PRPFX Comparisons to HB PP

Discussion of funds that implement the Permanent Portfolio strategy

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pershing83

PRPFX Comparisons to HB PP

Post by pershing83 » Fri Apr 15, 2011 9:45 am

I wonder if anyone has actually taken it upon himself to make a PP? And, if so, did he make 19% last year or 4.5% YTD? I think one should have better things to do than screw around trying to match up to PRPFX.

BTW, the WSJ, this AM, said LT treasuries are looking pretty good.
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PRPFX Discussion

Post by MediumTex » Fri Apr 15, 2011 10:17 am

pershing83 wrote: I wonder if anyone has actually taken it upon himself to make a PP? And, if so, did he make 19% last year or 4.5% YTD? I think one should have better things to do than screw around trying to match up to PRPFX.

BTW, the WSJ, this AM, said LT treasuries are looking pretty good.
Yes, and probably not.  PRPFX is riskier than the HB PP, and has benefited from its light LT bond exposure lately, just like it suffered for its lack of LT bond exposure in 2008.
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PRPFX Discussion

Post by dualstow » Fri Apr 15, 2011 10:23 am

pershing83 wrote: I wonder if anyone has actually taken it upon himself to make a PP? And, if so, did he make 19% last year or 4.5% YTD? I think one should have better things to do than screw around trying to match up to PRPFX.
Hah, read the forum and you will see that quite a lot of us have our own PP as opposed to PRPFX! Harry Browne himself advocated the DIY approach despite the fact that PRPFX was sponsoring his radio program.
As for performance, my pp is way too young to tell. There was no last year as this is the first. I do have 10K in PRPFX so that I can see how I'm doing against it, but that's in the future. I won't be "screwing around" with silver or swiss francs but I'm happy to own them as part of that 10K.
Future money will go into my own holdings, with far lower expenses than the mutual fund.
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PRPFX Discussion

Post by AdamA » Fri Apr 15, 2011 10:25 am

I'm a do-it-yourselfer, but considering PRPFX to earmark some money for my son as he grows up...
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PRPFX Discussion

Post by pershing83 » Fri Apr 15, 2011 10:38 am

The question is stil out there. Did anyone make 19% last year or 4.5% YTD.  That's a fair question.

0.82 is a pretty small price to pay. My money is where my mouth is, BTW. I own a very large amount of PRPFX and so does my family.
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PRPFX Discussion

Post by AdamA » Fri Apr 15, 2011 10:41 am

pershing83 wrote: The question is stil out there. Did anyone make 19% last year or 4.5% YTD.  That's a fair question.

0.82 is a pretty small price to pay. My money is where my mouth is, BTW. I own a very large amount of PRPFX and so does my family.
So you think because of this PRPFX is better than DIY, 'nuf said?
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Post by dualstow » Fri Apr 15, 2011 11:05 am

pershing83 wrote: The question is stil out there. Did anyone make 19% last year or 4.5% YTD.  That's a fair question.
Yes I did, but only in my variable portfolio. Then again, I am happy to move it into my pp (not prpfx) because you know what they say about past performance. Not sure why you're stuck on last year. If we were performance chaseers, I'm not sure that we would be interested in something as conservative as the permanent portfolio in the first place. Yours is an ironic question.
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PRPFX Discussion

Post by MediumTex » Fri Apr 15, 2011 11:10 am

pershing83 wrote: The question is stil out there. Did anyone make 19% last year or 4.5% YTD.  That's a fair question.

0.82 is a pretty small price to pay. My money is where my mouth is, BTW. I own a very large amount of PRPFX and so does my family.
As far as the exact returns for one year, I don't think that's especially relevant.  What's more important is whether you have an investment allocation that you are comfortable with and can stick with over time.

As HB himself said many times, PRPFX is a convenient way of utilizing the PP strategy, though its allocation differs a little from what HB prescribed.

One person chooses PRPFX for its simplicity, another chooses the traditional HB 25%x4 approach for its lower cost and lower volatility.  Both are usually going to be miles ahead of the rest of the investment world.

PRPFX has been doing great lately, and my kids' Coverdell accounts and my own holdings (about 10% of my total portfolio) have enjoyed the ride.
Last edited by MediumTex on Sat May 14, 2011 1:28 pm, edited 1 time in total.
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PRPFX Comparisons to HB PP

Post by pershing83 » Fri Apr 15, 2011 11:39 am

I'm not stuck on last year, I owned PRPFX for 6 years. It is reasonable to see if anyone out there has made better money with the DIY plan, so far silence. I don't see anything wrong with a DIY'er other than the trouble, but PRPFX is tried and true for last 10 yrs
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PRPFX Comparisons to HB PP

Post by MediumTex » Fri Apr 15, 2011 11:57 am

pershing83 wrote: I'm not stuck on last year, I owned PRPFX for 6 years. It is reasonable to see if anyone out there has made better money with the DIY plan, so far silence. I don't see anything wrong with a DIY'er other than the trouble, but PRPFX is tried and true for last 10 yrs
Aren't you presupposing that the goal of the traditional PP investor is to beat PRPFX?

I don't think that is a good assumption.

Over time, PRPFX's expense ratio will show up in its returns compared to the HB PP.  Also, in a deflationary scenario PRPFX is going to perform poorly relative to the PP.

But I'm not sure I'm following why it matters whether PRPFX does better than the HB PP over some prior period.  It sounds like you have been very pleased with your PRPFX investment, and I have been pleased with mine.  I have also been pleased with my HB PP allocation as well, and feel it is superior to PRPFX in that it provides better all-season protection at a lower cost, even if it may not beat PRPFX every year.

I also sense a bit of scorn in your posts for the person who follows the traditional HB PP approach.  I think this is misplaced.  The goal of an investment strategy is to match risk and return with one's temperament.  For many people, the PP is far too conservative; for others it may be too risky.  For some it it just right.  For those people PRPFX may not make any sense at all.

As far as the "DIY" PP approach being trouble, it's really no trouble at all.  It's actually incredibly easy.  Buy equal shares of VTI, TLT, IAU and SHV and check in on it once a year or so.  It might take 10 minutes to set up and five minutes to check on once a year.  That is far below my threshold for "trouble."  To me, trouble is having to keep up with Cuggino and make sure he hasn't lost his stock picking touch and wondering what would happen to PRPFX's tax efficiency if there was suddenly a wave of redemptions.

I encourage you to learn more about the basic Harry Browne permanent portfolio allocation (if you want to).  It will only deepen your understanding of why PRPFX has worked so well in recent years and it might bring into focus some of the blind spots in the PRPFX allocation strategy, chief among them its light LT bond exposure and potentially obsolete Swiss franc allocation.
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PRPFX Comparisons to HB PP

Post by dualstow » Fri Apr 15, 2011 11:59 am

This has nothing to do with the original thread, but it is a fair question. As one of the people who only started recently, I have no data for an answer. But I will add another reason for DIY: manager risk. I don't think Michael Cuggino has any major changes ahead, but if someone else takes over, he or she may have different ideas about what else they might like to add (or to underweight).  EDIT: i see MT beat me to it while I was typing.

That doesn't mean I think I can do better. It just means I'm sticking with Harry Browne's original plan, unless something causes me to change my mind one day.
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Post by pershing83 » Fri Apr 15, 2011 12:37 pm

Medium Tex detects "scorn" in my post. That is silly and does not deserve a reply. OTOH MT has posted a long lecture which I can do without, too.
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PRPFX Comparisons to HB PP

Post by MediumTex » Fri Apr 15, 2011 12:50 pm

pershing83 wrote: Medium Tex detects "scorn" in my post. That is silly and does not deserve a reply. OTOH MT has posted a long lecture which I can do without, too.
If I misunderstood you, try posting what you are trying to say in a different way.

We're all pretty friendly here.  It's not like that on all boards, so sometimes it takes a little getting used to.

My post wasn't intended as a lecture.
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Re: PRPFX Comparisons to HB PP

Post by Gumby » Fri Apr 15, 2011 1:45 pm

pershing83,

I started easing into my 4x25 Permanent Portfolio exactly 1 year ago — right after tax day. However, I didn't completely finish easing into my 4x25 Permanent Portfolio until early July 2010.

Below is the chart of my personal performance versus if I had gone all-in with PRPFX a year ago. If I had gone all-in with the 4x25 Permanent Portfolio, the results would be slightly different.

Image

It's important to understand that this chart will tell you nothing about future long term performance. PRPFX is a bit more volatile than a 4x25 Permanent Portfolio. When the world is falling apart, the 4x25 Permanent Portfolio does much better than PRPFX — due to the LT Bond allocation that MT referred to.

For instance, here is a chart that shows the difference between a 4x25 Permanent Portfolio vs. PRPFX during the 2008 financial crisis:

Image

As you can see, the 4x25 Permanent Portfolio is more stable — which suits me better. Some people prefer PRPFX, and there's absolutely nothing wrong with that — my son's Coverdell IRA is only in PRPFX.

Keep in mind that PRPFX was based on Harry Browne's first attempt at building the Permanent Portfolio (with John Chandler and Terry Coxon). A few years later Browne devised the 4x25 Permanent Portfolio as a simpler (and slightly more stable) approach that investors could do on their own with very little effort.

Hope that answers your question.
Last edited by Gumby on Fri Apr 15, 2011 2:11 pm, edited 1 time in total.
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Re: PRPFX Comparisons to HB PP

Post by moda0306 » Fri Apr 15, 2011 1:55 pm

Pershing,

I think if you take some time to see how people tend to interact here and contribute to discussions, you'll find that they're extremely informative and what may seem like lectures are just people trying to illustrate an entire thought, not necessarily assuming everyone's so stupid as to not already understand any of their post.  This is especially true of Medium Tex, who probably has offered more solid, useful insight on discussions than most of the rest of us put together.  His posts can be long and contain information you already know, but almost every one of them is a very complete thought.  He's not trying to be condescending, just thorough in his illustration of why he thinks the way he does.
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Re: PRPFX Comparisons to HB PP

Post by craigr » Fri Apr 15, 2011 2:50 pm

The main difference between the fund and DIY is the fund tends to overweight inflation linked assets. The last 10 years have been good for gold, silver and Swiss Francs so this has given it quite a tailwind. In the 1990s though the fund suffered due to less stock and bond exposure and poor gold and hard asset performance.

It just depends what you think works best for your situation. I'm a DIY because I want to limit costs and manage taxes for my situation. I also think it has a more balanced outlook. I think the DIY approach neither favors nor discounts any particular economic environment and will better handle a sudden sharp fall in gold prices for instance.
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Re: PRPFX Comparisons to HB PP

Post by pershing83 » Fri Apr 15, 2011 3:18 pm

Well, I come from perhaps  more rough and tumble message boards :).  Anyway, seriously, I'll consider my posts more carefully in the future. But, you guys must get 10%/year for 10 years; another  :)
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Re: PRPFX Comparisons to HB PP

Post by MediumTex » Fri Apr 15, 2011 3:20 pm

pershing83 wrote: Well, I come from perhaps  more rough and tumble message boards :).  Anyway, seriously, I'll consider my posts more carefully in the future. But, you guys must get 10%/year for 10 years; another  :)
Do hang around.

You'll like it.

Lots of good stuff here.
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Re: PRPFX Comparisons to HB PP

Post by moda0306 » Fri Apr 15, 2011 3:39 pm

Let's test how rough & tumble.... 

Pershing, you invest like you *%&^... slow and sloppy!  GO!



(jk, and MT please don't kick me off this board)
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Re: PRPFX Comparisons to HB PP

Post by MediumTex » Fri Apr 15, 2011 3:52 pm

Although PRPFX will probably have a very good day today, the HB PP may do even better.  Lately, that's been unusual.

It looks like the HB PP was up .72%. 

I'll be interested to see what PRPFX does.  The daily valuation of PRPFX often puzzles me--it's frequently not up or down as much as the underlying assets would suggest.
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Re: PRPFX Comparisons to HB PP

Post by AdamA » Fri Apr 15, 2011 4:00 pm

Pershing--

The thing about DIY is that it forces you really think about each asset class, which, for me at least, reinforced my macroeconomic understanding of what the PP is all about.

PRPFX is simple, and also a great way to invest, especially if you're not interested in learning about the bond market, or the different ways to own gold, total market vs. S&P vs. slice 'n dice strategies, etc...

For the sake of diversity, it's probably not a bad idea to use both (PRPFX and DIY) for some portion of one's holdings, as MT does. 

I hope you opt to stick around the board...there's a lot of really great info here, and it's also nice to have posters who prompt lively discussion.
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Re: PRPFX Comparisons to HB PP

Post by murphy_p_t » Fri Apr 15, 2011 4:55 pm

moda,

I 2nd your thought re: MT.


MT, please keep it up.


p
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Re: PRPFX Comparisons to HB PP

Post by Reub » Fri Apr 15, 2011 7:24 pm

PRPFX up 0.61% today. That settles it. DIY wins!
Let's just remember that PRPFX and DIY  are fraternal twins from the same parents (actually HB would be our father).
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Re: PRPFX Comparisons to HB PP

Post by clacy » Fri Apr 15, 2011 9:06 pm

I do a bit of both for my portion of investable money that is allocated to the PP.  I do see that PRPFX is slightly more risky.  I agree that the past decade has been great for PRPFX due to having higher allocations to hard assets and less LT bonds, which of course is great timing.  That of course doesn't mean squat starting on Monday however, because it could all reverse and the DIY will outperform. 
pershing83

Re: PRPFX Comparisons to HB PP

Post by pershing83 » Fri Apr 15, 2011 10:22 pm

As for the daily valuation of PRPFX I would guess there are some issues with calculating each asset and producing a number in a couple of hours. Maybe not...

Harry Brown lived near me and had run for POTUS on the Libertarian ticket, so I got interested in his investing ideas. By possibly 2005 I started looking at PRPFX as unique, at least IMO. I was selling a lot of stock/funds (advancing age) and had plenty of cash. The rest is history as they say. Looking at PRPFX by '06 and '07, started buying, and now have a lot. My argument for PRPFX is simple. It's done 10%/yr for 10 yrs and I woud think twice about improving that record. To beat Cuggino is a steep hill to climb. When I bought my first shares as I recall the fund had about $700-800 Mil, now it is 12 bil!

I would love to see us do 15-6% EOY. It's doable.
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