This Forum & Dissenting Opinions of the HBPP

General Discussion on the Permanent Portfolio Strategy

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MachineGhost
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Re: This Forum & Dissenting Opinions of the HBPP

Post by MachineGhost » Thu Dec 03, 2015 1:23 pm

sophie wrote: Yup, agree with PS.  Use the PP to build a base of money that will be the most dependable lifeline you can possibly have:  minimized risk of painful drawdowns, plenty of cash to draw on for emergencies, built-in protection against several Black Swan events, and built-in asset management.  This is more dependable than a job or any government benefits you can think of.  Perfect it is not, because there's no such thing, but it's pretty darn close.
I still have a problem with the PP having about a -25% maximum nominal drawdown.  Given the situation in the late 70's and early 80's that would have been incredibly painful and scary to experience, if you could manage to hold on.  The world felt like it was ending: gold was in a hyperbolic bubble, South America serially defaulted on its debt, our government was completely dysfunctional, Socialism/Communism was winning everywhere globally, union strikes were crippling entire industries, oil was at $185 a barrel in today's dollars, lots and lots and lots of social angst protests, etc.. You're right about everything else, though!
Last edited by MachineGhost on Thu Dec 03, 2015 1:25 pm, edited 1 time in total.
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Re: This Forum & Dissenting Opinions of the HBPP

Post by Pointedstick » Thu Dec 03, 2015 1:35 pm

Greg wrote:
Pointedstick wrote: And stashing away more cash would make me feel better about the prospect of affording health care without the cushy corporate cadillac health insurance I currently have for the family. That's my biggest worry, in fact. I'm concerned that I might take so little income in retirement that we'll get kicked onto Medicaid. I don't want that at all.
I'm confused, would you expect to stay on your employer's healthcare plan after you'd quit? Or would you go onto a new non-employee based healthcare plan? What's so bad about getting put onto Medicaid?
I like my current health insurance plan but it is heavily subsidized by my employer, so after I quit my job I won't have that option anymore. It'll be Obamacare or Medicaid, and and I'm not really big on Medicaid. I suspect the quality of care is lower and the wait is long. Besides, I don't really want to be relying on a welfare program. I'd rather pay my own way, but I know that's a pipe dream in this crazy US health care market we have. :(
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Re: This Forum & Dissenting Opinions of the HBPP

Post by Cortopassi » Thu Dec 03, 2015 1:39 pm

Pointedstick wrote:
Cortopassi wrote:Our highest expenditure per year is real estate taxes of about $9500.
Whoa!!!! That's crazy high! Are you in Chicago or CU? That's a rough position to find yourself in, for sure. Any plans to retire somewhere cheaper?
Northwest suburb of Chicago, Arlington Hts.  Excellent schools, high taxes...
But what do I know?
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Re: This Forum & Dissenting Opinions of the HBPP

Post by Cortopassi » Thu Dec 03, 2015 1:44 pm

sophie wrote:
And incidentally, who says the PP has "done nothing" for the past two years?  It was negative in 2013 and will be slightly negative this year, probably, but mine was up 9% in 2014.  It's definitely trailed my stock/bond retirement portfolios, but just wait for that next market crash.
Right now I am looking at a little worse than -3% for the PP this year.  Peak to Trough shows about -2.55%.  Does that fall into the slightly negative category?  Historically, for me, I guess I would say yes.

Stock market has now decided to take a dive with TLT getting killed.  Another one of those crappy days...
But what do I know?
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Re: This Forum & Dissenting Opinions of the HBPP

Post by buddtholomew » Thu Dec 03, 2015 1:48 pm

barrett wrote:
buddtholomew wrote: Looks like it's LTT's now. Sure makes the PP look obsolete doesn't it?

So much for it being a rising dollar issue. Dollar is down 1.5% and gold is up pennies.
Hey Budd... serious question

Do you think the PP is just a bad idea all the way around or is it in your opinion just not set up to deal well with whatever market conditions we have now? No agenda here. I am just curious. Thanks.
Honestly Barrett, I don't know what to think anymore. I used to believe that diversifying into gold, bonds and cash would make my portfolio more conservative. Now it appears the inclusion of gold and treasuries has made the portfolio more aggressive as compared to a more stock heavy allocation. How else do you explain gold down 11% YTD and treasuries down 5% (including today's 3% decline)? I just don't understand what I am holding anymore. All I do know is I continue to lose money.
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Re: This Forum & Dissenting Opinions of the HBPP

Post by barrett » Thu Dec 03, 2015 1:53 pm

MachineGhost wrote: I still have a problem with the PP having about a -25% maximum nominal drawdown.  Given the situation in the late 70's and early 80's that would have been incredibly painful and scary to experience, if you could manage to hold on.  The world felt like it was ending: gold was in a hyperbolic bubble, South America serially defaulted on its debt, our government was completely dysfunctional, Socialism/Communism was winning everywhere globally, union strikes were crippling entire industries, oil was at $185 a barrel in today's dollars, lots and lots and lots of social angst protests, etc.. You're right about everything else, though!
This is what I see on peaktotrough:

Max Drawdown 20.56% (1980-01-21 - 1980-03-27)

Add a few weeks of high inflation onto that and you're up around 22 - 23% Max DD. Yeah, that's a rough patch for sure but the PP recovered super quickly that year. An investor would have already been "made whole" again by early June. And gold certainly played a big part in that drama. At the end of January of that year the PP was off 9.7% in just five trading days. But what is one to do?
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Re: This Forum & Dissenting Opinions of the HBPP

Post by jafs » Thu Dec 03, 2015 2:02 pm

It seems to me that with any long-term investment strategy, following short-term trends too closely makes it harder to stay with your strategy.

If you understand the volatility of the portfolio you've chosen, and are ok with that, then under a wide range of "normal" conditions, you should feel ok just staying with it.

The harder question is when conditions stray outside of "normal" enough that you question whether or not the strategy is still the one you want, and aren't sure what to do instead.  And, how to decide whether the conditions at a given time are within that "normal" band or not.

And there are a lot of self-fulfilling prophecies at work too, like when everybody thinks bonds will go down, sells their bonds, and then...bonds go down.  Or when fears/expectations of inflation create inflation, or expectations of deflation create recessionary trends.
Last edited by jafs on Thu Dec 03, 2015 2:29 pm, edited 1 time in total.
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Re: This Forum & Dissenting Opinions of the HBPP

Post by MachineGhost » Thu Dec 03, 2015 2:31 pm

barrett wrote:
MachineGhost wrote: I still have a problem with the PP having about a -25% maximum nominal drawdown.  Given the situation in the late 70's and early 80's that would have been incredibly painful and scary to experience, if you could manage to hold on.  The world felt like it was ending: gold was in a hyperbolic bubble, South America serially defaulted on its debt, our government was completely dysfunctional, Socialism/Communism was winning everywhere globally, union strikes were crippling entire industries, oil was at $185 a barrel in today's dollars, lots and lots and lots of social angst protests, etc.. You're right about everything else, though!
This is what I see on peaktotrough:

Max Drawdown 20.56% (1980-01-21 - 1980-03-27)

Add a few weeks of high inflation onto that and you're up around 22 - 23% Max DD. Yeah, that's a rough patch for sure but the PP recovered super quickly that year. An investor would have already been "made whole" again by early June. And gold certainly played a big part in that drama. At the end of January of that year the PP was off 9.7% in just five trading days. But what is one to do?
Well if this is the best that can be done with an all weather portfolio -- and I certainly have been trying for three or four years to find something better, I guess we'll just have to live with it or deal with tactical.  I suppose its also small comfort to know you're in the Top 1% of investors during such an event.

Even the Browne Minimum Risk the MaxDD is around -10%.  That's pretty steep for basically what is just break-even on cash above inflation.

It is what it is.  There's no more rocks to turn over.

Sophie and PS hit the nail on the head.  My PP buttkicking has very little to do about asset allocation per se and everything to do with being able to stick with a ROBUST investment plan super long-term that I can pour income into without another thought.  The last thing I -- or anyone -- needs is to have the Mother of All Doubts halfway into what you thought was a "baked into the cake" investment plan.  That's even far more painful than choosing wrong at the outset and then immediately correcting as budd did.  Unlike subjective religion, you see the objective results if you choose wrong: you lose money (you likely cannot afford to lose).
Last edited by MachineGhost on Thu Dec 03, 2015 2:46 pm, edited 1 time in total.
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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: This Forum & Dissenting Opinions of the HBPP

Post by Tyler » Thu Dec 03, 2015 2:32 pm

Pointedstick wrote: I like my current health insurance plan but it is heavily subsidized by my employer, so after I quit my job I won't have that option anymore. It'll be Obamacare or Medicaid, and and I'm not really big on Medicaid. I suspect the quality of care is lower and the wait is long. Besides, I don't really want to be relying on a welfare program. I'd rather pay my own way, but I know that's a pipe dream in this crazy US health care market we have. :(
FWIW, between smart capital gains harvesting and IRA>Roth conversions, there are ways to stay above the MAGI threshold for Medicaid even with no earned income.
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Re: This Forum & Dissenting Opinions of the HBPP

Post by MachineGhost » Thu Dec 03, 2015 2:45 pm

Tyler wrote: FWIW, between smart capital gains harvesting and IRA>Roth conversions, there are ways to stay above the MAGI threshold for Medicaid even with no earned income.
You guys are probably far away from being eligible for Medicare, but being eligible for Medicaid is actually a bonus if you also qualify for Medicare.  You get to have access to the cadillac of all health insurance, the Dual Eligible plans.  It will be insurance where Medicare is primary payor and Medicaid secondary payor.  States offer many enhanced benefits via Medicaid that Medicare does not cover.  The benefits are all combined together in a single Dual Eligible Advantage Plan.  So below MAGI should be planned for at official retirement if you have such flexible control over your income.  I think it could actually be an interesting challenge!
Last edited by MachineGhost on Thu Dec 03, 2015 2:47 pm, edited 1 time in total.
"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: This Forum & Dissenting Opinions of the HBPP

Post by barrett » Thu Dec 03, 2015 2:45 pm

buddtholomew wrote:
barrett wrote:
buddtholomew wrote: Looks like it's LTT's now. Sure makes the PP look obsolete doesn't it?

So much for it being a rising dollar issue. Dollar is down 1.5% and gold is up pennies.
Hey Budd... serious question

Do you think the PP is just a bad idea all the way around or is it in your opinion just not set up to deal well with whatever market conditions we have now? No agenda here. I am just curious. Thanks.
Honestly Barrett, I don't know what to think anymore. I used to believe that diversifying into gold, bonds and cash would make my portfolio more conservative. Now it appears the inclusion of gold and treasuries has made the portfolio more aggressive as compared to a more stock heavy allocation. How else do you explain gold down 11% YTD and treasuries down 5% (including today's 3% decline)? I just don't understand what I am holding anymore. All I do know is I continue to lose money.
Well, my own opinion is that diversifying into those assets does make a portfolio less volatile. What I think might be happening with you (and believe me, I tend to be wired the same) is that you are looking at all of this through a microscope when the best thing is to probably step way back and think about how the next 40 or 50 years might play out. Lots of portfolios produce beautiful upward-sloping lines on a 40 to 50 year view, but in order to get that (and beat inflation), one has to go through lots of short-term ugliness.

Internet forums and having minute-by-minute updates are not likely to help much! Maybe we should all adjourn and come back in five years to compare notes.

Back to your last post for a second... If you look back at how the PP assets have performed historically, gold down 11% and LTTs down 5% in a year is not really unusual. There's just been nothing to really pick up the slack this year. Down years really stink when it's our money that is involved!

Edit: Also the PP gave us all that big head fake in January when both bonds and gold were way up. That's part of the current pain... that a 4X25 is well down from its earlier highs. My take is that as a whole the PP is probably just reverting to its mean performance. It got ahead of itself. That's less than ideal in the short term obviously, but ultimately these are just bonds, stocks, cash and some yellow stuff, none of which are capable of working magic. Which is why we work and save. Just thinking out loud hear. All my posts should be taken with a grain of salt.
Last edited by barrett on Thu Dec 03, 2015 2:57 pm, edited 1 time in total.
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Re: This Forum & Dissenting Opinions of the HBPP

Post by Pointedstick » Thu Dec 03, 2015 2:46 pm

MachineGhost wrote: Sophie and PS hit the nail on the head.  My PP buttkicking has very little to do about asset allocation per se and everything to do with being able to stick with a ROBUST investment plan super long-term that I can pour income into without another thought.
This is one of the reasons why I like Vanguard's platform so much. You can set up monthly transfers and auto-investments and then completely forget about the whole thing. There's something about a machine doing everything that seems to make it easier, at least for me. I can do 50% or 100% stocks there and not feel the least bit bad.
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