Gyroscopic Investing

The Street published an article about PRPFX:

http://www.thestreet.com/story/11489586 ... -cold.html

As usual, we see an attempt to analyze short-term results as well as judge the performance of individual assets. However, the final paragraph gives a valid point to meditate upon:

"If stocks return 6% annually in the next decade, as some analysts expect, then Permanent Portfolio is likely to trail the S&P 500. That will disappoint shareholders who expect the fund's winning streak to last indefinitely."


If stocks indeed will be growing at a low rate for the next who-knows-how-many years and gold and bonds will be flat could it be an end (or at least a pause) in the fund's solid performance over the last decade?

foglifter wrote: The Street published an article about PRPFX:

http://www.thestreet.com/story/11489586 ... -cold.html

As usual, we see an attempt to analyze short-term results as well as judge the performance of individual assets. However, the final paragraph gives a valid point to meditate upon:

"If stocks return 6% annually in the next decade, as some analysts expect, then Permanent Portfolio is likely to trail the S&P 500. That will disappoint shareholders who expect the fund's winning streak to last indefinitely."


If stocks indeed will be growing at a low rate for the next who-knows-how-many years and gold and bonds will be flat could it be an end (or at least a pause) in the fund's solid performance over the last decade?

It's all just guessing. 

The Perm Port, whether DIY or PRPFX or whatever, will likely have worse performance than stocks during a stock bull market.  If that "disappoints PP investors", then they don't conceptually understand the PP.  but even during stock bull markets, the PP should beat CPI inflation.  IIRC a US PP was between 4-5% real CPI-adjusted return from 1980-2010 overall, AND in each decade 1980s, 1990s (both 80s & 90s stock bull markets), & 2000s.

http://advisorperspectives.com/dshort/u ... uation.php
Keep in mind that stocks are currently expensive, as of Apr 2012 the P/E10 =22.2, which is more expensive than 85.4% of the prior historical months going (historical record ~1870-now).  The P/E10 is negatively correlated with the subsequent 20 yr div reinvested real CAGR return.

So if the article talks about 6% nominal returns for 2012-21 decade, let's say this means ~3% real annual return.  That could happen.  What also could happen is ~-6% real ala 1989-now Japan, 2000-now Nasdaq, etc.

BTW isn't it odd how a comparison is made bt the PP & 100% stock, but not PP vs 100% bond or PP vs 100% gold?  I doubt anyone on Planet Earth ever said or wrote, "dang, I feel like such a loser. My 2011 returns were only 11% because I used the lame PP, but if I had instead been 100% 30 yr T-Bonds, I would be up 33%".