pm

kitces:

The 2000 retiree is already half way through the 30-year time horizon with similar wealth to a 1929, 1937, or 1966 retiree had at this point, and the 2008 retiree is even further ahead than any of those historical scenarios (and even ahead of the 2000 retiree, too!).

And in the case of a 2008 retiree, the withdrawal rate is already right back at the 4% initial withdrawal rate the retiree began with (after already doing 6 years' worth of retirement spending!).
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Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Nov 03, 2015 2:25 pm

Tyler wrote:
mathjak107 wrote: correct but so is the conventionally invested retiree fine  , it was the same non event  for them as it was for the pp retiree ..
Yes, they both were non-events in the sense that a 4% WR is working fine for both.  The difference is that the low volatility (paired with reasonably high real returns) allows the PP to support a higher WR than the 60/40 portfolio over identical timeframes.  That's what I mean about volatility making a difference.  It's a big factor of what determines the SWR in the first place.
i disagree , no way can you say the pp can support a higher withdrawal rate because if sequence risk and performance are less going forward the good years all portfolio's have end up  paying  for the bad years .

i doubt the pp can claim that 90% of the time frames since 1926  30 years later  the ending balance is more than you started  with and 67% more than double left over .

first off you can't compare because of the gold issue pre 1975 .

if we rule out the two worst time frames a 60/40 mix has a 6.50% safe withdrawal rate and money left over .
Last edited by mathjak107 on Tue Nov 03, 2015 2:31 pm, edited 1 time in total.
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Re: Why the PP is better in accumulation than you think

Post by dutchtraffic » Tue Nov 03, 2015 2:27 pm

mathjak107 wrote: until our markets aren't , yes , we have been special and we are still one of the best places to invest in the world today - at least for now .
Hahaha, you think Japan is some 3rd world country or something? Japan was an absolute powerhouse.

"Throughout the 1970s, Japan had the world's third largest gross national product (GNP)—just behind the United States and Soviet Union— and ranked first among major industrial nations in 1990 in per capita GNP"

"Deflation in Japan started in the early 1990s. On 19 March 2001, the Bank of Japan and the Japanese government tried to eliminate deflation in the economy by reducing interest rates (part of their 'quantitative easing' policy). Despite having interest rates down near zero for a long period of time, this strategy did not succeed."

Hmm, where have we seen this before..

But oh wait, americans are immune to everything because they are "special"..right? :D :D :D :D
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