Re: Staying the course with LTTs
Posted: Thu Dec 16, 2021 7:00 am
Permanent Portfolio Forum
https://gyroscopicinvesting.com/forum/
https://gyroscopicinvesting.com/forum/viewtopic.php?f=3&t=12350
My parent generation were very adverse stocks. Cash deposits, maybe treasury bonds type generation. When gold was money, exchangeable at a fixed rate, it made more sense to hold money deposited and earning interest that bought back more ounces of gold at year end. Was like the state or bank paying you for it to securely store your gold, and where broadly there was 0% inflation but with clusters of volatility (inflation and deflation in around equal measure) at times.vincent_c wrote: ↑Thu Dec 02, 2021 10:30 amThere are probably certain things that you can say that for sure makes one model better than another when trying to come up with an educated guess about the value of something. At some point you get diminishing returns and errors that make any modelling that educated guess but if you're modelling various assets and those errors cancel each other out in the long term (which we know for example if you own part of a business that makes a profit in nominal terms then you should receive a positive cash flow in nominal terms), I think that's as close as you can get.
So in my opinion the PP is a good enough proxy for this allocation that we think represents fair value ownership in the underlying assets in the long term and so it can be used as a benchmark if you wished and so any under or out-performance of a manager can be measured against a benchmark and only if that alpha was created deliberately.
Just saying stocks had better return vs the PP as a whole doesn't mean it outperformed the PP. An outperformance to me ought to only be used to refer to someone's action that they deliberately took that goes against the benchmark they are measuring themselves. Is it rational to choose any other benchmark other than the PP or similar enough allocations?
Some on here would prefer to take the best returning asset class and measure the PP's return against that and say that those of us who use the PP have underperformed. My opinion is that using the PP as a benchmark is closer to an objective measure, what do you guys think?
If I remember correctly, when Harry Browne created the pp, he was diversifying out of almost all gold. Whether or not that was the case, I don’t doubt that a lot of his readers were very stock-averse, like your parents’ generation. Probably a lot of gold bugs.
I recall much the same Dualstow, a means to diversify heavy amounts of gold after large/fast gains into alternatives such as stocks and bonds in order to reduce risk.dualstow wrote: ↑Fri Dec 31, 2021 9:59 amIf I remember correctly, when Harry Browne created the pp, he was diversifying out of almost all gold. Whether or not that was the case, I don’t doubt that a lot of his readers were very stock-averse, like your parents’ generation. Probably a lot of gold bugs.
In other countries the likes of healthcare, pensions ..etc. used to be more collectively funded. National Health Service in the UK for instance. When so the inclinations are that once you've bought/own your own home and have general expenses covered by pension income, and health issues costs collectively covered, there is less need/desire to hold anything other than safe cash deposit like accounts for surplus capital accumulated after many years of working/saving. As a alternative to such cash deposits the PP can be a good choice. More like Ben Graham's advise of no less than 25% stock, alongside the rest being in a combination of treasury bonds and gold. Applying a Larry Portfolio small cap value tilt in that regard is reasonable for the stock holdings IMO.Berkshire Hathaway Chairman letter 1979 ...
One friendly but sharp-eyed commentator on Berkshire has
pointed out that our book value at the end of 1964 would have
bought about one-half ounce of gold and, fifteen years later,
after we have plowed back all earnings along with much blood,
sweat and tears, the book value produced will buy about the same
half ounce. A similar comparison could be drawn with Middle
Eastern oil. The rub has been that government has been
exceptionally able in printing money and creating promises, but
is unable to print gold or create oil.
In one of Harry's 2004/5 radio shows he said something like ...mathjak107 wrote: ↑Fri Dec 03, 2021 3:30 pmbond investors will want to be compensated when this inflation stays and is not just a flash in the pan …whether the fed can keep bond investors at bay with short term hikes remains to be seen.
Looking back over history when long dated treasuries were that winner and there are instances of where short end yields were low, and lower than inflation (negative real yields). Yes long dated lost for a while, but then rebounded to become that 'winning' asset. The sequence of returns worked out well.Well there's a interesting thing about investments that people rarely notice during a Bull, Bear, whatever market and that is the investments that are winning have a greater impact upon your portfolio than those that are losing. When a investment is in a Bear market it may do down 25, 35 maybe even 40 or maybe even 50% in some rare occasions, but when a investment is in a Bull market it doesn't go up 25, 35 or 40% but goes up 100% or 200% sometimes 300 or 400%, far far more than some other investment is losing, and as a result any combination of them tends to be driven by the investment that is winning and has a bigger impact on the outcome.
Make that 143.04 at the moment …phew ..awful slide with no bottom.mathjak107 wrote: ↑Thu Dec 16, 2021 7:00 am148.32 in this morning’s premarket..169 would be a great range to have been in
You don't know how LTT's might work out over the next decade+, could dive, have more added through rebalancing from other winning assets, and then be the winning asset, where the win is greater than the loss. The PP is a collective machine, throwing out one cog breaks that machine.foglifter wrote: ↑Sat Oct 30, 2021 6:42 pmOver the last couple of years this forum has seen lots of discussions about the current environment of historically low rates, unprecedented money printing and growing inflation and how it affects their attitude towards long-term Treasury bonds as part of PP. Some people stay the course and keep buying LTTs, while others tune their bonds bucket by adding intermediate and short-term bonds/TIPS/cash or even drop Treasurys altogether. One of the key concerns is that the 40-years old bond bull market ended and long Treasurys no longer have the capability to play their unique role in the portfolio as well as Harry Browne originally envisioned.
I want to stay the course, but I'm confused and alarmed after reading all the numerous posts on the topic. I don't want to make any changes to my bond bucket, but at the same time I don't want to be oblivious to the risks. In order to understand the situation and make an informed decision so I can stop worrying about Treasurys in my portfolio I would like to ask all the smart folks who frequent this forum: what are your thoughts on LTTs? Are you staying the course? Are you tweaking your bonds bucket?
Usual disclaimer: I'm not going to treat your responses as a financial advice, I simply want to gauge the collective opinion about LTTs as part of PP.
Gbtc is down close to 25% over the past year.