Let me guess, everything's great!

[ozzy]

If the above makes sense more or less, then we are really just talking about percentages and a lot of people tweak their PP percentages so that they hold more of one or two assets. The 25% bands are not intended to be a religion, right?

Well said Barrett.  I don’t believe the 25% bands are a religion either.  IMO nothing wrong with going heavier in equities and lower on cash and gold.  It really improves performance.  Everyone must choose the allocation they're comfortable with.

[dualstow]

Wasn't it nice when we had somebody on here who could explain, defend, and promote the PP passionately?

It was, but we shouldn't have to be coddled and reassured every day. I think Alan's post above makes a lot of sense.

[LC475]

https://www.youtube.com/watch?v=StTqXEQ2l-Y

Everything is Awesome!
Everything is cool when you're in the PP.
Everything is Awesome!
When you're living the dream!
Assets all do better when they stick toge-ether,
Side by side,
stocks and cash,
bonds and gold,
Forever!  Let's party forever!
Some do good,
Some do bad,
It depends.
They're all workin' in harmony!


Seriously, everything is awesome.  Perhaps it's just a matter of having a longer time horizon.  The reasons behind the PP are sound.  Looking around at our current situation, there's no reason it should stop working exactly as designed.  If Harry Browne were with us, he would be recommending the exact same thing he was always recommending: stocks, bond, gold and cash, 25% in each.  And in the next ten years, I can just bet that it will perform smoothly and beautifully, just as it did all the decades that he recommended it.

[dualstow]

https://www.youtube.com/watch?v=StTqXEQ2l-Y

...
Side by side,
stocks and cash,
bonds and gold,
...
.

Despite listening to the beginning of the song, when I read your lyrics all I could hear in my mind's ear was:
  Side by side on my piano key-board / oh lord / bonds and caaaash

[mortalpawn]

I think you are all way too skittish.  My PP is up about 7% this year, versus about 2.5% for the DOW and just over 7% for the S&P 500.  The PP has a fraction of the volatility of the other two as well.  I think that is very respectable.

Yes, the PP went down a bit in the last few weeks, but a 2% adjustment is hardly something to panic over.  In fact 5% drawdowns on the PP are pretty common (an average of about one a year over the last 40 years according to PeakToTrough).

Now if you don't mind I need to get back to stacking canned goods and reloading some .308 Winchester rounds...

[buddtholomew]

Yes, and that is the point.  Bad performance in the near future might be easier to accept had the last 2 or 3 years been a rewarding experience.

What do we have to look forward to, for the next year?  The next 2 years?

1 - Every time there is trouble in the Euro, there are apparently people exchanging Euros and other goods for dollars.  This may make it easier for me to buy plastic junk from Walmart, but it doesn't make me feel any better about my choice of investments, most of which do not rise with the plastic junk trade.

2 - What is going to happen if the Fed starts to raise rates?  I think we see it right now, since apparently people think it's going to happen in the 1st quarter of next year.  LTT and gold just dropped like rocks over little more than 2 weeks.  Gold has almost erased all its gains YTD.


I am waiting for good news, because all I have got right now is bad.  As I see it... half of the PP stands to gain only if there is a distinct trend in real rates: LTT for positive, gold for negative.  What if real rates just hover above zero?  Half the PP does nothing or declines, and the portfolio has to be carried by stocks.  Which it has been.


I don't have better ideas, myself.  I like the PP, in principle, but watching it tread water for 3 years has done little for my confidence in the strategy.  From now on I think new money is going to a Boglehead alternative.  Something with foreign stock exposure, which might ease my future worries about currency and interest rate risk.

We think along the same lines, which makes me wonder whether we are on the right track. Keep in mind that a strengthening dollar will have a negative impact on international investments, similar to what we have experienced with gold in the last few weeks.

Nevertheless, I sold a portion of GLD in taxable to TLH, invested some of the proceeds in VEU (All-World ex-US) and the balance in Cash on 9/15.

PP Allocation: 30% equities (90% SPY, 10% VEU), 20% GLD, 25% TLT and 25% Cash. I am comfortable with this allocation and expect to hold indefinitely. Surprising what a 5% difference (GLD to VEU) can achieve for your peace of mind.

[sophie]

PP Allocation: 30% equities (90% SPY, 10% VEU), 20% GLD, 25% TLT and 25% Cash. I am comfortable with this allocation and expect to hold indefinitely. Surprising what a 5% difference (GLD to VEU) can achieve for your peace of mind.

That's the important thing!  Interestingly, you can make the case that buying gold now is an excellent strategy, precisely because we are all too scared to do so.

Is the problem you are having the existence of some volatility with the PP, or the fact that everyone holding a near 100% stock portfolio has been getting double digit returns for the past few years and you're sitting there thinking about lost opportunities in 2013?

If the former, you're probably better off keeping a large hunk of your capital in cash, separate from the PP.

I think all of us have a hard time dealing with the lost opportunity/tracking error issue.  Unfortunately, human nature being what it is, if you can't stop yourself from looking at short term (< 3 year) results, you'll find it difficult to avoid chasing the recent good performing funds - which is a great recipe for buying high and then getting hit with losses when the fund reverts to the mean.  Alternatively, you can try to ignore your PP and instead put some money into a separate stock index fund and enjoy watching that instead.  For some people this would be a standard investment, but for you I suspect you should regard it as a VP.

Speaking of reverting to the mean, that's exactly what the PP is doing right now.  It enjoyed a big spike in returns in the 2010-2012 years mainly courtesy of the gold run-up.  I thought when I was buying into it in early 2012 (after holding PRPFX for a few years) that this was bound to happen, and sure enough...

[buddtholomew]

PP Allocation: 30% equities (90% SPY, 10% VEU), 20% GLD, 25% TLT and 25% Cash. I am comfortable with this allocation and expect to hold indefinitely. Surprising what a 5% difference (GLD to VEU) can achieve for your peace of mind.

That's the important thing!  Interestingly, you can make the case that buying gold now is an excellent strategy, precisely because we are all too scared to do so. I was not close to a re-balancing band, so the thought of purchasing additional gold would have been a market timing event. The thought of selling gold at a low crossed my mind, but the ability to TLH mitigated the concern. I still have a significant investment in the metal, but this slight reduction in favor of international exposure appeared a reasonable trade-off. I've never been comfortable with gold and was tired of the anxiety that accompanied holding this investment at 25%. Seemed like a good opportunity to make the adjustment and I have no regrets if gold rises from here. If it falls to 15% of PP allocation, I plan to rebalance back to 20%

Is the problem you are having the existence of some volatility with the PP, or the fact that everyone holding a near 100% stock portfolio has been getting double digit returns for the past few years and you're sitting there thinking about lost opportunities in 2013?
My tax-deferred accounts are invested 70/30 equities/fixed income, so gratefully I participated in the equity bull market since 2009.

If the former, you're probably better off keeping a large hunk of your capital in cash, separate from the PP.
Looking at taxable investments holistically, I am invested 25% equities, 15% GLD, 60% TLT and Cash - AVG duration of 5.6 years

I think all of us have a hard time dealing with the lost opportunity/tracking error issue.  Unfortunately, human nature being what it is, if you can't stop yourself from looking at short term (< 3 year) results, you'll find it difficult to avoid chasing the recent good performing funds - which is a great recipe for buying high and then getting hit with losses when the fund reverts to the mean.  Alternatively, you can try to ignore your PP and instead put some money into a separate stock index fund and enjoy watching that instead.  For some people this would be a standard investment, but for you I suspect you should regard it as a VP.
http://finance.yahoo.com/q/bc?s=VEU&t=5 ... &q=l&c=GLD

Speaking of reverting to the mean, that's exactly what the PP is doing right now.  It enjoyed a big spike in returns in the 2010-2012 years mainly courtesy of the gold run-up.  I thought when I was buying into it in early 2012 (after holding PRPFX for a few years) that this was bound to happen, and sure enough...

[moda0306]

Budd,

I've skipped most of the posts on this thread, so I hope I'm not being redundant, but after literally years of seeing your reaction to the PP, I REALLY think you need to tweak it.

If I were you, I'd find out what size draw down tends to really bother you.  Then do some excel work to find out what portion of your portfolio you would have to keep in cash to keep some of the worst draw downs since 2008 or so from having exceeded that amount.

Gold is usually the most volatile asset, so perhaps you should also reduce gold's share and see how this helps.

But your constant lamenting against draw-downs that we have actually SEEN out of the portfolio before leaves me wondering whether you should just stop using it as you do and accept the lower return.  It's totally legitimate to ask questions about draw-downs and potential exposure.  However, it is actually a little bit immature and irritating (sorry to be blunt) when every time the PP has a small weak streak that it has been SHOWN to have and either could have or HAS been discussed in debate, you fly off the handle think the world is falling apart and want us to explain what is going on.


I know this sounds condescending and probably a bit rude, but I honestly find your reactions on here to be extremely immature and knee-jerk and not reflecting a guy who has reviewed the portfolio's historical draw-downs at inter-year periods, especially during times where the dollar is strengthening and/or interest rates are being raised.  And we've had NUMEROUS conversations about some of those draw-downs.  So I'd politely ask you to review the worst years of the PP, and build your portfolio accordingly... ask any questions you like, but don't wait until the next .5% daily draw-down to come on hear screaming that the sky is falling and asking for us to talk you off a ledge.

Peace,

Moda

[buddtholomew]

Budd,

I've skipped most of the posts on this thread, so I hope I'm not being redundant, but after literally years of seeing your reaction to the PP, I REALLY think you need to tweak it.

If I were you, I'd find out what size draw down tends to really bother you.  Then do some excel work to find out what portion of your portfolio you would have to keep in cash to keep some of the worst draw downs since 2008 or so from having exceeded that amount.

Gold is usually the most volatile asset, so perhaps you should also reduce gold's share and see how this helps.

But your constant lamenting against draw-downs that we have actually SEEN out of the portfolio before leaves me wondering whether you should just stop using it as you do and accept the lower return.  It's totally legitimate to ask questions about draw-downs and potential exposure.  However, it is actually a little bit immature and irritating (sorry to be blunt) when every time the PP has a small weak streak that it has been SHOWN to have and either could have or HAS been discussed in debate, you fly off the handle think the world is falling apart and want us to explain what is going on.


I know this sounds condescending and probably a bit rude, but I honestly find your reactions on here to be extremely immature and knee-jerk and not reflecting a guy who has reviewed the portfolio's historical draw-downs at inter-year periods, especially during times where the dollar is strengthening and/or interest rates are being raised.  And we've had NUMEROUS conversations about some of those draw-downs.  So I'd politely ask you to review the worst years of the PP, and build your portfolio accordingly... ask any questions you like, but don't wait until the next .5% daily draw-down to come on hear screaming that the sky is falling and asking for us to talk you off a ledge.

Peace,

Moda

Noted.

[l82start]

http://gyroscopicinvesting.com/forum/ot ... ivil-6079/ just because Med Tex and Craig are not a visible presence does not mean the cat is away.. please lets keep it civil..

we have two threads getting attitude today, lets try to keep whatever is "in the air" off the forum

thanks

[buddtholomew]

http://gyroscopicinvesting.com/forum/ot ... ivil-6079/ just because Med Tex and Craig are not a visible presence does not mean the cat is away.. please lets keep it civil..

we have two threads getting attitude today, lets try to keep whatever is "in the air" off the forum

thanks

My apologies. This forum is too important to me to alienate respected members. Deleted inappropriate comments.

[dragoncar]

http://gyroscopicinvesting.com/forum/ot ... ivil-6079/ just because Med Tex and Craig are not a visible presence does not mean the cat is away.. please lets keep it civil..

we have two threads getting attitude today, lets try to keep whatever is "in the air" off the forum

thanks

My apologies. This forum is too important to me to alienate respected members. Deleted inappropriate comments.

I'd still like you to PM me your address

[buddtholomew]

http://gyroscopicinvesting.com/forum/ot ... ivil-6079/ just because Med Tex and Craig are not a visible presence does not mean the cat is away.. please lets keep it civil..

we have two threads getting attitude today, lets try to keep whatever is "in the air" off the forum

thanks

My apologies. This forum is too important to me to alienate respected members. Deleted inappropriate comments.

I'd still like you to PM me your address

1600 Pennsylvania Avenue, NW
Washington, DC 20500

I'll be waiting 

[dualstow]

Aw man, I didn't even get to find out what an ar_______y d___ was. 

[LC475]

PP Allocation: 30% equities (90% SPY, 10% VEU), 20% GLD, 25% TLT and 25% Cash. I am comfortable with this allocation and expect to hold indefinitely. Surprising what a 5% difference (GLD to VEU) can achieve for your peace of mind.

I think this plan sounds very good for you.  This is a great success!

You know, as strongly as Harry Browne felt about the PP, he never wanted to shoehorn or pressure someone into doing something that person was not comfortable with.  It was all about: what's right for you?  What will best help you achieve your goals and live your life?

What you've done will give you similar results to the safety and stability of a Permanent Portfolio, and do it at a much lower cost for you, personally, in terms of peace of mind.

So this is a fantastic plan.  Congratulations!

[I Shrugged]

Is 3% VEU significant?  Not in my way of thinking.  Anything less than 5%, and maybe 10%,  is just noise.  Not trying to be mean, just saying it plainly. 

[buddtholomew]

Is 3% VEU significant?  Not in my way of thinking.  Anything less than 5%, and maybe 10%,  is just noise.  Not trying to be mean, just saying it plainly. 

Yes, I agree. The plan is for 80/20 US/EU or 5% of equities. Retirement accounts are 50/50 US/EU.

This is done.

25/15/20/40 equities/gold/treasuries/cash, US/EU 80/20 with 5.6 years fixed income duration.

[buddtholomew]

PP Allocation: 30% equities (90% SPY, 10% VEU), 20% GLD, 25% TLT and 25% Cash. I am comfortable with this allocation and expect to hold indefinitely. Surprising what a 5% difference (GLD to VEU) can achieve for your peace of mind.

I think this plan sounds very good for you.  This is a great success!

You know, as strongly as Harry Browne felt about the PP, he never wanted to shoehorn or pressure someone into doing something that person was not comfortable with.  It was all about: what's right for you?  What will best help you achieve your goals and live your life?

What you've done will give you similar results to the safety and stability of a Permanent Portfolio, and do it at a much lower cost for you, personally, in terms of peace of mind.

So this is a fantastic plan.  Congratulations!

Thank you for your post LC. Much appreciated!

[buddtholomew]

Is 3% VEU significant?  Not in my way of thinking.  Anything less than 5%, and maybe 10%,  is just noise.  Not trying to be mean, just saying it plainly. 

This is done.

25/15/20/40 equities/gold/treasuries/cash, US/EU 80/20 with 5.6 years fixed income duration.

[dualstow]

Looks good

[buddtholomew]

Looks good

Thanks dualstow. I favor this composition and don't believe that these slight modifications violate the principles of the HBPP. I am still committed to equities, gold, LTT and Cash and 1. only sold enough GLD to offset gains in LTT's and 2. reach the maximum allotted annual deduction of 3K.

Purchasing US equities would have raised some market timing eyebrows, so I chose to invest in All World ex-US at 5% of equities (VEU). International markets have not faired as well as US equity investments over the last few years and I have wanted the additional diversification in taxable as well.

Anyway, that's my rationale for the changes. Hopefully I can commit to this allocation for the long-term, through thick and thin...

[6 Iron]

Have not been on here for a while, but was interested by this thread. I hope you find peace with your new portfolio, budd, but I suspect that will only come when you are at peace enough to not check it so frequently. I cannot tell you how good it feels to be on the every three month plan, and I may go to every six. There is an incredible amount of noise out there, and 10% rebalancing bands are huge.

[TripleB]

Is 3% VEU significant?  Not in my way of thinking.  Anything less than 5%, and maybe 10%,  is just noise.  Not trying to be mean, just saying it plainly. 

This is done.

25/15/20/40 equities/gold/treasuries/cash, US/EU 80/20 with 5.6 years fixed income duration.

Why not just put 20% of your portfolio into cash as your variable portfolio and 80% of your portfolio into a true PP? Then never mix the two.

[buddtholomew]

Is 3% VEU significant?  Not in my way of thinking.  Anything less than 5%, and maybe 10%,  is just noise.  Not trying to be mean, just saying it plainly. 

This is done.

25/15/20/40 equities/gold/treasuries/cash, US/EU 80/20 with 5.6 years fixed income duration.

Why not just put 20% of your portfolio into cash as your variable portfolio and 80% of your portfolio into a true PP? Then never mix the two.

I prefer to view the portfolio holistically for a true representation of my risk tolerance.

I tried the PP/VP allocation as you suggest, but was still too focused on the volatility without seeing the big picture.