Permanent Portfolio Analysis for week ending 2/23/07
The Permanent Portfolio fund hit a new record high this week, again.
I just love it when gold moves up like this. Not only does the value of my portfolio go up a lot but I get a warm-positive feeling that there are people out there in the world that understand that gold is precious. I'm not buying or selling right now. I am bullish on gold so I always buy when the price gets close to the 180-day Moving Average and I back up the truck and load it when the "Accum" trigger is hit, now at -.37. If you are building your portfolio, you might want to wait for the next dip. If you are in sell-mode the past few days would have been a good time to sell a few coins to get you through the month. If you are balancing your Permanent Portfolio to get gold to 25% selling now is OK. Put the proceeds into the Long Bond or into whatever class you are short.
I buy the physical metal and bury it. I also buy "Paper Gold" in stocks and funds that are highly correlated to the price of gold (e.g. ASA, GLD, TGLDX, etc.). When I get ready to sell the first thing that goes will be the paper. I'll hold the physical metal until the end.
Note to kids: Always take a couple of gold coins with you when you travel overseas just incase the dollar crashes while you're away. Everyone accepts gold but not everyone accepts dollars, pounds, yen, sea shells or colons. Love, Dad.
Bonds are starting to move relatively higher. I always buy when the "Accum" trigger is hit and the price is below the Median, now at -.56 and 10.26 respectively. If you are just starting to build your portfolio, now is an OK time to accumulate the long-bonds.
When I'm buying I either buy the actual 30-year bond or TLT.
The S&P500 just wants to ride along the plus one standard deviation line. It became relatively cheaper all week long but still has a long way to go before I start buying more. Unless, of course, my total investment in stocks drop to 15% of the portfolio then I've got to rebalance to play by the rules.
I am bearish on Stocks so I always buy when the "Accum" trigger is hit and the price is below the Median, now at -.88 and 17.68 respectively. It looks like I'm going to be waiting a while... I would wait to see what happens next week...next month...maybe next year. Be patient and wait for the correction. Remember, you can hold as much as 35% of your portfolio in cash, bonds or gold and still be compliant with the strategy.
I'm currently speculating on the energy and defense sectors as it seems we're going to be in this war for a while. Heck, you can't do anything about it so you might as well try to make some money.
My cash position is now about 35% of the portfolio. I believe something is going to give and I want to have some cash available to take advantage of it.
I speculate in Yen and Swiss Francs. Tracking Yen on my charts shows that it has moved out of the "Accum" region and is about .0005 below median. Francs are just hanging around the 180-day MA.
I'm just you're average Bob so I get no points for suggesting www.everbank.com as a potential vendor for your transactions but I use them to buy foreign currencies. It seems to me that in order to play the currency game you've got to be ready to speculate about $250K in it so unless you want build to that position you might as well forget about it.
The Permanent Portfolio Fund:
The Permanent Portfolio Fund continues trading in the Strong Sell region (two standard deviations above the 180-day moving average) and set another record on Friday. PRPFX has been trading above the MA for quite a while and I believe the approach used helps to support this general trend.
Something is going to give. Stand by.
Playing the Permanent Portfolio Game:
Harry Browne suggested an allocation of 25%/each to gold, stocks, bonds and cash. He said that this would produce a return of 8% if followed carefully and rebalanced annually. I have no reason to doubt it and if one looks at a similar portfolio, PRPFX, one will see that this approach has worked fairly well. We haven't seen a huge drop in any of these asset classes over the past history of this fund and the approach seems logical to me so I'm going to stick with it. The long-term graph seems almost ridiculous! Gold and stocks have both been moving up during the almost parabolic increase in PRPFX. I'm interested to see what happens when one of these classes starts to break down. The near-term past has been very good to us.
There are two simple scenarios that I try to consider in this weekly post:
- You are working and have money to invest in a Permanent Portfolio
- You are retired and are living off your Permanent Portfolio
I am working and have income to invest so I'm looking for investments that are relatively cheap among the four investment classes and buy them. Others may be retired and are living off their portfolio. For those selling, I try to identify the classes that are relatively expensive and are candidates for selling and/or re-balancing to maintain a 25% allocation to gold, stocks, bonds and cash.
Harry Browne believed that one should have a plan for investing and divesting that was simple and would not require constant maintenance and worry. Through these posts I try to identify the investments that are relatively high or low so that you can quickly see what of your current portfolio may need attention. You should never be put into a position that you are constantly worried about your investments. Harry's Permanent Portfolio strategy, does, in fact, give one "peace-of-mind" but when you want to either invest or divest it's helpful to have some guideposts.
I am currently accumulating short-term T-Bills and the long bond. I remain waiting for Gold and Stocks to become more reasonable before I start buying more. If you are just starting out now to build your Permanent Investment Portfolio, long-term bonds and cash would be a good place to start as they are relatively cheap.
Hoping Ron Paul runs for President as he is the only one that can beat Hillary,