Gyroscopic Investing

Coffee wrote: Really? 

Is your investment strategy: Buy high, sell low?

As it is for most, in exactly this manner. It's ironic that when our brains are telling us to bail out and run for the hills, it's probably the best time to double down.

I can relate to the OP. I started in early May, and am currently down 6% as of this morning. Right now, I'm trying to just keep a level head and stick with the plan, which involves doing nothing at the moment. I may buy more gold if prices continue to fall. We'll see.

It appears as though I was a little premature in panicking, but I certainly sense some anxiety from other members of this board. I knew you were out there as I am not the only one who questions themselves. One member has capitulated publically and how many privately we will never know. Those members whi can tune out the noise are a rare breed and in the minority.

I will not sell, but rather stick to the rebalancing strategy. I have obviously checked my portfolio, so that's strike 1. I will see how committed I am to stop checking the portfolio startung tomorrow. I had every intention of staying on track until I overheard a comment that gold was down 6%

Don't feel so bad - my wife's portfolio is down 5.82% (traditional 4xHBPP, purchased 18 months ago).  It sucks...

buddtholomew wrote: It appears as though I was a little premature in panicking, but I certainly sense some anxiety from other members of this board. I knew you were out there as I am not the only one who questions themselves. One member has capitulated publically and how many privately we will never know. Those members whi can tune out the noise are a rare breed and in the minority.

I will not sell, but rather stick to the rebalancing strategy. I have obviously checked my portfolio, so that's strike 1. I will see how committed I am to stop checking the portfolio startung tomorrow. I had every intention of staying on track until I overheard a comment that gold was down 6%

I quit looking at the markets.  Didn't want to capitulate if I saw how bad things were.  We'll see by the end of the year how things play out.  When the Feds inflation estimate for next year is 1 - 2%, gold doesn't look so hot.  And Uncle Ben only indicated a slowing of QE going forward and no increase in rates until at least 2015.  Not sure why LTT's are selling off.  If short term rates are to remain near 0 for the next couple of years, wouldn't you think LTT yields would lower.  And where is all the money going?  With stocks, bonds and gold all selling off, isn't there going to be a pile of cash sitting on the sidelines?  Some asset class will surely benefit.

Here's my prediction...the S&P500 will end in the green.

catacomb wrote: Just sold my entire gold portion.
bought a hefty dose of ZGLD for 1580$ a couple of month ago.
Sold all of it for 1277$ now.

Sorry, this sh*t is not for me, I'd rather bet on soccer and at least have some fun losing

That's sad to hear, especially since I know from your previous posts that you were good at saving a lot of your income.
After all that saving, you don't seem like the type to lock in losses so abruptly.

The 1987 crash was down 22% in one day.
As Dustin Hoffman said in Wag the Dog,"This is nothing".

The market does look awful but calculate your move.
Don't do it in a panic..

dualstow wrote:

catacomb wrote: Just sold my entire gold portion.
bought a hefty dose of ZGLD for 1580$ a couple of month ago.
Sold all of it for 1277$ now.

Sorry, this sh*t is not for me, I'd rather bet on soccer and at least have some fun losing

That's sad to hear, especially since I know from your previous posts that you were good at saving a lot of your income.
After all that saving, you don't seem like the type to lock in losses so abruptly.

catacomb, I understand how you're feeling. I can assure you almost everyone on this forum had been a novice at some point so we all have had our doubts and fears. As others have said new PP investors tend to overreact to the market fluctuations. The best course of action would be to relax and refrain from checking your portfolio too often. Let the PP do its magic.

Remember: every time when you feel an urge to sell in panic you should remember that there is someone at the other end of the trade.

foglifter wrote:

dualstow wrote:

catacomb wrote: Just sold my entire gold portion.
bought a hefty dose of ZGLD for 1580$ a couple of month ago.
Sold all of it for 1277$ now.

Sorry, this sh*t is not for me, I'd rather bet on soccer and at least have some fun losing

That's sad to hear, especially since I know from your previous posts that you were good at saving a lot of your income.
After all that saving, you don't seem like the type to lock in losses so abruptly.

catacomb, I understand how you're feeling. I can assure you almost everyone on this forum had been a novice at some point so we all have had our doubts and fears. As others have said new PP investors tend to overreact to the market fluctuations. The best course of action would be to relax and refrain from checking your portfolio too often. Let the PP do its magic.

Remember: every time when you feel an urge to sell in panic you should remember that there is someone at the other end of the trade.

+1

This is a permanent investing strategy!

catacomb wrote: Just sold my entire gold portion.
bought a hefty dose of ZGLD for 1580$ a couple of month ago.
Sold all of it for 1277$ now.

Sorry, this sh*t is not for me, I'd rather bet on soccer and at least have some fun losing

Gold is a hard asset to own when it is falling.

There are few people around to comfort you and those who are often sound like they are crazy.

Pointedstick wrote:

Coffee wrote: Really? 

Is your investment strategy: Buy high, sell low?

As it is for most, in exactly this manner. It's ironic that when our brains are telling us to bail out and run for the hills, it's probably the best time to double down.

Seriously...emotions are the enemy in investing.  I'm itching to rebalance into gold and long-terms though I'm not really close to 15% yet.  But I'll wait....

Alanw wrote: We'll see by the end of the year how things play out.  When the Feds inflation estimate for next year is 1 - 2%, gold doesn't look so hot.  And Uncle Ben only indicated a slowing of QE going forward and no increase in rates until at least 2015.  Not sure why LTT's are selling off.  If short term rates are to remain near 0 for the next couple of years, wouldn't you think LTT yields would lower.  And where is all the money going?  With stocks, bonds and gold all selling off, isn't there going to be a pile of cash sitting on the sidelines?  Some asset class will surely benefit.

I suspect everything's selling off because "the market" is figuring out that Uncle Ben has been blowing multiple bubbles, it's not sure which assets are most over-inflated, so it's hedging all bets and moving to cash until the dust settles. Financial pundits talk about the wisdom of the market; it seems like the market is pretty stupid in the short-term, though I might give it more deference over the mid- and long-term.

cnh wrote: Financial pundits talk about the wisdom of the market; it seems like the market is pretty stupid in the short-term, though I might give it more deference over the mid- and long-term.

Take a look at the S&P 500 chart starting in 1997.

It went from 800 to 1500.

Then it went from 1500 to 800.

Then it went from 800 to 1500.

Then it went from 1500 to 800.

The it went from 800 to 1500.

That looks like 16 years of stupid to me.

MediumTex wrote:

cnh wrote: Financial pundits talk about the wisdom of the market; it seems like the market is pretty stupid in the short-term, though I might give it more deference over the mid- and long-term.

Take a look at the S&P 500 chart starting in 1997.

It went from 800 to 1500.

Then it went from 1500 to 800.

Then it went from 800 to 1500.

Then it went from 1500 to 800.

The it went from 800 to 1500.

That looks like 16 years of stupid to me.

Some great rebalancing opportunities during those years.  Just wait and let the markets tell you where to invest.

All this hand-wringing about the Permanent Portfolio being down 3% is just odd.  VBINX is -1.99 over roughly the same period; VWINX, -2.19%.  So two highly regarded balanced funds, moderate and conservative, are little better.  SPY is -4.51% over the last month; AGG, -1.98%, and -1.72% over the last 3 months.  Aside from 100% cash or ultra short-term bonds, which have a negative real return themselves, where're you gonna hide?

I'm not concerned with 1 month losses < 3% losses... I'm more concerned with 18 month 6.97% losses...  Who you gonna call?

Storm wrote: I'm not concerned with 1 month losses < 3% losses... I'm more concerned with 18 month 6.97% losses...  Who you gonna call?

I feel your pain.  I know you are frustrated.  I wish I could say something to make you feel better. 

I'm sure it's no consolation, but historically when a strategy like the PP is down like it is now it is the best possible time to add more money to it.  Most people don't see it that way at the time, though.  They think that the latest crisis is somehow different from all of the crises that came before it, but in hindsight every crisis has a way of looking a lot like the ones that came before it.  Even the 2008 financial crisis looks a lot like previous financial crises that tend to hit every economy at least once a generation.  The good news is that a 2008-type event is very unlikely to happen again in the U.S. for at least several more decades.

Storm wrote: I'm not concerned with 1 month losses < 3% losses... I'm more concerned with 18 month 6.97% losses...  Who you gonna call?

- 3K$ is not a lot of money in US!

Whats the problem?

stay in the course

Storm wrote: I'm not concerned with 1 month losses < 3% losses... I'm more concerned with 18 month 6.97% losses...  Who you gonna call?

I believe Fidelity doesn't include your core account when computing overall gain/loss.  Not only are you not including your cash "cushion", but also the dividends from the stock and bond funds that collected in the core account (otherwise there would be an "a" appended to the cost basis).

I started my 4x25 HBPP around the same time you did, in March 2012.  On May 1 it was still in the black by about 3%.  I do have the advantage of direct ownership of both long and short Treasuries, some physical gold with effectively zero ER, and a nice chunk of I-Bonds. 

This month has not been fun, but it's not bothering me nearly as much as watching my retirement accounts go into a zero-g nosedive in 2000-2001, and again in 2008.  And when you think about how well your friends are doing in the stock market, remember that "record high" levels of the Dow and S&P500 means that someone holding stocks since 2000 is only now earning any gain at all, and otherwise has only dividends to show for their trouble.  It's annoying having bought in just before a big stock runup, but 5-10 years from now you'll have forgotten about all this.

cnh wrote:

catacomb wrote: Currently I'm considering some more solid investments like 10% stocks / 90% AAA bonds local mutual funds.

90% bonds? Unless they're all ultra short-term, you'll get crushed when interest rates normalize, which they will.  If you're smarter and faster than all the professional bond traders, financial "insiders," FED, ECB, etc, then....

You can avoid catastrophe with bonds by purchasing high-quality bonds directly, rather than by using funds.  At least that way you know you'll at least get your principle back when the bond matures... if you can resist selling it before then, that is. 

rocketdog wrote:

cnh wrote:

catacomb wrote: Currently I'm considering some more solid investments like 10% stocks / 90% AAA bonds local mutual funds.

90% bonds? Unless they're all ultra short-term, you'll get crushed when interest rates normalize, which they will.  If you're smarter and faster than all the professional bond traders, financial "insiders," FED, ECB, etc, then....

You can avoid catastrophe with bonds by purchasing high-quality bonds directly, rather than by using funds.  At least that way you know you'll at least get your principle back when the bond matures... if you can resist selling it before then, that is.

But unfortunately you won't know what that principal will be worth when you get it back.
Which is just another example of the fact that there is no such thing as a riskless investment; all you can do is try to pick the risks that are the least distressing to you.

Sold got rid of my permanent portfolio today.

overall i lost almost 7% in total (currency loss included) in less than three months. i bought all the assets at once as recommended so naturally i lost pretty hard.

as someone who is EXTREMELY frugal (90% investment rate) this was very painful to me. It was also my first time investing on my own (or at all) which will definitely leave me with some trauma for the future.

Right now it seems cash is king - inflation rate in Israel is below 1% so I might as well just buy 100% local treasuries.

I learned a lot from this forum and from the book but i genuinely no longer trust the PP as a viable investment strategy for the current economic environment. The theory sounds fantastic but it does not hold. The strategy proved to be way too volatile and risky for my liking and I certainly would not recommend it to newbies.

Thank you all and goodluck with your investments!

I regret to see you dropping PP. I hope you will find a better investment strategy that will grow your assets without occasional fluctuations and help you sleep at night. I'm sure we all would be more than happy to learn about such a strategy, so far I haven't.

In another thread MediumTex brilliantly put into words the essence of what's happening to many investors:

"From my perspective, it seems like many people spend their entire investing careers bouncing from strategy to strategy looking for some magic solution to the problem of risk without realizing that their constant portfolio shifts create more risk in most cases than just sticking with one "good enough" strategy."

Here's the complete post:
http://gyroscopicinvesting.com/forum/pe ... /#msg70095

I wish you all the best.

catacomb wrote:Right now it seems cash is king - inflation rate in Israel is below 1% so I might as well just buy 100% local treasuries.

So you're selling everything in order to buy what's hot right now?  I believe that buying high and selling low is a pretty good way to lose money.