Late again this month due to some personal travel and an unexpected sinus infection. See here for the usual performance report. May was another uninspired month for the portfolio with a -0.95% loss versus modest gains for comparables. The portfolio definitely protected better than these benchmarks during June’s most volatile days. However, in the grand scheme of things it didn’t make that much of a difference.
Note that this is as of the 06/24/22 close. June’s drawdown is reflected in these numbers. The most notable impact here is that gold’s weight increased a couple points versus the rest of the allocation, which had the overall effect of reducing gross exposure. You will notice a couple of new line items here also: an ex-US DM Value fund and a US Small Cap Value ETF.
Due to the quirks of my personal cash flow, I’ve had excess cash to invest during this period of market turbulence. One of the things I like to do to promote mental flexibility is add incrementally to strategies/assets that might benefit from a sustained regime change, if it seems a regime change could be underway (since we can only know for certain in hindsight). Different market regimes have different rules in terms of what will and won’t work. From a behavioral perspective, conditioning and reconditioning one’s self to the rules of a new regime is no mean feat. It takes time. It takes real dollars. Only real dollars will generate acute enough pleasure and pain responses to make the conditioning stick.
The role of a diversified portfolio core isn’t to outperform at any given point in time. The diversified core’s role is to be resilient and adaptive enough to keep you in the game across many different regimes. Also, if desired, to provide the capital base to take some big swings in the satellite portion of the portfolio. I don’t think I’ve ever come close to “cracking” the best way of integrating market feedback into a portfolio, but I know it’s something I want to continue to work on over time.
Sorry for a very late post this month. I’ve been busy with work and other projects. Here is the performance package for the leveraged permanent portfolio through April 30. Overall another fairly frustrating month.
I’m not going to post the allocation now since I’ll be doing the next update in a couple weeks and I don’t have the historical allocation as of 5/1 to hand anyway. There have been some allocation changes since my last update, though this has been driven by my personal cash flow and some asset availability/asset location considerations rather than any philosophical changes.
No special comments or insights to offer this month.
The portfolio gained 1.14% in March 2022, compared to +0.22% for an investable global 60/40 mix, +1.94% for ACWI and +3.69% for VOO. Year-to-date, performance remains frustratingly mediocre at -6.00%, versus -5.48%, -5.67% and -4.63% for those comps, respectively. Ex-US equity exposure remains a drag on performance as a 50/50 NTSX/GLD mix would be -1.36% year-to-date.
I have been told that people are not able to view the permanent portfolio track record data directly on Portfolio Visualizer. Apparently this is because it is a custom data set. Therefore, going forward I will be exporting the data to .pdf and uploading to Google Drive. You can access the .pdf here: https://drive.google.com/file/d/11vG4v8Dj_hHeMHB5sI9SKNwl4t5EMY9-/view?usp=sharing. If you have issues accessing the file please drop me a line.
Current portfolio exposures:
I did execute a discretionary rebalance trade in March, selling some GLD and adding the proceeds to the EM Large Cap Fund.
Otherwise there is not much to report this month. 2021 through year-to-date 2022 have been a frustrating slog for the portfolio. I do not expect this to change any time soon given the current market environment. I do remain confident in the long-term efficacy of the approach.
I missed the February update for the portfolio (those of you who follow me on Twitter know I have posted very little recently). This was due to a health issue that emerged over the past few months, and a major career decision I’ve had to grapple with at the same time. I may write about both those experiences in time. For now, suffice it to say I am mostly recovered and healthy, with no life-threatening issues. Over the next few months I hope to get back to a more frequent cadence of writing and engaging.
Unfortunately, my leveraged permanent portfolio has provided little comfort during this period. It returned -5.72% in February, -1.42% in February, and has returned -0.71% month-to-date in March. Full performance data set is available here as usual. Year-to-date, the portfolio is -7.73%. This has provided a little better downside protection compared to most broad equity market indices (ACWI was -10.02% through 03/04/2022). But not much.
The real issue has been the ex-US equity exposure within the portfolio. A 50/50 NTSX/GLD portfolio would have returned -1.10% over the same period.
The current allocation is below.
Despite a difficult stretch, I remain confident in the leveraged permanent portfolio concept, and its utility as a relatively stable core for a wealth allocation over long time horizons. The low correlation of GLD to equities and fixed income provides a source of liquidity even in this difficult period. GLD is +7.51% year-to-date, versus -3.09% for the US Agg Bond Index and -10% for ACWI. Depending on an investor’s objectives, this portion of the allocation could be used to tactically rebalance into equities, or to fund near-term cash flow needs.
Personally, I will likely just rebalance some of the GLD into the hard-hit ex-US small cap portion of the portfolio. The discretionary stock portion of my wealth allocation has held up very well so far in 2022, and I have ample liquidity available to redeploy into new opportunities that will likely emerge over the coming months. (Here I owe a shoutout to fellow members of the LMT and MO investing cults communities)
Hopefully you will be hearing from me more frequently in the future.
I have been delayed in making this post due to some real life distractions. The year ended 2021 was a weak one for the portfolio, with a +5.70% return versus nearly +13% for a global 60/40 allocation and a blistering +28% for the S&P 500. A simple 50/50 NTSX/GLD portfolio would have returned +9.03%.
The full set of performance statistics is available here.
You’ll notice I’ve made some allocation changes, notably by introducing a US small/micro cap value fund into the mix. This is a discretionary adjustment I’ve made as an initial, adaptive step in a macroeconomic and market environment that seems increasingly supportive of “value” (defined here as “statistical cheapness”). Since the purpose of this portfolio is to provide a stable core for one’s net worth, incremental adjustments are the order of the day.
2022 is shaping up to be a very interesting year so far. As I write this, this S&P 500 is -7.66% for the year. However, this bellwether belies huge dispersion across equity styles. US Small Caps as proxied by the Russell 2000 are down nearly 11.50%, and the Russell 2000 Growth index is down nearly 16% (!!). Ex-US and “value” style securities have delivered much more muted declines. Treasuries are down slightly and gold is flat.
All in all, the current market trends are relatively more favorable for a diversified portfolio such as this one. I say “relatively” because if 2022 plays out as the dominant narratives expect we are going to see rising interest rates, slowing growth and elevated inflation. A nasty cocktail for financial assets. Such an environment is one where most long-only allocations will be “taking their medicine.”
Nonetheless, a relatively stable portfolio core with some downside protection should provide a base of capital that can be selectively redeployed into the pain to scoop up some bargains in individual securities. I have a feeling there will be plenty to look at this year!
Updated performance statistics available here. The portfolio was -1.80% in November. This compares favorably with many equity market segments (US large cap being a notable exception). Relative to a “vanilla” US-equity-only implementation, ex-US equity exposure and a growth style tilt weighed on performance.
Month-to-date in December, the portfolio has been relatively flat, down 12 basis points. Overall it is shaping up to be a very mediocre year for the strategy (which I may write about more when the full year is on the books).
But yes. Another Dune take. I watched the movie over the weekend. Here are some unfocused thoughts. They are not particularly organized or polished. If you are not interested in Dune or the Dune movie you can safely skip this.
Overall, I thought this was about as good a Dune movie as you can make in a standard movie runtime. The challenge (and temptation) facing anyone adapting Dune to the screen is that it lies partway between space opera/fantasy (Star Wars) and what I will call “concept sci-fi” (The Three Body Problem; Solaris). Space opera films quite well. Concept sci-fi is trickier. It can involve action, but is typically more about ideas than characters. The things that make Dune uniquely Dune do not necessarily film well. They are more conceptual than operatic.
Villeneuve’s film uses production design and cinematography to pull some of the conceptual weight. It all “feels right” relative to the book. It leaves you feeling that the production team “did their homework.” Some of it may have been lifted directly from the thwarted Jodorowsky Dune adaptation (the Giedi Prime establishing shots come to mind). The “weight” of the novel’s worldbuilding comes through on the screen.
Problems? Conceptual issues aside, even in superficial plot and character terms there is a lot of stuff to jam into a Dune movie’s runtime. Inevitably, and even split into multiple parts, things end up feeling rushed. To a fan of the book, the first third of the movie feels extremely rushed. Borderline disjointed. (spoiler) As a result the downfall of House Atreides doesn’t quite feel “earned.”
To me the most natural form for any Dune adaptation is television mini-series. Perhaps this was considered and abandoned (I don’t know all the backstory). I suspect there are at least two seasons’ worth of material in the portion of the story covered in this first Villeneuve adaptation. This would allow the audience some time to marinate in the ambience. It would also reduce the need for clunky expository dialogue. These info-dumps are expedient but jarring, in contrast to the novel’s show-don’t-tell style of exposition.
Whoa. I really got behind on these updates. Here is the current portfolio allocation:
There have been some modest changes over the past three months (embarrassingly my last update covered through June). These are the result of market moves and also some mild rebalancing as I had cash flows into the portfolio.
The detailed performance comparison data is available here.
2021 continues to be a “take your medicine” year for the strategy. It’s a good illustration of why more people don’t invest like this. This kind of relative performance is trying, even for someone who has spent a good deal of time “doing the work” on the strategy.
Longer term, the static allocation (Portfolio 2 in the data) continues to perform as expected. The difference between this return stream and Portfolio 1 (the live track record) is partly why I decided to jettison the tactical elements of the original strategy. In 2020 the tactical overlays kept a significant portion of the portfolio in cash well past the nadir of the Covid drawdown. This led to poor up capture in the latter half of the year.