mathjak107 wrote:
i am not splitting assets out of the portfolio as much as i think the assets in the portfolio finally ran its course over the 40 years of having a bond bull market with some speed bumps along the way.
You don't think the bull market in bonds is still with us?
the pp always had traction from bonds for most of it's life since the 1980's . it had interest on cash and it had excellent gains on stocks . that offset golds performance which usually over most time frames runs from lack luster to awful except for 1999 until the peak , then it took most of those gains away leaving losses again .
Excellent gains on stocks? The 40 year period of PP data covered two secular bear markets for stocks, and we only recently breached stock market levels that were first reached over 15 years ago. That's not what I would call "excellent gains on stocks."
Why are you saying that most of the gains in gold since have been taken back? In 2000, gold was selling for $275 an ounce, and today it is selling for $850 an ounce. Even with gold at its current depressed price, that's an average annual return of 7.7% over the 2000-2015 period. How did stocks do over that period?
The gold bull market in the 1970s was even stronger than the 2000-2011 gold bull market. Where are you getting that over most timeframes gold runs from lackluster to awful? Gold was awful in the 80s and 90s just like stocks were awful in the 70s and 00s.
well that is the past and now is the new normal we are in.
Honestly, it just looks like the same old normal to me.
with LT treasury's only coming to life now when there is a crisis event and not in a normal downward rate pattern and gold just sustaining deeper and deeper losses the tide has finally changed for the pp .
There are huge gains to be harvested from LT Treasuries trading in the current range. There isn't any rule that says you can't profit a lot from buying low and selling high when an asset is trading in a range.
As far as gold sustaining deeper and deeper losses, that's part of what happens when you own three non-correlated volatile assets. Right now, one of them is down. That's utterly unremarkable to me.
When you look at the relative stability of the whole portfolio over the most recent 1, 3 and 5 year periods, I really don't know why you would say that the "tide has finally changed" for the PP. That's a weird response to being down 2-3% here and there. Those are normal fluctuations in the value of the portfolio.
with zero rates and high stock valuations never happening before this new normal requires in my opinion assets that play nice together and do not kill each other off as the pp has been doing .
No, you want the assets to fight with each other. That's where you get the protection against having your eggs in the wrong basket.
the last few years have seen the new normal require's portfolio's that work together with out ripping apart what ever meager gains equity's can muster since historically equity's have been the primary growth engine .
Meager gains! The stock market doubled in value over the 2009-2014 period, which translates into 15% per year gains in that asset. Nothing meager about that.
i think with the potential for single digit equity gains and near zero real returns on cash and bonds you need to give equity's all the room you can to support things since nothing else appears to be able to .
Why do you think that after five years of 15% annual gains in equities it is now only reasonable to expect single digit gains going forward? Isn't that the "wall of worry" that every secular bull market climbs (assuming we are in such a market for equities now)?
Similarly, why do you think that bonds offer zero real gains going forward after showing repeatedly since 2008 that they can generate HUGE gains even at very very low rates?
sure you can sustain no growth or losses for years and years in the pp until some other asset class has an extended run possibly even gold but you run the risk of being so far behind or at a loss that even then it isn't enough to pull you out .
You could have said that about the PP at any point over the last 40 years, since there is always a case to be made that the relationships within the portfolio are on the verge of breaking down. I don't see anything unusual about today except that it happens to be the day that we are living through right now.
keep the charts and just switch to the pp's performance the last few years and you will see that is what is now happening to it .
the mutiny between asset classes is letting it slide deeper and deeper behind so even when those big stock rally's happen it still can't get it back on track .
What are you talking about? When you adjust for the low inflation we have been experiencing in recent years, the PP's real 4% or so returns have just been chugging along probably just a little below the long term average real returns.
i would bet the next decade would likely have cash instruments and equity's beat the pp as it still has a civil war going on and no real growth engine clearly propelling it .
Maybe, maybe not. I would rather not bet. I would rather just cover all bases. The PP will always have a civil war going on inside it. That is its nature.
you would have to count on an extended calamity to pull it out of the funk it's in . having to bet on just black swan events being extended to propell a portfolio is never a good idea if that is what it gets down to .
It's not in a funk and thus no extended calamity is needed. If the current trends continue of solid equity gains, intermittent large gains in LT Tresuries, gold bottoming near current levels and T-bills continuing to pay 0%, that would translate into above average PP returns going forward. If a calamity comes along that will be fine too, but it's not needed.
I appreciate your steady stream of critical PP-related comments because they do create good discussions, but I wanted to address them point-by-point because I think that your pessimism and skepticism about the PP reflects what is, to me, a superficial understanding of how the portfolio works and its resilience in the face of certain market conditions.
I'm not saying you're wrong; I'm just saying that your understanding of the PP doesn't seem to have a lot of nuance to it, and so many of the interesting things about the PP reside in those nuances.
