Quiet board - time to buy?

[seajay]

I have introduced a few coworkers to balanced investing over the past year. (In addition to Bitcoin for speculation.)

A issue for me with bitcoin is that of being passed "dirty" coins - historic trail of having been used for illicit purposes or tax avoidance ...etc - resulting in the value being lost/frozen/seized. Since having become more mainstream there's been a tendency towards bitcoin reacting like 3x QQQ (TQQQ leveraged tech stock) which might be held in a tax efficient account and isn't likely to be frozen.

Rebalance to 8% TQQQ, 8% 3x gold, 84% in treasury bills once/year

Since 2016 (I don't know of a US 3x gold fund, so weighted UGL 2x gold to 12%)

https://www.portfoliovisualizer.com/bac ... lfnvMp278h

[dualstow]

… issue for me with bitcoin is that of being passed "dirty" coins - historic trail of having been used for illicit purposes or tax avoidance ...etc - resulting in the value being lost/frozen/seized.

I wonder if that has actually happened. So far, search results say that bitcoins are generally returned to the initial victims of the crime after they’re seized. Not too much info on unseized coins that make their way into the wide world.

[stpeter]

The GB is also allowed me to ease into this style of investing. It’s hard to wrap your head around 1/4 gold even though 1/5 is nearly the same.

The 25% cash can also feel weird. Imagine you had a portfolio of $100m. Would you really put $25m into T-bills? Seems doubtful - you'd prefer to invest those funds in more productive assets, while still keeping a smaller percentage around as "dry powder" in case you want to buy another Lamborghini. ;-) More prosaically, once you've set aside enough cash for, say, 5 or even 10 years of living expenses, why put more into cash?

[dualstow]

I feel like this applies to all portfolios. Once you have a ridiculous amount of money, perhaps some amounts should be specific minimum $(Euro) amounts and not necessarily %.

Some very wealthy people purportedly keep all stocks and can live off the dividend payments.
At that point I’d rather have a lot of gold, but the purpose would be transferring it to heirs.

[stpeter]

I feel like this applies to all portfolios. Once you have a ridiculous amount of money, perhaps some amounts should be specific minimum $(Euro) amounts and not necessarily %.

Some very wealthy people purportedly keep all stocks and can live off the dividend payments.
At that point I’d rather have a lot of gold, but the purpose would be transferring it to heirs.

Good points. But it doesn't seem that this forum is filled with the ultra-rich, so this might not be a constructive topic for discussion, eh?

[Smith1776]

I feel like some of the richest members may have left in recent years haha.

[dualstow]

I feel like this applies to all portfolios. Once you have a ridiculous amount of money, perhaps some amounts should be specific minimum $(Euro) amounts and not necessarily %.

Some very wealthy people purportedly keep all stocks and can live off the dividend payments.
At that point I’d rather have a lot of gold, but the purpose would be transferring it to heirs.

Good points. But it doesn't seem that this forum is filled with the ultra-rich, so this might not be a constructive topic for discussion, eh?

Agreed. I was just responding to your “imagine $100Mn” post. But I would like to think that Tom Cruise and Taylor Swift are anonymous pp’ers here. Personally, I think the Vinny account is Taylor Swift.

[ppnewbie]

The GB is also allowed me to ease into this style of investing. It’s hard to wrap your head around 1/4 gold even though 1/5 is nearly the same.

The 25% cash can also feel weird. Imagine you had a portfolio of $100m. Would you really put $25m into T-bills? Seems doubtful - you'd prefer to invest those funds in more productive assets, while still keeping a smaller percentage around as "dry powder" in case you want to buy another Lamborghini. ;-) More prosaically, once you've set aside enough cash for, say, 5 or even 10 years of living expenses, why put more into cash?

I guess the only counterpoint to having too much cash is that this is really about portfolio dynamics. It dampens the volatility of the entire portfolio. So if you want the HBPP / GB low ulcer index you would need the cash component, in the specified allocation range.

[stpeter]

I guess the only counterpoint to having too much cash is that this is really about portfolio dynamics. It dampens the volatility of the entire portfolio. So if you want the HBPP / GB low ulcer index you would need the cash component, in the specified allocation range.

With regard to my proposed "Golden Dragon" portfolio with 10% cash: if I recall correctly, its ulcer index came out very well on Tyler's portfolio visualizer tool (slightly higher than the Golden Butterfly, but not by much). However, I don't recall the specifics right now and I'll need to study the matter in more depth before getting serious about a switch.

More generally, here are two other considerations I've been pondering...

First, as Tyler explained in his posts at Portfolio Charts, the Golden Butterfly is designed to take advantage of the fact that periods of prosperity are much more common than periods of deflation / disinflation (when long-term bonds are supposed to shine) or tight-money recession (when cash is king). By allocating 25% to long-term bonds and cash, one might be over-insuring against infrequent scenarios.

Second, Harry Browne defined the Permanent Portfolio as the place to park the investable assets one can't afford to lose. Thus another way to think about variations on the PP (such as the Golden Butterfly and Golden Dragon) is that they park X% of total investable assets in the PP and Y% in a Variable Portfolio containing something else (for both GB and GD that "something else" is more equities). However, mentally it becomes hard to keep track of things that way (off the cuff, does GB = 80% PP and 20% VP containing SCV or whatever?). Furthermore, assigning such a portfolio a nice name like "Golden Butterfly" gives people something to hang their hat on, makes it easier to remember and visualize and discuss and compare, etc.

[mathjak107]

i can see a 50/20/20/10 for retirement

50% equities, 20% gold/bitcoin , maybe 16% gold 4% bitcoin , 20% split between vgsh and vtip and then 10% cash

[seajay]

The 25% cash can also feel weird. Imagine you had a portfolio of $100m. Would you really put $25m into T-bills? Seems doubtful - you'd prefer to invest those funds in more productive assets, while still keeping a smaller percentage around as "dry powder" in case you want to buy another Lamborghini. ;-) More prosaically, once you've set aside enough cash for, say, 5 or even 10 years of living expenses, why put more into cash?

Dollar bills never expire and are in hand, but lose purchase power each year, however if you have more than enough you may prefer in-hand assets, hard cash, physical gold, art, land/houses ... distributed across multiple currencies/citizenships/countries. Art, land, gold might broadly match inflation, 25% in hard cash loses perhaps 4%/year to inflation (1% of the total portfolio value), after 30 years your wealth in inflation adjusted terms is down to 75% and you still have more than enough. Yes you might instead have had 3 times more real instead, where that involved other third parties. If you have two land based homes in two different countries, a third mobile home such as a yacht or private jet then even the total sudden loss of a third of your wealth might make little/no difference to your lifestyle. Having more than enough and pushing for even more is like living a lifestyle of when you've had enough steak in a restaurant you order another three more - just because you can. You might do that initially but after a while decide to pass - say no thanks, give them to someone else, I've had more than enough.

[seajay]

i can see a 50/20/20/10 for retirement

50% equities, 20% gold/bitcoin , maybe 16% gold 4% bitcoin , 20% split between vgsh and vtip and then 10% cash

At times the domestic currency might relatively strengthen, assets (stocks/commodities) decline, such as was the case for Japan 2008 (global financial crisis) that amplifies the stocks/commodities declines.

A stock with global business costs/exposure/earnings may remain the same price in other countries/currencies, but rise or fall in domestic currency terms, correlate with gold. Counting stocks and gold as "foreign currency" cash as domestic currency, the PP takes the neutral stance, 50/50. Shifting to 70/30 (70% combined equities/gold/bitcoin to 30% cash/bonds) tilts that.

With a high cash weighting such as 80% (as per the 8/12/80 3x stock/2x gold/cash I outlined earlier) some of that cash might be held in foreign currency form (30% to reduce domestic cash down to 50% neutral weighting). It's more opaque to shift some global stock (currency) to domestic stock (currency) exposure, individual companies might opt to hedge or not FX costs/earnings in a dynamic manner. Those stocks that are pure domestic only are inclined to be relatively small, might not make up even a fractional percent of a stock index.

stock market < bond market < FX market. The rich primarily focus upon moving currency around, absent that effort/dynamics a reasonable choice is to 50/50.