Permanent Portfolio getting slaughtered in 2012

secretwealth · Post by **secretwealth** » Fri Jun 01, 2012 9:46 pm

I know a lot of PP folks hang out here, so I'd like to get their insight/views on why Permanent Portfolio is getting hit so badly this year and when they think the tide will turn.
I was looking at starting a PP investment early this year, but I decided against it to focus on deleveraging and avoiding the bear market we're now experiencing (and that I expected we'd see much earlier this year). I'm glad I waited, but now I'm thinking of getting in.

KevinW · Post by **KevinW** » Fri Jun 01, 2012 10:35 pm

I guess I don't think it's "getting hit so badly." I just checked etfreplay.com and it shows VTI/TLT/GLD/SHV are up 2.8% year-to-date which extrapolates to a 6.9% CAGR. That seems consistent with its historical performance of 3-5% real return.
Are you disappointed by that? Or are you looking at a different metric?

secretwealth · Post by **secretwealth** » Fri Jun 01, 2012 10:41 pm

I was looking at PRPFX and PERM, both of which are down (-1.08% for PERM since inception and -5.04% over the past year for PRPFX).

Maus · Post by **Maus** » Fri Jun 01, 2012 10:49 pm

@secretwealth

I can't speak for others, but even after the bloodbath today, my PP is up about 5% for the year. It is performing exactly as designed: as stocks have fallen, bonds have risen and gold is once again trending upward.
Compare that to my VP, which is predominately large-cap dividend payers. Since May 1 I've lost around 4% of the portfolio's value. But this isn't as problematic as the prospect of reduced or eliminated dividends (think BAC).

Spartan_Warrior · Post by **Spartan_Warrior** » Fri Jun 01, 2012 11:46 pm

Odd. I'm up for the year (though not by much). I wonder what those ETFs are doing wrong.
I'm still in the process of setting up my portfolio and I'm still light on long-term treasuries, which I understand have performed unexpectedly well this year. (I'm still reluctant to buy in as I can't imagine rates will go lower--and then they do.) I also bought a bunch of gold right before the sell-off began. So, if anything, I would've thought PP overall would be doing even better than my particular implementation.

KevinW · Post by **KevinW** » Sat Jun 02, 2012 12:15 am

PERM didn't exist until February so a big chunk of the YTD time window is missing. Its asset allocation is slightly different from the 4x25; the stocks are tilted and it includes some silver. PRPFX' AA is even more different and is managed actively. Sometimes those differences help relative to the 4x25 and sometimes they hurt.

Post by **jacob** » Sun Jun 03, 2012 5:22 pm

Huh? It doesn't seem to be doing worse than the Dow.

secretwealth · Post by **secretwealth** » Sun Jun 03, 2012 9:54 pm

Well, I'd say the Dow hasn't been doing too well either.
Perhaps "slaughtered" was a bit strong. I was just floored at the YTD on PERM, but I realize I need to look on a longer-term perspective with this strategy.

tylerrr · Post by **tylerrr** » Sun Jun 03, 2012 11:43 pm

@Spartan_Warrior,
can you explain more? I have kinda the same question as the OP. I thought PERM and PRPFX are a fund and ETF that is the permanent portfolio mix of investments.
But some of you are saying they are not exactly that?
A little elaboration would be great.
thanks,
Tyler

tzxn3 · Post by **tzxn3** » Mon Jun 04, 2012 12:17 am

If I recall correctly the Permanent Portfolio funds are not of the same composition as the conventional PP.

Spartan_Warrior · Post by **Spartan_Warrior** » Mon Jun 04, 2012 12:24 am

Tyler, I don't think you're aiming that at me but rather at KevinW, who seems to have the scoop on those ETFs. But yeah, from what I've heard previously, none of the ETFs available that are supposed to mimic the Permanent Portfolio do so exactly. If you want an exact PP using ETFs you have to get four separate ETFs for each asset type.

KevinW · Post by **KevinW** » Mon Jun 04, 2012 2:54 am

I added that information to the PP's wiki page:

http://earlyretirementextreme.com/wiki/ ... d-of-Funds

tylerrr · Post by **tylerrr** » Mon Jun 04, 2012 4:04 am

thanks a lot. From WIKI it looks like PERM is more accurate replica than prpfx.

JohnnyH · Post by **JohnnyH** » Mon Jun 04, 2012 3:58 pm

My PP is up 5.7% in 2012, before meager interest on cash portion... Slightly ahead of 10% historical average.
Frankly, I do not trust either PERM or PFPFX... Or TLT, or GLD, or SHY, or...
My PP's performance 6.1.11-6.4.12, 3.20.12 rebalance:

http://db.tt/GJJcPQSa

KevinW · Post by **KevinW** » Mon Jun 04, 2012 6:32 pm

@tylerrr

Yes, PERM is closer to 4x25 than PRPFX.

tylerrr · Post by **tylerrr** » Sat Jun 09, 2012 1:26 am

I have a question for those who use the 4/25 permanent portfolio method.
Do you re-balance only if one of the parts breaks the 15/35 band rule?
Or do you re-balance once per year to a perfect 4/25 ratio?
thanks,
Tyler

KevinW · Post by **KevinW** » Sat Jun 09, 2012 2:13 am

I follow the 15/35 rule. Rebalancing every year is fine but probably makes for more transaction expenses and taxes.

44deagle · Post by **44deagle** » Sat Jun 09, 2012 7:23 pm

Any of you permanent portfolio guys thinking about getting out of bonds? It seems to me the risk/reward of staying in bonds at this point is rather negative.

Post by **jacob** » Sat Jun 09, 2012 7:36 pm

The risk of bonds have been growing for years...since the early 1980s, but so have the rewards. The rebalancing aspect of the PP has slowly gotten PP investors out of bonds accordingly.
In any case, I guess the question of out of bonds must be answered with another question, namely, "and into what?"

KevinW · Post by **KevinW** » Sat Jun 09, 2012 9:00 pm

+1 to @jacob's response.