Gyroscopic Investing

AdamA wrote:

buddtholomew wrote: I don't appreciate this comment even if it was made jokingly. From now on I will not share my personal emotions with other members of this board.

Budd--

I hope you don't stop posting. I think it's admirable that you post your honest feelings for us all to see.  I'm sure you're not the only one who has thoughts like this.  This thread has been around for months and is now 12 pages long, so obviously people are getting something from it.

I agree.  Budd, the emotions you're experiencing are raw and real.  I genuinely appreciate that you share them with us and I would really miss your perspective.

I'm also sure that you represent a great number of people that are having a hard time "just relaxing" in the choppy post-2008 investing world.  I myself went through most of 2009 feeling very agitated whenever the subject of investing crossed my mind.  For me, the only solution was to:

• Find a safe, solid investment strategy with a rock-solid theoretical underpinning and great empirical performance.  No wild rides, please.  And no amazing outperformance required.
• Let it do its thing while I lived my life.  I'm not going to be day-trading so why look at the portfolio if I do not plan to take any action on it that day?

Have you ever heard of the Stanford Marshmallow Experiment?  Four-year-olds were left alone in a room with a single marshmallow and told that if they went twenty minutes without eating the marshmallow they would get a second marshmallow.  For a four-year-old this kind of deferred gratification is a difficult thing to master!

What's instructive is how the successful kids behaved.  They didn't just stare at the marshmallow as this quickly depleted their tiny reserves of willpower.  The successful kids would look away, squeeze their eyes shut, fool with the chair, kick the table, whatever.  Anything but keep staring at that marshmallow!

So while it's easy to see infrequent checking as burying your head in the sand, try to think of it in terms of this marshmallow experiment.  You go do other things and live your best possible life while the Permanent Portfolio works on getting you that second marshmallow.

Here's a very amusing video of kids trying to make it through this marshmallow test.  This was basically me all through 2009!    http://www.youtube.com/watch?v=6EjJsPylEOY

I like it. "Don't stare at the marshmallow!"

This could be the PP motto.

Reub wrote: I like it. "Don't stare at the marshmallow!"

This could be the PP motto.

LOL. That's a great view on things.

The Mature Marshmallow Test..

http://www.youtube.com/watch?NR=1&featu ... QvBrEEYS20

I know what everyone is thinking when they read this portion of the post...Panic!


However; for some reason, I feel a sense of calm and I'm not sure why. Perhaps I have arrived at the realization that the PP is not some magical instrument that only goes up. The next challenge I face is to rebalance the portfolio to 4x25 as my cash portion is nearing the 35% upper threshold. Stocks, Treasuries and Gold are all still well within their tolerance bands (23%, 22% and 19% respectively).

Best-
Budd

buddtholomew wrote: I know what everyone is thinking when they read this portion of the post...Panic!


However; for some reason, I feel a sense of calm and I'm not sure why. Perhaps I have arrived at the realization that the PP is not some magical instrument that only goes up. The next challenge I face is to rebalance the portfolio to 4x25 as my cash portion is nearing the 35% upper threshold. Stocks, Treasuries and Gold are all still well within their tolerance bands (23%, 22% and 19% respectively).

Best-
Budd

It looks like today was another bad day for the PP.  It's okay.  It happens.  (http://youtu.be/okHIj_Kyl5M)

I hope that your rebalancing goes smoothly when it happens.

Rebalancing events triggered by cash reaching 35% are very rare.

I have always thought that the ideal mental state for an investor wouldn't be icy cool like Val Kilmer in "Top Gun", but something more along the lines of complete indifference, "like a clock in a thunderstorm."

Sometimes the PP goes up, sometimes it goes down.  Over time it tends to go up, normally by some positive figure in excess of inflation.  It arrives at this long term trend through unpredictable moves.

MediumTex wrote:

buddtholomew wrote: I know what everyone is thinking when they read this portion of the post...Panic!


However; for some reason, I feel a sense of calm and I'm not sure why. Perhaps I have arrived at the realization that the PP is not some magical instrument that only goes up. The next challenge I face is to rebalance the portfolio to 4x25 as my cash portion is nearing the 35% upper threshold. Stocks, Treasuries and Gold are all still well within their tolerance bands (23%, 22% and 19% respectively).

Best-
Budd

Rebalancing events triggered by cash reaching 35% are very rare.

I have been contributing to the Cash portion of the PP for several months now.

buddtholomew wrote:

MediumTex wrote:

buddtholomew wrote: I know what everyone is thinking when they read this portion of the post...Panic!


However; for some reason, I feel a sense of calm and I'm not sure why. Perhaps I have arrived at the realization that the PP is not some magical instrument that only goes up. The next challenge I face is to rebalance the portfolio to 4x25 as my cash portion is nearing the 35% upper threshold. Stocks, Treasuries and Gold are all still well within their tolerance bands (23%, 22% and 19% respectively).

Best-
Budd

Rebalancing events triggered by cash reaching 35% are very rare.

I have been contributing to the Cash portion of the PP for several months now.

First and foremost, do what makes you comfortable, but I think that now is a great time to rebalance.

MT...what's currently your favorite assett class (for VP purposes)?

murphy_p_t wrote: MT...what's currently your favorite assett class (for VP purposes)?

Definitely gold.

MediumTex wrote:

murphy_p_t wrote: MT...what's currently your favorite assett class (for VP purposes)?

Definitely gold.

Hmm, first time I've ever taken a rational, purposeful position was gold a few months ago. Mr. market has handed me a reminder about why I don't need a VP.

buddtholomew wrote: I know what everyone is thinking when they read this portion of the post...Panic!

However; for some reason, I feel a sense of calm and I'm not sure why.
...

Good on you, Budd!
Hang in there.

buddtholomew wrote: However; for some reason, I feel a sense of calm and I'm not sure why. Perhaps I have arrived at the realization that the PP is not some magical instrument that only goes up.

That's wonderful to hear.  Keep cultivating that sense of inner calm and I think you'll love what it does for your outlook and internal dialog.

Those moments of worry or even near-panic will likely still strike from time to time, at least for a while.  My advice is to just gently push them away.  It takes time, but eventually you'll find that their hold on you grows weaker and weaker.  It's very freeing.

MachineGhost wrote:

moda0306 wrote: Budd,

The PP dropped something like 15% in 2008, mid-year.  I would load up much more heavily on T-bills and start maxing out your I Bonds until a 15% dip in everything else doesn't bother you.

25%.  

Gold dipped 66% historically, so 25% of 66% is -16.5% which is pretty close to 1981 when the PP closed out the year at -12.5% or so.  Rising real rates are the PP's #1 enemy.  Real rates don't have to be positive or above 2%, just the upward direction alone is enough for the market to discount such a future.

I don't even look at the portfolio values in Quicken when I load it unless I absolutely have to, but the annoying temptation is like a naked woman.

Budd, you've got to practice the art of selective ignorance and compartmentalization to avoid emotional entanglements and cultivate a sense of serenity.  The PP is hedged all ways from one, but only in the long run.

MG,

Are you saying the PP was down 25% in 2008 at some point?  Could you please give a bit more detail on this?

Thanks

I loaded up on GTU @ 57.15 

MG,

Are you saying the PP was down 25% in 2008 at some point?  Could you please give a bit more detail on this?

Thanks
[/quote]

I've got a 14.62% max drawdown on 11/12/08, assuming you put on equal dollar weight positions on 12/31/07.

Date HB 4 asset
12/31/07 100000
1/2/08 100837.25
1/3/08 101027.57
1/4/08 100276.1
1/7/08 100274.61
1/8/08 100460.25
1/9/08 100676.4
1/10/08 101004.55
1/11/08 101145.11
1/14/08 101768.09
1/15/08 101022.62
1/16/08 100325.69
1/17/08 99997.7
1/18/08 99967.2
1/22/08 100325.57
1/23/08 100751.44
1/24/08 100964.41
1/25/08 101190.89
1/28/08 101995.27
1/29/08 101718.44
1/30/08 101635.62
1/31/08 102106.79
2/1/08 101888.76
2/4/08 101270.15
2/5/08 100423.05
2/6/08 100565.14
2/7/08 100464.87
2/8/08 101009.87
2/11/08 101356.14
2/12/08 100820.18
2/13/08 100860.05
2/14/08 100255.22
2/15/08 100251.67
2/19/08 100794.07
2/20/08 101544.74
2/21/08 101618.27
2/22/08 101597.63
2/25/08 101495.93
2/26/08 101985.98
2/27/08 102324.79
2/28/08 102950.14
2/29/08 102960.83
3/3/08 102993.73
3/4/08 102046.16
3/5/08 102630.68
3/6/08 101994.68
3/7/08 101649.26
3/10/08 101637.67
3/11/08 102102.78
3/12/08 102759.93
3/13/08 103097.15
3/14/08 103183.67
3/17/08 103322.13
3/18/08 103229.78
3/19/08 102024.55
3/20/08 101572.75
3/24/08 101508.16
3/25/08 102464.46
3/26/08 102464.3
3/27/08 102124.34
3/28/08 101702.01
3/31/08 101467.99
4/1/08 100545.87
4/2/08 101324.7
4/3/08 101436.04
4/4/08 101972.76
4/7/08 102080.86
4/8/08 101715.23
4/9/08 102404.59
4/10/08 102269.63
4/11/08 101864.02
4/14/08 101562.82
4/15/08 101487.96
4/16/08 102241.36
4/17/08 101967.16
4/18/08 101666.04
4/21/08 101578.77
4/22/08 101480.94
4/23/08 101151.9
4/24/08 100394.68
4/25/08 100451.19
4/28/08 100670.9
4/29/08 100088.31
4/30/08 100473.71
5/1/08 100042.76
5/2/08 99941.86
5/5/08 100356.9
5/6/08 100509.06
5/7/08 100056.54
5/8/08 100681.31
5/9/08 100822.8
5/12/08 100853.28
5/13/08 100080.82
5/14/08 100092.21
5/15/08 101140.76
5/16/08 101724.12
5/19/08 101910.02
5/20/08 102331.51
5/21/08 102220.42
5/22/08 101640.49
5/23/08 101525.44
5/27/08 100971.68
5/28/08 100783.88
5/29/08 99907.73
5/30/08 100434.99
6/2/08 100382.85
6/3/08 100137.92
6/4/08 99883.81
6/5/08 100111.23
6/6/08 100511.89
6/9/08 100078.3
6/10/08 99001.88
6/11/08 99077.14
6/12/08 98350.95
6/13/08 98743.01
6/16/08 99160.95
6/17/08 99161.54
6/18/08 99527.83
6/19/08 99447.7
6/20/08 99413.52
6/23/08 98804.2
6/24/08 99013.4
6/25/08 99190.48
6/26/08 99728.19
6/27/08 100258.12
6/30/08 100212.84
7/1/08 100633.23
7/2/08 100462.07
7/3/08 100093.27
7/7/08 99758.37
7/8/08 100212.03
7/9/08 100111.14
7/10/08 100828.41
7/11/08 100719.58
7/14/08 101012.17
7/15/08 100844.98
7/16/08 100328.05
7/17/08 100323.4
7/18/08 100292.14
7/21/08 100746.38
7/22/08 100270.57
7/23/08 99562.47
7/24/08 99576.5
7/25/08 99471.93
7/28/08 99486.9
7/29/08 99478.27
7/30/08 99480.12
7/31/08 99691.87
8/1/08 99499.64
8/4/08 98821.71
8/5/08 98559.75
8/6/08 98659.88
8/7/08 98628.2
8/8/08 98640.22
8/11/08 97592.91
8/12/08 97434.77
8/13/08 97608.12
8/14/08 97225.84
8/15/08 97072.06
8/18/08 97215.07
8/19/08 97393.41
8/20/08 97465.69
8/21/08 98136.36
8/22/08 98017.09
8/25/08 97790.51
8/26/08 97967.32
8/27/08 98214.66
8/28/08 98818.92
8/29/08 98275.52
9/2/08 97524.67
9/3/08 97507.26
9/4/08 96892.34
9/5/08 97176.89
9/8/08 97616.25
9/9/08 96427.02
9/10/08 95724.66
9/11/08 95658.72
9/12/08 96289.43
9/15/08 96904.93
9/16/08 96890.71
9/17/08 98822.47
9/18/08 98223.88
9/19/08 99221.94
9/22/08 99446.34
9/23/08 98744.73
9/24/08 98404.28
9/25/08 98601.76
9/26/08 98826.71
9/29/08 99208.01
9/30/08 97626.21
10/1/08 98199.6
10/2/08 96444.94
10/3/08 96528.46
10/6/08 96906.84
10/7/08 96608.81
10/8/08 96432.13
10/9/08 95301.51
10/10/08 92669.98
10/13/08 93837.05
10/14/08 93591.17
10/15/08 92637.33
10/16/08 91993.13
10/17/08 91050.73
10/20/08 92461.97
10/21/08 91384.54
10/22/08 89709.97
10/23/08 89764.42
10/24/08 89214.55
10/27/08 88670.63
10/28/08 90274.13
10/29/08 90062.12
10/30/08 89997.12
10/31/08 89626.11
11/3/08 89614.06
11/4/08 92011.97
11/5/08 90691.7
11/6/08 89526.43
11/7/08 89801.06
11/10/08 90156
11/11/08 89423.81
11/12/08 88211.87
11/13/08 89149.24
11/14/08 89325.24
11/17/08 88894.41
11/18/08 89351.47
11/19/08 89090.95
11/20/08 89158.27
11/21/08 91599.04
11/24/08 93114.36
11/25/08 94113.48
11/26/08 94938.14
11/28/08 95515.78
12/1/08 92834.67
12/2/08 94209.78
12/3/08 94668.98
12/4/08 94240.38
12/5/08 94334.13
12/8/08 95679.73
12/9/08 95821.01
12/10/08 97047.35
12/11/08 96724.61
12/12/08 97024.45
12/15/08 97468.58
12/16/08 99939.32
12/17/08 100711.45
12/18/08 100378.23
12/19/08 99988.09
12/22/08 99638.49
12/23/08 99096.8
12/24/08 99391.24
12/26/08 100410.45
12/29/08 100469.32
12/30/08 101250.41
12/31/08 101201.21

moda0306 wrote: Are you saying the PP was down 25% in 2008 at some point?  Could you please give a bit more detail on this?

Lately, I've been confusing nominal and real in memory.  For instance, 1981 closed out at -5% nominal but -12.5% real.  I'm too lazy to go back and check for 2008, but I am pretty sure the portfolio dipped that much intra-year in nominal terms.  A good reason not to check except once a year and never in the fall.

200th post and couldn't resist 

buddtholomew wrote: 200th post and couldn't resist 

You just thought you were done.

MediumTex wrote:

buddtholomew wrote: 200th post and couldn't resist 

You just thought you were done.

Now that's funny...I was underdone back then...

HB PP up .60% today.

Like a clock in a thunderstorm.

MediumTex wrote: HB PP up .60% today.

Like a clock in a thunderstorm.

Out of curiosity, how are you tracking this?  I assume it's not the performance of your particular instance of the PP?

MikeK wrote:

MediumTex wrote: HB PP up .60% today.

Like a clock in a thunderstorm.

Out of curiosity, how are you tracking this?  I assume it's not the performance of your particular instance of the PP?

I keep a Smart Money portfolio of roughly 25% x 4 in GLD, SHY, TLT and VTI.  Right now, though, TLT has grown to about 30% of the portfolio, so I should probably reset it.

I just use Yahoo's "recent quotes" feature.  I keep IAU, TLT, and VOO in there.  To get the daily change in an idealized PP, add the three numbers and divide by four.

HB PP up .95% today.

We should change the name of this thread from "I'm Done!" to "Gettin' It Done!"