LTT & HARRY BROWNE: Doug Casey Opines

[mathjak107]

i always felt rising rates as a trend were the pp's kryptonite... we have not had that in 40 plus years

[dualstow]

...
The PP itself is an artifact of particular times, interest rates, market conditions and limited investment options that no longer exist.

I take it you mean the limits no longer exist, i.e. there are many more options now.

[Kbg]

I know this is just semantics/word parsing but I think a relatively important point.

There is nothing to suggest the PP has lost it's mojo and there is nothing to suggest the LTT component is not acting exactly as would be expected. It has stood and still is standing the test of time. If i-rates go up, LTTs are going to lose value. That's a feature of the PP not a bug. The expectation is cash and gold will compensate and stock may or may not compensate depending on correlation going forward.

So really what we are discussing is departing from the PP to something else that may be inspired by the PP but ISN'T the PP. You are then making an active bet that you can call interest rates correctly. If they go down or if they stay where they are at in both cases tossing LTTs will have been a performance mistake.

[Kevin K.]

...
The PP itself is an artifact of particular times, interest rates, market conditions and limited investment options that no longer exist.

I take it you mean the limits no longer exist, i.e. there are many more options now.

Yeah, that's pretty much what I meant, but more specifically I'm referring to Doug Casey's statement that Browne's recommendation of LTT's was a product of what they were yielding during his time as an investor. The dominance of "paper" gold vs. physical, Chinese government bonds paying double the U.S. LTT rate, the rise of cryptocurrencies are other relatively recent developments I'd have loved to have heard Mr. Browne's take on.

[Kevin K.]

I know this is just semantics/word parsing but I think a relatively important point.

There is nothing to suggest the PP has lost it's mojo and there is nothing to suggest the LTT component is not acting exactly as would be expected. It has stood and still is standing the test of time. If i-rates go up, LTTs are going to lose value. That's a feature of the PP not a bug. The expectation is cash and gold will compensate and stock may or may not compensate depending on correlation going forward.

So really what we are discussing is departing from the PP to something else that may be inspired by the PP but ISN'T the PP. You are then making an active bet that you can call interest rates correctly. If they go down or if they stay where they are at in both cases tossing LTTs will have been a performance mistake.

No disagreement from me about LTT's behaving as expected but as has been pointed out by everyone from Ray Dalio to Doug Casey and any number of others they don't offer much deflation protection now unless rates go negative.

There's a difference between "tossing" LTT's and saying they have to be 25% of one's holdings or one has broken the PP (not that I'm accusing you of saying that, but some here do view the 4 x 25% allocation as somewhat of a religion). I for one am not going to say that someone who tilts the allocation towards prosperity as the Golden Butterfly does, or who reduces the LTT's to 10 or 15% for the short term while holding more T-bills, or who diversifies the equities beyond TSM, is somehow guilty of breaking the PP.

[Kbg]

Well diverting from the classic PP is heretical by definition. LOL.

I've never done the PP in it's classic form, but I do think it is exceedingly well thought out and simplistically elegant. You don't see that much in a popularized portfolio.

As I mea culpa'd up front, I'm word parsing. However, I do think once you completely ditch an asset class of the four for something else the conversation should go to the VP section of the board. :-)

[mathjak107]

I know this is just semantics/word parsing but I think a relatively important point.

There is nothing to suggest the PP has lost it's mojo and there is nothing to suggest the LTT component is not acting exactly as would be expected. It has stood and still is standing the test of time. If i-rates go up, LTTs are going to lose value. That's a feature of the PP not a bug. The expectation is cash and gold will compensate and stock may or may not compensate depending on correlation going forward.

So really what we are discussing is departing from the PP to something else that may be inspired by the PP but ISN'T the PP. You are then making an active bet that you can call interest rates correctly. If they go down or if they stay where they are at in both cases tossing LTTs will have been a performance mistake.

Well rates on the 10 year have gone up 100% from the March lows and the 30 year is up substantially too.....short term rates have not moved up .....gold is lower as well ... so only stocks ran with the ball ...

The point is we can’t assume a rise in bond rates effects short term rates too ....

[Kriegsspiel]

Good bump. I saw that he recently talked with John Robb (EDIT: here), who used to write the excellent Global Guerrillas blog. It was because of GG that I discovered two of the best fiction authors I've read, John Twelve Hawks and Daniel Suarez. Their books are even more topical today than they were when I read them.

Suarez
Daemon
Freedom
Kill Decision (stand alone)

JTH
Traveler
The Dark River
The Golden City
Spark (stand alone)

[dualstow]

.

Suarez' Daemon was a lot of fun to read.

[Kriegsspiel]

Did you read Freedom?

[dualstow]

Did you read Freedom?

I haven't, nope.

[Kriegsspiel]

Well... if you liked Daemon, you should!

[dualstow]

No disagreement from me about LTT's behaving as expected but as has been pointed out by everyone from Ray Dalio to Doug Casey and any number of others they don't offer much deflation protection now unless rates go negative.

There's a difference between "tossing" LTT's and saying they have to be 25% of one's holdings or one has broken the PP (not that I'm accusing you of saying that, but some here do view the 4 x 25% allocation as somewhat of a religion). I for one am not going to say that someone who tilts the allocation towards prosperity as the Golden Butterfly does, or who reduces the LTT's to 10 or 15% for the short term while holding more T-bills, or who diversifies the equities beyond TSM, is somehow guilty of breaking the PP.

At some point, if you deviate far enough and long enough beyond the reblancing bands, ie not 20% but 12% or 35% in an asset, you have broken the PP. But so what? What does that mean? If you’ve made a conscious decision based on careful calculations and thoughtul strategizing, you may have a perfectly good portfolio.

For me, it just means that if things go sour you can’t turn around and say that the pp doesn’t work. Is that fair? It’s not about religion (blind dogma) or maintaining the pp name.