Why the PP is better in accumulation than you think

General Discussion on the Permanent Portfolio Strategy

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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 2:29 pm

japans central bank was clueless and 3x made tragic flaws that threw the country in to a deflationary spiral it can't break  in 30 years .

while we are not invincible e are not japan .
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 2:31 pm

So did the FED.
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Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Nov 03, 2015 2:35 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 .

the worst case scenario's the 4% safe withdrawal rate is based on already expects steep drops .  that is why it is called a safe withdrawal rate .  all it cares about is the 15 year average is at least a 2% real return .


https://www.kitces.com/blog/how-has-the ... al-crisis/
Here's the problem.  The duration is out of your control unless you use downside risk management (whether that be trend following or adjusting portfolio duration).  Are you 100% confident the government will everywhere and always always prop up the markets AND the public will not lose confidence in their actions being positive, as is now occuring in China and Japan?

BTW, when I judge what is risk-reward optimal in terms of drawdowns, I take into consideration BOTH the magnitude AND the duration.  1987 was deep but a blip and it will have a lower risk score than something like 2007-2009.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Nov 03, 2015 2:37 pm

we are never sure of much when it come to investing , but one thing seems pretty sure and that is out of all the timing systems out there including the failed market timing graveyard  i don't know of any that passed any academic study as far as working long enouh to be of use  .
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Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Nov 03, 2015 2:39 pm

mathjak107 wrote: 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!).
Pretty much a solid argument there for using downside risk management.  2008 was the exception to the rule due to QEternity.  Betting on exceptions to repeat is foolish.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

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

Post by mathjak107 » Tue Nov 03, 2015 2:40 pm

betting this time is different has been even more foolish and costly .
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Re: Why the PP is better in accumulation than you think

Post by Tyler » Tue Nov 03, 2015 2:41 pm

mathjak107 wrote: 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 gol issue pre 1975 .
Well I've provided tools to compare both portfolios since 1972. The relative SWR performance of the PP vs the 60/40 over the same timeframe is quite clear, with the PP supporting a significantly higher WR.  The absolute SWR throughout all of history is certainly up for debate, and the longer back you look the lower it will be.  I see no evidence, however, that if you look back to 1926 (and if the gold standard laws were the same then) the PP will look significantly worse while the 60/40 will not (the 60/40 SWR since 1972 is only 0.3% higher than the one since 1870).  So I believe one can make an educated decision on the relative merits with the data provided, and conservatively plan to reduce the absolute WR to account for longer timeframes.  You may disagree, and prefer to only invest in portfolios with data going back to 1926.  Either approach is fine, IMHO.  In the end, we all have to be comfortable with our plan. 

For the record, I think the 60/40 portfolio is a fine choice.  I just find the myopic focus on the S&P500 and total bond market to be pretty darn boring and shortsighted.  The investing world is a lot more interesting than that, and other portfolios may have different results.  Including your own Mathjak portfolio!
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Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Nov 03, 2015 2:42 pm

as long as we are making up what our perception of us gold prices would be make sure you use 35 bucks an ounce too , it will really shine .
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Re: Why the PP is better in accumulation than you think

Post by MachineGhost » Tue Nov 03, 2015 2:44 pm

mathjak107 wrote: we are never sure of much when it come to investing , but one thing seems pretty sure and that is out of all the timing systems out there including the failed market timing graveyard  i don't know of any that passed any academic study as far as working long enouh to be of use  .
I'll post them for you when I come across them again.  But there's many other downside risk management approaches that work to beat buy and hold besides just trend following.  There's trailing stops, there's rebalancing bands, there's modifying portfolio duration, there's constant proportion portfolio insurance, there's dollar cost averaging, there's the reverse glide path, etc.  Not all of these have formal academic evidence even though they work empirically.  Waiting for academics to catch up to the real world is how a lot of money is left on the table.  Academics are 1) not investors and 2) not traders.
Last edited by MachineGhost on Tue Nov 03, 2015 2:45 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 2:52 pm

the proof will be in the pudding as they say ,. 
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Re: Why the PP is better in accumulation than you think

Post by ochotona » Tue Nov 03, 2015 2:57 pm

mathjak107 wrote: the proof will be in the pudding as they say ,.
The proof will be in the backtesting? But I though you said that backtesting was...
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Re: Why the PP is better in accumulation than you think

Post by mathjak107 » Tue Nov 03, 2015 3:01 pm

nope , the proof will be going forward  and how "you " do . afterall that is all that counts .
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