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Meh , anyone looking at what happens over a year or two really should stay away from long term investing and just day trade .
2022 was predicted 50 years ago by Harry brown when he said no traditional asset classes like gold ,bonds or stocks will do well in a tight money recession so this was expected and goes with the cycle .
If five years out things are still in a tight money recession I would worry ..right now meh , it’s all part of the business cycle and always has been .
All that changes is the events that cause the cycle to happen.
Fear of missing out when things look like they are changing is as stressful if not more then when things drop and you are in .
When things fall our brains adjust and the stress is alleviated as we wait for the recovery .
fear of missing out stress and thinking about what to do never ends as markets turn around.
That was proven in Jason zweigs book using brain imaging and scans.
Like night follows day we will have to fall into one of the big four outcomes and when we do these assets will react way before we are actually there so betting on no particular outcome can end up a win no matter what
I can tell you betting on no particular outcome is a lot easier then waking up in the middle of the night and trying to figure out what and when to buy to catch your prediction.
Especially when assets are moving up and you can’t decide if it a suckers rally or the real McCoy.
A years worth of average gains on an asset can happen in just days when things turn and you are still trying to figure out if it’s a suckers rally or the right asset class choice
I completely agree but the concerning thing is that PP is essentially flat over the past 5 year period and negative when accounting for inflation.
I didn’t run the other portfolios but if you are going to judge 5 years in a down market it can happen …
However on average the pp has gained over 20% coming out of the down years .
So any exceptionally good or bad year can influence things .
Look at Exxon . it has returned about 3% cagr over the last 15 years …if it wasn’t for the one up year now it would be negative for 15 years
So anything sizable up or down can effect all previous years
Perhaps my larger point is that it hasn’t proved much “safer” than the S&P during this most recent downturn and it certainly contains far less upside over longer periods.
My main issue with Harry Browne is he has no academic background in finance, and that shows up in his books. He was in sales & marketing then saw he could make more money as a financial advisor and talked his way into that. None of which means his ideas are wrong - but it lacks academic rigor. His portfolio, for example, doesn't correctly (from an academic perspective) incorporate mathematical optimization, the Security Market Line, the liquidity preference function, Pareto-efficiency, personal risk tolerance and the like. And, of course, it completely ignores identified & well-researched "smart beta-based" factor-investing models.
The main thing the Permanent Portfolio does is lower overall portfolio risk - which is neither good nor bad. Its performance isn't better than the canonical 60/40 portfolio, but it does appear to have a better Sharpe ratio. If the objective is to beat the 60/40 while simultaneously reducing risk, Risk Parity appears promising over the long run.
But, of course, in the long run we're all dead.
But the flip side is his work has been held in the highest esteem for 50 years now.
It was also the brainchild of himself , terry coxen who founded the fund by the same name and Doug Casey so it wasn’t just harry brown
It was never designed to compete with 60/40
60/40 which commonly uses a total bond fund has no real deflation protection or real high inflation weak dollar protection.
The pp was designed to preserve capital over the longer term while beating inflation by a few points …it was never designed for growth.
It was to keep from being devastated by the 4 major economic outcomes of which a tight money recession is not one of them.
It was also designed for simplicity that even grandma can do
Portfolio labs show 60/40 down 20%
They show pp down 18.50
Last edited by mathjak107; 10-23-2022 at 10:40 AM..
Perhaps my larger point is that it hasn’t proved much “safer” than the S&P during this most recent downturn and it certainly contains far less upside over longer periods.
Portfolio visualizer shows the pp up 3.34% the last 5 years with rebalancing so it is right on par with wellesly
There will be times all assets move together in the pp so at certain times it will move both up or down the same as an equity heavy portfolio.
However once we move out of this temporary tight money recession the assets should resume their more normal yin and Yang ….so yes , the pp protects in more of the major economic outcomes then say a 60/40 or even wellesly.
Also remember , the pp holds cash in the portfolio..other portfolios hold cash positions outside the portfolio….pull out cash from the pp and let it run with three assets and you will see higher results in up markets.
So it usually is not an apple to apple comparison to portfolios that leave your cash outside
“Tight money /recession: A period during which the growth of the supply of money in circulation slows down. This leaves people with less cash than they expected to have, and usually leads to a recession—a period of poor economic conditions.
It usually lasts no longer than 18 months before falling into one of the major 4
Prosperity
Recession
High inflation / weak dollar
Depression
Last edited by mathjak107; 10-23-2022 at 10:44 AM..
I’m sorry to hear that. I had a few colleagues that retired within the past couple years and they are very stressed right now. Fed policy over the last 15 years has really screwed the baby boomer generation.
The problem with first retiring in a down market is your opening draw is based on that balance …
Of course that can change as things recover but initially you start lower unlike those who have already established their draw and are simply using a safe withdrawal rate.
Now that we are 7 years in to retirement , even though we use each years balance , using bob clyatts 95/5 method we get the higher of 4% of the balance or just 5% less then the previous year .
So it isn’t a big difference ,especially after a bull market where your draw has been higher then the conventional 4% swr
WRONG. I was "howling" that everything was FAKE and PHONY. That there is no REAL economic growth, that the FED was FAKING this economic growth with DEBT spending and ZIRP. That everything was ARTIFICIAL. I was "howling" that as soon as the FED allows interest to rise everything will crash down because everything was propped up and fake + phony.
This fool Matjhak was saying the opposite. He was the cheerleader for ZIRP and this everything bubble. He is the biggest joke on this forum and he was WRONG about everything.
Good Luck!
WRONG. You’ve been a BROKEN RECORD since 2016 and not putting your money where your mouth was just proves you didn’t know what you’re were talking about.
In the words of the wise, go away boy you bother me.
WRONG. You’ve been a BROKEN RECORD since 2016 and not putting your money where your mouth was just proves you didn’t know what you’re were talking about.
In the words of the wise, go away boy you bother me.
Portfolio visualizer shows the pp up 3.34% the last 5 years with rebalancing so it is right on par with wellesly
There will be times all assets move together in the pp so at certain times it will move both up or down the same as an equity heavy portfolio.
However once we move out of this temporary tight money recession the assets should resume their more normal yin and Yang ….so yes , the pp protects in more of the major economic outcomes then say a 60/40 or even wellesly.
Also remember , the pp holds cash in the portfolio..other portfolios hold cash positions outside the portfolio….pull out cash from the pp and let it run with three assets and you will see higher results in up markets.
So it usually is not an apple to apple comparison to portfolios that leave your cash outside
Actually I would say 80% wellesly and 20% gold would be a very nice simple portfolio…it really does backtest well.
I ran these charts a while ago ..it seems to fill the weak areas in wellesly
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