Investing, economics, finance and random thoughts.
Archive for June, 2010
Permanent Portfolio Mid-Year 2010
Jun 29th
I generally advise not looking at portfolio returns too often, but it’s about halfway through the year so we’ll take a peek because some people have wanted to know.
The standard Permanent Portfolio allocation is 25% split into stocks, bonds, cash and gold. So far Morningstar shows:
25% Stocks – Vanguard Total Stock Market (Ticker: VTI): -5.35%
25% Bonds – iShares Treasury Long Term 20+ year Bond Fund (Ticker: TLT): +14.37%
25% Cash – iShares Very Short Term Treasury Bond Fund (Ticker: SHV) [Equivalent to a Treasury Money Market Fund]: +0.04%
25% Gold – SPDR Gold Trust (Ticker: GLD): +13.0%
Total Return YTD: +5.4% (Total Returns including all interest and dividends according to Morningstar)
If you are using my modification which substitutes the Treasury Money Market cash for a 1-3 year Short Term Treasury Fund (Ticker: SHY) you are up YTD: +5.9%
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For comparison I track a 60% Total Stock Market and 40% Total Bond Market portfolio as well:
60% Vanguard Total Stock Market (Ticker: VTI): -5.35%
40% Vanguard Total Bond Market (Ticker: BND): +5.10%
Total Return YTD: -1.5% (Total Returns including all interest and dividends according to Morningstar
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Interesting year so far. Gold and LT bonds are showing some serious muscle at the same time – A very unusual thing. However the markets have been very volatile for the stocks yet the portfolio has been protecting and growing the value regardless.
Keep an eye on your asset allocation and be sure you are rebalancing if you need to do so.
Gold “Bubble”
Jun 27th
There’s much discussion in the news about Gold’s new price high (about $1300). The word “bubble” is getting tossed around a lot. There are a flood of articles (and advertisements) about buying gold and an equal flood about selling gold. What to do?
Talks about gold seem to devolve into market timing arguments. But for someone holding gold as part of their total asset allocation, such as the Permanent Portfolio, it should be treated like stocks or bonds with no market timing involved.
The only reason to be timing the market with gold is if you are treating it as a speculation. In this case it’s no different than relying on various indicators to sell out of all your stocks or sell out of all your bonds, etc. So use what you feel is best because they are all equally unreliable as market timing doesn’t work.
I can recall seeing these gold conversations when it hit $600 an ounce. I recall them when it hit $850 an ounce (matching the high in 1981). I can recall them when it hit $1000 an ounce. I can recall them when it hit $1100 an ounce. And of course I am seeing them all over as gold hovers near $1300 an ounce. The price of gold could fall at any time, but then again it could just keep going up responding to world events. We have no way of knowing these things.
If you own gold in your portfolio already then be sure you keep it rebalanced and use the profits to buy your laggards. If you don’t own it already, be sure you are doing so with a logical plan in place why you are doing it and not some knee jerk reaction to what you are seeing in the news.
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This topic is being discussed on the forum.
Permanent Portfolio Forum – 100 Registered Users
Jun 22nd
In two months the forum has reached 100 registered users and almost 1000 posts! Thanks to everyone for contributing and bringing your perspectives to the discussion.
Permanent Portfolio Discussion Forum
Overseas Accounts?
Jun 13th
One of Harry Browne’s pieces of advice was to hold some assets overseas. However, options for US Citizens in this regard are very limited and/or impossible in today’s world (segregated gold storage in your own name in a foreign bank).
Some have wondered why holding an account overseas has become much more difficult the past few years for American citizens. Two words: Red Tape. This article goes into the latest reason:
The U.S. government – under a new law incorporated in the Hiring Incentives to Restore Employment Act signed by President Barack Obama on 18 March 2010 – is demanding that international financial institutions reveal which of their clients are U.S. citizens with accounts of more than $50,000. Foreign banks are, in effect, being asked to act as the international enforcement arms of the Internal Revenue Service. Those banks that don’t comply will be subject to a 30% withholding tax on all payments made to them in the U.S. Many banks and wealth managers have decided it is far easier to politely show their U.S. clients the door.
The basic message here is that you can be fully compliant with all tax laws but the banks will still not want you as a customer. In essence, the US Govt. is putting up capital controls without doing it overtly. They are doing it with red tape and it is deliberate.
These regulations have nothing to do with “tax evasion” and have everything to do with controlling where US citizens hold their money. A wall is being built very quietly and you have to wonder how it will be used.
This topic is being tracked on the forum. Stop by if you want to discuss it:
A Gold Blog Without Goldbuggery
Jun 9th
A while back I ran across a blog run by an employee of the Perth Mint in Western Australia. This blog presents solid analysis from a precious metal industry insider. He does a great job of cutting through the gold conspiracy theories that seem to abound:
I’ve come across a lot of really bad information about gold through the years. This blog however is an oasis in the vast wasteland for those that want to learn more about the gold market. *
* The Gold FAQ is my own attempt to cut out the bad information as well.