Mad Money Machine

Lazy Portfolios Thru June 2010

Paul Douglas Boyer — Sun, 04 Jul 2010 14:23:10 +0000

We have arrived at mid-year 2010 and can now take a look at the half-year results of the lazy portfolios we have been tracking. It looks like the Paul Boyer Permanent Portfolio has gained 1% per month this year. Just four of the portfolios are positive with three of them based around the Permanent Portfolio concept. Portfolios P2 and P1 used Vanguard mutual funds. If we would have used the recommended ETFs TLT, SHY, VTI, VBR, VWO, and GLD, the results were 6.6% and 6.1%, respectively.

ID#	Portfolio Name	YTD Return
P2	Paul Boyer Permanent Portfolio	6.0%
P1	Harry Browne Permanent Portfolio	5.4%
P3	Permanent Portfolio Fund	2.5%
P23	Larry Swedroe Min Fat Tails	0.9%
P11	Bill Schultheis’ Coffeehouse Portfolio Vanguard	-0.3%
P14	David Swensen’s Yale Endowment	-0.9%
P17	Scott Burns’ Couch Potato Portfolio	-1.3%
P22	Larry Swedroe Simple	-1.9%
P7	William Bernstein’s No Brainer Cowards Portfolio	-2.0%
P19	Scott Burns’ Four Square Portfolio	-2.5%
P13	David Swensen’s Lazy Portfolio	-2.5%
P25	IFA Index Portfolio 50 Bright Red	-2.5%*
P12	FundAdvice Ultimate Buy & Hold	-2.6%
P20	Scott Burns’ Five Fold Portfolio	-3.3%
P10	Ted Aronson’s Lazy Portfolio	-3.9%
P24	IFA Index Portfolio 100 Bright Red	-4.4%*
P6	Rick Ferri Core Four	-4.6%
P8	William Bernstein’s Basic No-Brainer Portfolio	-4.8%
P18	Scott Burns’ Margarita Portfolio	-4.9%
P21	Scott Burns’ Six Ways from Sunday Portfolio	-5.2%
P15	MMM Do It Yourself Funds	-5.2%
P4	Taylor Larimore 3 Fund	-5.8%
P5	Taylor Larimore 4 Fund	-5.9%
P9	Dilbert World’s Simplest	-6.7%
P16	Vanguard Windsor	-8.7%

Have you shifted into a Permanent Portfolio yet?

Here are the returns of the individual components of the lazy portfolios:

ID	FUND NAME	TICKER	%	YTD Return
P1	Harry Browne Permanent Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	25%	-6.4%
	Vanguard Long-Term Treasury Investor	VUSTX	25%	12.4%
	Vanguard Short-Term Treasury	VFISX	25%	2.1%
	SPDR Gold Shares	GLD	25%	13.4%
				5.4%
P2	Paul Boyer Permanent Portfolio
	Vanguard Small Cap Value Index	VISVX	12.5%	-1.0%
	Vanguard Emerging Mkts Stock Idx	VEIEX	12.5%	-6.9%
	Vanguard Long-Term Treasury Investor	VUSTX	25%	12.4%
	Vanguard Short-Term Treasury	VFISX	25%	2.1%
	SPDR Gold Shares	GLD	25%	13.4%
				6.0%

P3	Permanent Portfolio Fund	PRPFX	100%	2.5%


P4	Taylor Larimore 3 Fund
	Vanguard Total Intl Stock Index	VTSMX	50%	-6.4%
	Vanguard Short-Term Bond Index	VGTSX	30%	-12.0%
	Vanguard Total Bond Market Index	VBMFX	20%	4.9%
		TOTAL	100%	-5.8%

P5	Taylor Larimore 4 Fund
	Vanguard Total Intl Stock Index	VTSMX	50%	-6.4%
	Vanguard Short-Term Bond Index	VGTSX	30%	-12.0%
	Vanguard Total Bond Market Index	VBMFX	10%	4.9%
	Vanguard Inflation-Protected Secs	VIPSX	10%	3.9%
		TOTAL	100%	-5.9%

P6	Rick Ferri Core Four
	Vanguard Total Intl Stock Index	VTSMX	48%	-6.4%
	Vanguard REIT Index	VGSIX	8%	4.7%
	Vanguard Total Intl Stock Index	VGTSX	24%	-12.0%
	Vanguard Total Bond Market Index	VBMFX	20%	4.9%
		TOTAL	100%	-4.6%

P7	William Bernstein’s No Brainer Cowards Portfolio
	Vanguard Short-Term Investment-Grade	VFSTX	40%	2.5%
	Vanguard Total Stock Mkt Idx	VTSMX	15%	-6.4%
	Vanguard Small Cap Value Index	VISVX	10%	-1.0%
	Vanguard Value Index	VIVAX	10%	-6.0%
	Vanguard Emerging Mkts Stock Idx	VEIEX	5%	-6.9%
	Vanguard European Stock Index	VEURX	5%	-16.9%
	Vanguard Pacific Stock Index	VPACX	5%	-6.9%
	Vanguard REIT Index	VGSIX	5%	4.7%
	Vanguard Tax-Managed Small Cap Inv	VTMSX	5%	-0.9%
		TOTAL	100%	-2.0%

P8	William Bernstein’s Basic No-Brainer Portfolio
	Vanguard 500 Index	VFINX	25%	-7.2%
	Vanguard Tax-Managed Small Cap Inv	VTMSX	25%	-0.9%
	Vanguard Tax-Managed Intl	VTMGX	25%	-13.7%
	Vanguard Short-Term Bond Index	VBISX	25%	2.6%
		TOTAL	100%	-4.8%

P9	Dilbert World’s Simplest
	Vanguard Total Intl Stock Index	VTSMX	50%	-6.4%
	Vanguard Short-Term Bond Index	VEIEX	50%	-6.9%
		TOTAL	100%	-6.7%

P10	Ted Aronson’s Lazy Portfolio
	Vanguard Emerging Mkts Stock Idx	VEIEX	20%	-6.9%
	Vanguard 500 Index	VFINX	15%	-7.2%
	Vanguard Pacific Stock Index	VPACX	15%	-6.9%
	Vanguard Extended Market Idx	VEXMX	10%	-1.8%
	Vanguard Inflation-Protected Secs	VIPSX	10%	3.9%
	Vanguard European Stock Index	VEURX	5%	-16.9%
	Vanguard High-Yield Corporate	VWEHX	5%	2.3%
	Vanguard Long-Term U.S. Treasury	VUSTX	5%	12.4%
	Vanguard Small Cap Growth Index	VISGX	5%	-1.7%
	Vanguard Small Cap Value Index	VISVX	5%	-1.0%
	Vanguard Total Stock Mkt Idx	VTSMX	5%	-6.4%
		TOTAL	100%	-3.9%

P11	Bill Schultheis’ Coffeehouse Portfolio Vanguard
	Vanguard Total Bond Market Index	VBMFX	40%	4.9%
	Vanguard 500 Index	VFINX	10%	-7.2%
	Vanguard Value Index	VIVAX	10%	-6.0%
	Vanguard Total Intl Stock Index	VGTSX	10%	-12.0%
	Vanguard REIT Index	VGSIX	10%	4.7%
	Vanguard Small Cap Value Index	VISVX	10%	-1.0%
	Vanguard Small Cap Index	NAESX	10%	-1.4%
		TOTAL	100%	-0.3%

P12	FundAdvice Ultimate Buy & Hold
	Vanguard 500 Index	VFINX	6%	-7.2%
	Vanguard Value Index	VIVAX	6%	-6.0%
	Vanguard Small Cap Index	NAESX	6%	-1.4%
	Vanguard Small Cap Value Index	VISVX	6%	-1.0%
	Vanguard REIT Index	VGSIX	6%	4.7%
	Vanguard Developed Markets Index	VDMIX	12%	-13.5%
	Vanguard Inflation-Protected Secs	VIPSX	8%	3.9%
	Vanguard Interm-Term U.S. Treas	VFITX	20%	6.3%
	Vanguard Short-Term Treasury	VFISX	12%	2.1%
	Vanguard International Value	VTRIX	12%	-14.7%
	Vanguard Emerging Mkts Stock Idx	VEIEX	6%	-6.9%
		TOTAL	100%	-2.6%

P13	David Swensen’s Lazy Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	30%	-6.4%
	Vanguard REIT Index	VGSIX	20%	4.7%
	Vanguard Developed Markets Index	VDMIX	15%	-13.5%
	Vanguard Emerging Mkts Stock Idx	VEIEX	5%	-6.9%
	Vanguard Inflation-Protected Secs	VIPSX	15%	3.9%
	Vanguard Short-Term Treasury	VFISX	15%	2.1%
		TOTAL	100%	-2.5%

P14	David Swensen’s Yale Endowment
	Vanguard Total Stock Mkt Idx	VTSMX	30%	-6.4%
	Vanguard REIT Index	VGSIX	20%	4.7%
	Vanguard Developed Markets Index	VDMIX	15%	-13.5%
	Vanguard Emerging Mkts Stock Idx	VEIEX	5%	-6.9%
	Vanguard Inflation-Protected Secs	VIPSX	15%	3.9%
	Vanguard Short-Term Treasury	VUSTX	15%	12.4%
		TOTAL	100%	-0.9%

P15	MMM Do It Yourself Funds
	Vanguard 500 Index	VFINX	12%	-7.2%
	Vanguard Value Index	VIVAX	12%	-6.0%
	Vanguard Small Cap Value Index	VISVX	20%	-1.0%
	Bridgeway Ultra-Small Company Market	BRSIX	20%	-1.9%
	Vanguard REIT Index	VGSIX	5%	4.7%
	Vanguard International Value	VTRIX	9%	-14.7%
	Vanguard International Explorer	VGTSX	9%	-12.0%
	Vanguard Emerging Mkts Stock Idx	VEIEX	13%	-6.9%
		TOTAL	100%	-5.2%

P16	Vanguard Windsor	VWNDX	100%	-8.7%

P17	Scott Burns’ Couch Potato Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	50%	-6.4%
	Vanguard Inflation-Protected Secs	VIPSX	50%	3.9%
		TOTAL	100%	-1.3%

P18	Scott Burns’ Margarita Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	33%	-6.4%
	Vanguard Inflation-Protected Secs	VIPSX	33%	3.9%
	Vanguard Total Intl Stock Index	VGTSX	33%	-12.0%
		TOTAL	100%	-4.9%

P19	Scott Burns’ Four Square Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	25%	-6.4%
	Vanguard Inflation-Protected Secs	VIPSX	25%	3.9%
	Vanguard Total Intl Stock Index	VGTSX	25%	-12.0%
	Vanguard REIT Index	VGSIX	25%	4.7%
		TOTAL	100%	-2.5%

P20	Scott Burns’ Five Fold Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	20%	-6.4%
	Vanguard Inflation-Protected Secs	VIPSX	20%	3.9%
	Vanguard Total Intl Stock Index	VGTSX	20%	-12.0%
	Vanguard REIT Index	VGSIX	20%	4.7%
	American Century International Bd Inv	BEGBX	20%	-6.8%
		TOTAL	100%	-3.3%

P21	Scott Burns’ Six Ways from Sunday Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	16.7%	-6.4%
	Vanguard Inflation-Protected Secs	VIPSX	16.7%	3.9%
	Vanguard Total Intl Stock Index	VGTSX	16.7%	-12.0%
	Vanguard REIT Index	VGSIX	16.7%	4.7%
	American Century International Bd Inv	BEGBX	16.7%	-6.8%
	Vanguard Energy	VGENX	16.7%	-14.3%
		TOTAL	100.0%	-5.2%

P22	Larry Swedroe Simple
	Vanguard Value Index	VIVAX	15%	-6.0%
	Vanguard Small Cap Value Index	VISVX	15%	-1.0%
	Vanguard Small Cap Index	NAESX	13%	-1.4%
	Vanguard Emerging Mkts Stock Idx	VEIEX	4%	-6.9%
	Vanguard International Value Inv	VTRIX	13%	-14.7%
	Vanguard Inflation-Protected Secs	VIPSX	40%	3.9%
		TOTAL	100%	-1.9%

P23	Larry Swedroe Min Fat Tails
	Vanguard Small Cap Value Index	VISVX	15%	-1.0%
	Vanguard Emerging Mkts Stock Idx	VEIEX	15%	-6.9%
	Vanguard Inflation-Protected Secs	VIPSX	35%	3.9%
	Vanguard Short-Term Treasury	VFISX	35%	2.1%
		TOTAL	100%	0.9%

P24	IFA Index Portfolio 100 Bright Red
	DFA U.S. Large Company	DFUSX	12%	-7.2%
	DFA U.S. Large Cap Value	DFLVX	12%	-4.4%
	DFA U.S. Micro Cap	DFSTX	20%	-0.5%
	DFA U.S. Small Cap Value	DFFVX	20%	-1.4%
	DFA Real Estate Securities	DFGEX	5%	-1.3%
	DFA Intl Value	DFIVX	6%	-14.4%
	DFA Intl Small Company	DFISX	6%	-6.9%
	DFA Intl Small Cap Value	DISVX	6%	-10.7%
	DFA Emerging Markets	DFEMX	4%	-6.0%
	DFA Emerging Markets Value	DFEVX	4%	-6.8%
	DFA Emerging Markets Small Cap	DEMSX	5%	-1.8%
		TOTAL	100%	-4.9%*

P25	IFA Index Portfolio 50 Bright Red
	DFA U.S. Large Company	DFUSX	12%	-7.2%
	DFA U.S. Large Cap Value	DFLVX	12%	-4.4%
	US Small Cap	DFSTX	6%	-0.5%
	DFA U.S. Small Cap Value	DFFVX	6%	-1.4%
	DFA Real Estate Securities	DFGEX	6%	-1.3%
	DFA Intl Value	DFIVX	6%	-14.4%
	DFA Intl Small Company	DFISX	3%	-6.9%
	DFA Intl Small Cap Value	DISVX	3%	-10.7%
	DFA Emerging Markets	DFEMX	2%	-6.0%
	DFA Emerging Markets Value	DFEVX	2%	-6.8%
	DFA Emerging Markets Small Cap	DEMSX	2%	-1.8%
	DFA One-Year Fixed-Income I	DFIHX	10%	0.6%
	DFA Two-Year Global Fixed-Income I	DFGFX	10%	1.1%
	DFA Five-Year Government I	DFFGX	10%	2.8%
	DFA Five-Year Global Fixed-Income I	DFGBX	10%	3.2%
		TOTAL	100%	-3.0%*

*Note that these results use Yahoo! Finance adjusted historical returns with the exception of IFA portfolios results from IFA.com that include IFA’s fee.

Permanent Portfolio volatility in May

Paul Douglas Boyer — Wed, 02 Jun 2010 20:54:59 +0000

Dave sent this to me and said I could post it for all of you. Nice analysis of how the Permanent Portfolio did last month.

Permanent Portfolio performance during the very volatile month of May

This May was the worst May since 1940. The Dow and VTI (total stock market) both had losses of -7.9%. Volatility has returned to the market! When the market is volatile, the wisdom of investing in the Permanent Portfolio becomes apparent. The Harry Browne Permanent Portfolio always has the same four assets: total stock market (VTI), gold (GLD), long term Treasury bonds (TLT) and short term Treasury bonds (SHY). These assets are rebalanced each year.

Let’s see how the Permanent Portfolios performed on a weekly basis for the very volatile month of May.

Date Stocks Gold Long Bonds Short Bonds PermPort
— VTI GLD TLT SHY

May   3 –   7          -7.0%               2.5%              4.1%                  0.3%                     0.0%
May 10 – 14           3.0%               1.8%             -0.7%                 0.1%                     1.0%
May 17 – 21          -4.5%              -4.3%              3.7%                 0.1%                    -1.2%
May 24 – 28           0.7%               3.2%             -2.0%                  0.0%                     0.5%

Total for May -7.9% 3.1% 5.1% 0.5% 0.2%

2010 to May -0.1% 10.8% 8.9% 1.4% 5.5%

The week-by-week returns show that the Permanent Portfolio is much less volatile than the VTI. The volatility is amazingly low because the VTI and TLT (and GLD) move in opposite directions — they are negatively correlated. The first week of May provides a good example of the negative correlation of the assets: the VTI was down -7.0% while GLD was up 2.5%, TLT was up 4.1% and SHY was up 0.3%. This resulted in a 0.0% change for the Permanent Portfolio. The returns for each of the other three weeks further demonstrate the negative correlations of the assets.

The final returns for the month of May show that if you had been invested in the Permanent Portfolio you would have been ahead by 0.2% instead of being behind by -7.9% for a VTI investment. A Permanent Portfolio investor would not think that this May was the worst May since 1940.

The last line in the table shows the year-to-date returns for each of the assets. The advantage of the Permanent Portfolios over the VTI (total stock market) is obvious.

The main problem with the Permanent Portfolio is that it is just too boring for most investors!

MMM-178: A Look Back, A Look Forward

Paul Douglas Boyer — Mon, 31 May 2010 23:50:15 +0000

How have lazy portfolios performed so far in 2010? How do you get started investing in the Permanent Portfolio?

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Review the performance of Lazy Portfolios
Why does risk matter?
Which account holds which asset?
How to buy bonds?

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Lazy Portfolios Thru May 2010

Paul Douglas Boyer — Sat, 29 May 2010 12:28:45 +0000

Here are the Year-To-Date returns of the Lazy Portfolios through the end of May 2010. The components of each portfolio are listed at the end. The “Paul Boyer Permanent Portfolio” is my modification of the Harry Browne Permanent Portfolio where instead of investing 25% in the total US stock market, we invest 12.5% in US Small Cap Value and 12.5% in Emerging Markets.

ID#	Portfolio Name	YTD Return
P2	Paul Boyer Permanent Portfolio	5.0%
P1	Harry Browne Permanent Portfolio	4.8%
P3	Permanent Portfolio Fund	3.3%
P11	Bill Schultheis’ Coffeehouse Portfolio Vanguard	2.6%
P23	Larry Swedroe Min Fat Tails	1.6%
P14	David Swensen’s Yale Endowment	1.6%
P24	IFA Index Portfolio 100 Bright Red	1.3%
P17	Scott Burns’ Couch Potato Portfolio	1.3%
P22	Larry Swedroe Simple	1.2%
P7	William Bernstein’s No Brainer Cowards Portfolio	0.9%
P19	Scott Burns’ Four Square Portfolio	0.8%
P13	David Swensen’s Lazy Portfolio	0.7%
P25	IFA Index Portfolio 50	0.4%
P15	MMM Do It Yourself Funds	0.1%
P12	FundAdvice Ultimate Buy & Hold	-0.7%
P20	Scott Burns’ Five Fold Portfolio	-0.9%
P10	Ted Aronson’s Lazy Portfolio	-1.2%
P6	Rick Ferri Core Four	-1.2%
P8	William Bernstein’s Basic No-Brainer Portfolio	-1.3%
P16	Vanguard Windsor	-1.5%
P21	Scott Burns’ Six Ways from Sunday Portfolio	-2.3%
P4	Taylor Larimore 3 Fund	-2.8%
P5	Taylor Larimore 4 Fund	-2.9%
P18	Scott Burns’ Margarita Portfolio	-2.9%
P9	Dilbert World’s Simplest	-3.6%

Below is a Return vs. Risk Chart for these portfolios from 1985 through 2009 (Note: this chart does not include returns through the end of May 2010). The ideal portfolio would be high return at low risk and thus appear at the top left of the chart. [Chart data is computed using Simba's spreadsheet from the Bogleheads.org forum with the exception of IFA portfolios from ifa.com.]

See how there is almost an invisible boundary line from lower left to upper right? That is the “Efficient Frontier” and shows that returns are correlated with risk over the long term. It is nearly impossible to construct a portfolio that will be above that efficient frontier. So the only question you need to answer is, how much risk are you willing to accept. That is, can you tolerate the downturns in the market in the short term?

Looking at a shorter term, here is a chart showing just the previous ten years from 2000 through 2009.

I like the boost to returns the Paul Boyer Permanent Portfolio got during prosperity and it didn’t hurt too much during recession either.

And to see if you can indeed stomach a bad short term, here is a chart with just the previous three years:

How about a chart of just the recent heyday of stocks from 2003 thru 2006:

Looking at past charts is fun, but should not be the only data you use to make investment decisions. I like the Permanent Portfolio concept because it is so simple, has low fees, and covers the four economic cycles of prosperity, inflation, deflation, and recession. It has been shown to be the lowest in risk among the lazy portfolios while not sacrificing returns. They are the only portfolios to include gold.

Here are the components of each of the portfolios*:

				YTD
ID#	PORTFOLIO NAME	TICKER	%	Return
P1	Harry Browne Permanent Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	25%	-0.4%
	Vanguard Long-Term Treasury Investor	VUSTX	25%	7.3%
	Vanguard Short-Term Treasury	VFISX	25%	1.4%
	SPDR Gold Shares	GLD	25%	10.8%
		TOTAL	100%	4.8%
P2	Paul Boyer Permanent Portfolio
	Vanguard Small Cap Value Index	VISVX	12.5%	7.7%
	Vanguard Emerging Mkts Stock Idx	VEIEX	12.5%	-6.9%
	Vanguard Long-Term Treasury Investor	VUSTX	25%	7.3%
	Vanguard Short-Term Treasury	VFISX	25%	1.4%
	SPDR Gold Shares	GLD	25%	10.8%
		TOTAL	100%	5.0%

P3	Permanent Portfolio Fund	PRPFX	100%	3.3%


P4	Taylor Larimore 3 Fund
	Vanguard Total Intl Stock Index	VTSMX	50%	-0.4%
	Vanguard Short-Term Bond Index	VGTSX	30%	-11.0%
	Vanguard Total Bond Market Index	VBMFX	20%	3.2%
		TOTAL	100%	-2.8%

P5	Taylor Larimore 4 Fund
	Vanguard Total Intl Stock Index	VTSMX	50%	-0.4%
	Vanguard Short-Term Bond Index	VGTSX	30%	-11.0%
	Vanguard Total Bond Market Index	VBMFX	10%	3.2%
	Vanguard Inflation-Protected Secs	VIPSX	10%	2.9%
		TOTAL	100%	-2.9%

P6	Rick Ferri Core Four
	Vanguard Total Intl Stock Index	VTSMX	48%	-0.4%
	Vanguard REIT Index	VGSIX	8%	11.5%
	Vanguard Total Intl Stock Index	VGTSX	24%	-11.0%
	Vanguard Total Bond Market Index	VBMFX	20%	3.2%
		TOTAL	100%	-1.2%

P7	William Bernstein’s No Brainer Cowards Portfolio
	Vanguard Short-Term Investment-Grade	VFSTX	40%	1.7%
	Vanguard Total Stock Mkt Idx	VTSMX	15%	-0.4%
	Vanguard Small Cap Value Index	VISVX	10%	7.7%
	Vanguard Value Index	VIVAX	10%	-0.4%
	Vanguard Emerging Mkts Stock Idx	VEIEX	5%	-6.9%
	Vanguard European Stock Index	VEURX	5%	-16.0%
	Vanguard Pacific Stock Index	VPACX	5%	-4.8%
	Vanguard REIT Index	VGSIX	5%	11.5%
	Vanguard Tax-Managed Small Cap Inv	VTMSX	5%	6.7%
		TOTAL	100%	0.9%

P8	William Bernstein’s Basic No-Brainer Portfolio
	Vanguard 500 Index	VFINX	25%	-1.5%
	Vanguard Tax-Managed Small Cap Inv	VTMSX	25%	6.7%
	Vanguard Tax-Managed Intl	VTMGX	25%	-12.2%
	Vanguard Short-Term Bond Index	VBISX	25%	1.7%
		TOTAL	100%	-1.3%

P9	Dilbert World’s Simplest
	Vanguard Total Intl Stock Index	VTSMX	50%	-0.4%
	Vanguard Short-Term Bond Index	VEIEX	50%	-6.9%
		TOTAL	100%	-3.6%

P10	Ted Aronson’s Lazy Portfolio
	Vanguard Emerging Mkts Stock Idx	VEIEX	20%	-6.9%
	Vanguard 500 Index	VFINX	15%	-1.5%
	Vanguard Pacific Stock Index	VPACX	15%	-4.8%
	Vanguard Extended Market Idx	VEXMX	10%	5.7%
	Vanguard Inflation-Protected Secs	VIPSX	10%	2.9%
	Vanguard European Stock Index	VEURX	5%	-16.0%
	Vanguard High-Yield Corporate	VWEHX	5%	0.4%
	Vanguard Long-Term U.S. Treasury	VUSTX	5%	7.3%
	Vanguard Small Cap Growth Index	VISGX	5%	5.8%
	Vanguard Small Cap Value Index	VISVX	5%	7.7%
	Vanguard Total Stock Mkt Idx	VTSMX	5%	-0.4%
		TOTAL	100%	-1.2%

P11	Bill Schultheis’ Coffeehouse Portfolio Vanguard
	Vanguard Total Bond Market Index	VBMFX	40%	3.2%
	Vanguard 500 Index	VFINX	10%	-1.5%
	Vanguard Value Index	VIVAX	10%	-0.4%
	Vanguard Total Intl Stock Index	VGTSX	10%	-11.0%
	Vanguard REIT Index	VGSIX	10%	11.5%
	Vanguard Small Cap Value Index	VISVX	10%	7.7%
	Vanguard Small Cap Index	NAESX	10%	6.7%
		TOTAL	100%	2.6%

P12	FundAdvice Ultimate Buy & Hold
	Vanguard 500 Index	VFINX	6.00%	-1.5%
	Vanguard Value Index	VIVAX	6.00%	-0.4%
	Vanguard Small Cap Index	NAESX	6.00%	6.7%
	Vanguard Small Cap Value Index	VISVX	6%	7.7%
	Vanguard REIT Index	VGSIX	6%	11.5%
	Vanguard Developed Markets Index	VDMIX	12%	-12.1%
	Vanguard Inflation-Protected Secs	VIPSX	8%	2.9%
	Vanguard Interm-Term U.S. Treas	VFITX	20%	4.1%
	Vanguard Short-Term Treasury	VFISX	12%	1.4%
	Vanguard International Value	VTRIX	12%	-12.7%
	Vanguard Emerging Mkts Stock Idx	VEIEX	6%	-6.9%
		TOTAL	100.00%	-0.7%

P13	David Swensen’s Lazy Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	30%	-0.4%
	Vanguard REIT Index	VGSIX	20%	11.5%
	Vanguard Developed Markets Index	VDMIX	15%	-12.1%
	Vanguard Emerging Mkts Stock Idx	VEIEX	5%	-6.9%
	Vanguard Inflation-Protected Secs	VIPSX	15%	2.9%
	Vanguard Short-Term Treasury	VFISX	15%	1.4%
		TOTAL	100%	0.7%

P14	David Swensen’s Yale Endowment
	Vanguard Total Stock Mkt Idx	VTSMX	30%	-0.4%
	Vanguard REIT Index	VGSIX	20%	11.5%
	Vanguard Developed Markets Index	VDMIX	15%	-12.1%
	Vanguard Emerging Mkts Stock Idx	VEIEX	5%	-6.9%
	Vanguard Inflation-Protected Secs	VIPSX	15%	2.9%
	Vanguard Short-Term Treasury	VUSTX	15%	7.3%
		TOTAL	100%	1.6%

P15	MMM Do It Yourself Funds
	Vanguard 500 Index	VFINX	12.00%	-1.5%
	Vanguard Value Index	VIVAX	12.00%	-0.4%
	Vanguard Small Cap Value Index	VISVX	20.00%	7.7%
	Bridgeway Ultra-Small Company Market	BRSIX	20.00%	6.4%
	Vanguard REIT Index	VGSIX	5.00%	11.5%
	Vanguard International Value	VTRIX	9.00%	-12.7%
	Vanguard International Explorer	VGTSX	9.00%	-11.0%
	Vanguard Emerging Mkts Stock Idx	VEIEX	13.00%	-6.9%
		TOTAL	100.00%	0.1%

P16	Vanguard Windsor	VWNDX	100.00%	-1.5%

P17	Scott Burns’ Couch Potato Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	50%	-0.4%
	Vanguard Inflation-Protected Secs	VIPSX	50%	2.9%
		TOTAL	100%	1.3%

P18	Scott Burns’ Margarita Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	33.30%	-0.4%
	Vanguard Inflation-Protected Secs	VIPSX	33.30%	2.9%
	Vanguard Total Intl Stock Index	VGTSX	33.30%	-11.0%
		TOTAL	99.90%	-2.9%

P19	Scott Burns’ Four Square Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	25%	-0.4%
	Vanguard Inflation-Protected Secs	VIPSX	25%	2.9%
	Vanguard Total Intl Stock Index	VGTSX	25%	-11.0%
	Vanguard REIT Index	VGSIX	25%	11.5%
		TOTAL	100%	0.8%

P20	Scott Burns’ Five Fold Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	20%	-0.4%
	Vanguard Inflation-Protected Secs	VIPSX	20%	2.9%
	Vanguard Total Intl Stock Index	VGTSX	20%	-11.0%
	Vanguard REIT Index	VGSIX	20%	11.5%
	American Century International Bd Inv	BEGBX	20%	-7.4%
		TOTAL	100%	-0.9%

P21	Scott Burns’ Six Ways from Sunday Portfolio
	Vanguard Total Stock Mkt Idx	VTSMX	16.7%	-0.4%
	Vanguard Inflation-Protected Secs	VIPSX	16.7%	2.9%
	Vanguard Total Intl Stock Index	VGTSX	16.7%	-11.0%
	Vanguard REIT Index	VGSIX	16.7%	11.5%
	American Century International Bd Inv	BEGBX	16.7%	-7.4%
	Vanguard Energy	VGENX	16.7%	-9.2%
		TOTAL	100.0%	-2.3%

P22	Larry Swedroe Simple
	Vanguard Value Index	VIVAX	15%	-0.4%
	Vanguard Small Cap Value Index	VISVX	15%	7.7%
	Vanguard Small Cap Index	NAESX	13%	6.7%
	Vanguard Emerging Mkts Stock Idx	VEIEX	4%	-6.9%
	Vanguard International Value Inv	VTRIX	13%	-12.7%
	Vanguard Inflation-Protected Secs	VIPSX	40%	2.9%
		TOTAL	100%	1.2%

P23	Larry Swedroe Min Fat Tails
	Vanguard Small Cap Value Index	VISVX	15%	7.7%
	Vanguard Emerging Mkts Stock Idx	VEIEX	15%	-6.9%
	Vanguard Inflation-Protected Secs	VIPSX	35%	2.9%
	Vanguard Short-Term Treasury	VFISX	35%	1.4%
		TOTAL	100%	1.6%

P24	IFA Index Portfolio 100 Bright Red
	DFA U.S. Large Company	DFLCX	12%	0.0%
	DFA U.S. Large Cap Value	DFLVX	12%	3.8%
	DFA U.S. Micro Cap	DFSCX	20%	8.7%
	DFA U.S. Small Cap Value	DFSVX	20%	9.0%
	DFA Real Estate Securities	DFREX	5%	11.7%
	DFA Intl Value	DFIVX	6%	-11.6%
	DFA Intl Small Company	DFISX	6%	-5.7%
	DFA Intl Small Cap Value	DISVX	6%	-8.0%
	DFA Emerging Markets	DFEMX	4%	-5.5%
	DFA Emerging Markets Value	DFEVX	4%	-6.8%
	DFA Emerging Markets Small Cap	DEMSX	5%	-3.6%
		TOTAL	100%	1.32%*

P25	IFA Index Portfolio 50
	DFA U.S. Large Company	DFLCX	12%	0.0%
	DFA U.S. Large Cap Value	DFLVX	12%	3.8%
	DFA U.S. Micro Cap	DFSCX	6%	8.7%
	DFA U.S. Small Cap Value	DFSVX	6%	9.0%
	DFA Real Estate Securities	DFREX	6%	11.7%
	DFA Intl Value	DFIVX	6%	-11.6%
	DFA Intl Small Company	DFISX	3%	-5.7%
	DFA Intl Small Cap Value	DISVX	3%	-8.0%
	DFA Emerging Markets	DFEMX	2%	-5.5%
	DFA Emerging Markets Value	DFEVX	2%	-6.8%
	DFA Emerging Markets Small Cap	DEMSX	2%	-3.6%
	DFA One-Year Fixed-Income I	DFIHX	10%	0.4%
	DFA Two-Year Global Fixed-Income I	DFGFX	10%	0.8%
	DFA Five-Year Government I	DFFGX	10%	2.3%
	DFA Five-Year Global Fixed-Income I	DFGBX	10%	3.2%
		TOTAL	100%	0.36%*

*Note that these results use Yahoo! Finance adjusted historical returns with the exception of IFA portfolios results from IFA.com that include IFA’s fee.

Mark Hulbert Writes About the Permanent Portfolio

Paul Douglas Boyer — Wed, 19 May 2010 14:30:12 +0000

In his MarketWatch article today, Mark Hulbert writes,

Would you be interested in an all-weather portfolio that, despite hardly ever changing its composition, performs creditably in almost all market environments?

Hulbert characterizes the Permanent Portfolio this way:

Browne’s idea was to invest in a basket of asset classes, each one of which has a low correlation with the others. As a result, when any one of the asset classes is performing poorly, there is a good chance that the others will at least be holding their own — if not actually appreciating in value.

He describes Harry Browne’s Permanent Portfolio as an antidote to volatility. He then gives some past performance of the PRPFX fund which somewhat implements Harry Browne’s concept:

This fund over the last 15 years (through Apr. 30) has produced an 8.2% annualized return, which is remarkable given that stocks, gold and bonds did not, individually, do as well: The Wilshire 5000 index gained 7.9% over the same period, the Shearson Lehman Treasury Index produced a 6.3% annualized return, and gold bullion rose at a 7.7% annualized pace.

I might suggest that while the result of the four asset classes is low correlation, that is not the way Harry Browne explained the reasoning. Instead, the portfolio is designed to have one component that does well in each of four different economic circumstances: prosperity (stocks), inflation (gold), deflation (LT Bonds), and recession (cash). Harry said that while you can expect one of the assets to go down, the one that goes up more than makes up for the loser. For example, while one asset may go down 30% or 40%, the winning asset can go up 200% or 300%, more than making up for the loss.

I think the best thing about the portfolio is this: No one can predict the future so we might as well invest in all possibilities.

Present Permanent Portfolio Performance…

Paul Douglas Boyer — Fri, 07 May 2010 14:55:37 +0000

So, how has the Harry Browne Permanent Portfolio done so far in 2010?

Thru yesterday’s market turmoil, the components have done the following:

VTI +2.8% (Stocks)

TLT +9.2% (Bonds)

SHY +1.3% (Cash)

GLD +10.4% (Gold)

And the total portfolio, assuming 25% in each at the start of 2010 is…

+5.9%

How’s that compare with YOUR portfolio?

MMM-177: Harry Browne’s 16 Golden Rules of Financial Safety

Paul Douglas Boyer — Wed, 05 May 2010 16:41:40 +0000

I present Harry Browne’s 16 Golden Rules of Financial Safety and talk about his Permanent Portfolio.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Radiohead – No Surprises
Read Harry Browne’s 16 Golden Rules of Financial Safety.
Link to the link to Harry Browne’s radio show where he discussed the 16 rules.
The book Fail-Safe Investing: Lifelong Financial Security in 30 Minutes by Harry Browne
Join the Permanent Portfolio Forum
GLD, PHYS, TLT, SHY, VBR, VWO
Tears for Fears – Sowing the Seeds of Love
The Fixx – Two Different Views

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Permanent Portfolio Discussion Forum

Paul Douglas Boyer — Fri, 30 Apr 2010 15:07:25 +0000

If you have any questions about Harry Browne’s Permanent Portfolio, head over to the Permanent Portfolio Discussion Forum that CraigR just started over at CrawlingRoad.com. Experts there have studied it from all angles and can help you get it implemented yourself.

And here’s the book you need to read:

iPad Cat Teaches Investing

Paul Douglas Boyer — Sat, 24 Apr 2010 20:02:07 +0000

The latest video from MadMoneyMachine studios:

MMM-176: Things Are Messed UP

Paul Douglas Boyer — Fri, 09 Apr 2010 16:29:32 +0000

Mulch Guy showed up. EPCOT Candy Lady. GURU MediumTex. Quotes. What’s UP with UP? Voiceover class. TOO: FireCalc. Bonus: iPad unboxing.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Mulch Guy showed up. Why didn’t we get his phone number?
How can Candy Lady at EPCOT remain enthusiastic after all these years?
GURU: MediumTex, world’s most ardent advocate for the Harry Browne Permanent Portfolio. Read MediumTex at Bogleheads.org.
Harry Browne Quote of the Week
Wise words from Reagan’s first inaugural.
Things are Messed UP.
Voiceover Class. Is everything a scam?
Have you watched the YouTube videos I put together for IFA? See previous posts here on the blog.
TOOL: FireCalc to see if you have enough money.
BONUS SEGMENT: iPad Unboxing.

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IFA Radio Interviews John Bogle

Paul Douglas Boyer — Fri, 09 Apr 2010 12:08:04 +0000

I put the video together for this audio interview with Vanguard Group founder John Bogle. I hope you like it.

Permanent Portfolio to Perfect Portfolio?

Paul Douglas Boyer — Wed, 31 Mar 2010 14:18:48 +0000

Harry Browne’s Permanent Portfolio is so simple. Split your investments into equal parts stocks, bonds, cash, and gold. Is it too simple? Can it be improved yet remain simple? I used Simba’s spreadsheet (from Bogleheads.org) to back-test some alternatives from 1972 through 2009.

First, the original portfolio:

Stocks: VTSMX (Total US Stock Market)
Bonds: VUSTX (Long-term Bond)
Cash: VMPXX (Money Market)
Gold (Kitco 1972-2004, GLD 2004-2009)

yielded the following return vs. risk:

P1 (HBPP):

Compound Annual Growth Rate (CAGR): 9.1%
Standard Deviation (Risk): 8.02%
Sharpe Ratio: 0.46

Next, substitute 2-Year Short Term Treasuries (VFISX) instead of Money Market:

P2 (P1 with 2-yr T-Bills):

CAGR: 9.5%
Standard Deviation (Risk): 8.17%
Sharpe Ratio: 0.50

Alternatively, how about for the “Prosperity” component, i.e., Stocks, we substitute half US Small-Cap Value and half Emerging Markets for the US Total Stock Market:

P3 (P1 with 12.5% VISVX and 12.5% VEIEX):

CAGR: 10.8%
Standard Deviation (Risk): 8.57%
Sharpe Ratio: 0.64

And finally, combine P2 and P3 to have 2-yr T-Bills, US Small Cap Value, and Emerging Market:

P4 (P2 with 12.5% VISVX and 12.5% VEIEX):

CAGR: 11.3%
Standard Deviation (Risk): 8.65%
Sharpe Ratio: 0.68

And just for comparison I ran “Solver” on Simba’s spreadsheet to find the least risky portfolio that yielded 11.3% of that time span. It came up with the following mix:

VISVX (US Small Cap Value): 13.43%
VEIEX (Emerging Market): 14.30%
PCRIX (Commodities): 5.19%
VFITX (5-Yr T-Bills): 49.31%
VFISX (2-Yr T-Bills): 7.88%
Gold: 9.88%

Which resulted in:

P5 (Solver optimized portfolio):

CAGR: 11.3%
Standard Deviation (Risk): 7.25%
Sharpe Ratio: 0.80

And here is a chart with them all plotted, CAGR vs. Standard Deviaion (Risk):

I’ve played with lots of combinations of back-tested portfolios through many different time periods and one thing is common: substituting VISVX and VEIEX for VTSMX resulted in higher returns and a higher Sharpe Ratio. And short term T-Bills for cash also added nicely.

Note that I only show the Solver optimized portfolio (P5) for reference. I believe it strays too far from the Permanent Portfolio strategy to be safe going forward.

I talked about P4 on MMM-175: The Perfect Portfolio. While I am not yet invested in it, it is the one I am targeting. I do not expect a CAGR of 11.3% for the next 37 years, but if I can get 6% I will be very happy.

New Video: Super Nova to Black Hole

Paul Douglas Boyer — Wed, 24 Mar 2010 12:52:14 +0000

It is truly surprising, amazing, astonishing to find out how poorly active managers do when compared to indexes. Watch this video:

New Video: Sweet Surrender

Paul Douglas Boyer — Thu, 11 Mar 2010 03:47:59 +0000

Have a look at this video. It points out the importance of long-term data, the irrelevance of even reliable advice, the emphasis of trading by the financial media, and the wisdom of Nobel prize winners regarding investments.

Oh, and don’t miss THE END-ing!

Harry Browne Investment Show Archives

Paul Douglas Boyer — Mon, 08 Mar 2010 14:06:22 +0000

I have had a number of emails from people trying to get into the Harry Browne investment radio show archives. The links at the original site appear to be down, but fortunately Craig at CrawlingRoad blog has a mirror that you can use. I’ve recently listened to all 44 investment shows and am now going through his political shows starting back from 2002. (I have my own personal mirror of those.)

MMM-175: The Perfect Portfolio

Paul Douglas Boyer — Sun, 28 Feb 2010 17:06:52 +0000

Disney World in Feb. iPhone and earphones. Jakob Fugger. VBR, VWO, TLT, GLD, SHY: The Perfect Portfolio. Tool: My Personal Index. Lego Mindstorms.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Our trip to Disney World
iPhone volume knob broke off
Got the new iPhone 3GS. Fast!
Bought iPhone earphones on eBay for 7 bucks. Not bad!
GURU: Jakob Fugger “Fugger the Rich”
Harry Browne’s portfolio recommendations. His book Fail-Safe Investing.
He talked about TLT, the 20+ yr Treasury Bond fund.
Here’s the Perfect Portfolio (for me): 13% VBR, 12% VWO, 25% TLT, 25% GLD, 25% SHY.
TOOL: My Personal Index for Windows. Mac and Linux versions may be coming soon. Version 3 also due.
Got any Lego Mindstorms suggestions? Email me!

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The Value of the Right Advisor

Paul Douglas Boyer — Sat, 13 Feb 2010 19:47:33 +0000

The voice sounds familiar…

MMM-174: Money Talk

Paul Douglas Boyer — Fri, 29 Jan 2010 18:18:54 +0000

Harry Browne. Etymotic ear phones are sturdy. Sortino Ratio. GURU Richard Maybury. Broken Window Fallacy. Hybrid School Bus. Economics of Recycling. BRK/B split 50:1. Bing cashback. No deer. TOOL: Readability.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

A tribute to Harry Browne
Opening theme by Bob Crosby, Come Back Sweet Papa
Etymotic ear phones are the most sturdy I’ve found.
How should I use Facebook?
How does anyone read the important stuff from Twitter?
Sortino ratio doesn’t penalize upswings as risk
My iPad predictions results
GURU: Richard Maybury. He writes the Early Warning Report. He has a YouTube channel worth watching.
Harry Browne talks about the Broken Window Fallacy in his 2004-12-05 Money Talk radio show.
Our county bought a hybrid school bus… to save money.
The Economics of Recycling
The Berkshire Hathaway 50:1 stock split.
Bing Cashback still works. Buy your gold eagle coins now.
No deer this year.
TOOL: Readability will help you read web articles
You gotta watch Fear the Boom and Bust

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It’s iPad!

Paul Douglas Boyer — Wed, 27 Jan 2010 21:42:47 +0000

Just a quick post to review the predictions I made and how well they turned out.

Name: iPad (Ding!)
Size: 9.7″ (Ding! I said 10″)
Form Factor: Basically a large iPod Touch (Ding!)
Home Button? (Ding!)
Aluminum back? (Ding!)
Buttons and holes: headphone (Ding), microphone (Ding), volume (Ding), mute (Ding), sleep (Ding)
USB port? (Bzzzt!) Only has Apple dock. But that serves to connect to your computer. And it does have adapters for cameras.
Orientation: (Ding! Both portrait and landscape)
WiFi (Ding)
Internet connectivity: (Ding? 3G is optional. Nice surprise that it is easy to get 250MB/mo for $14.95)
Won’t have a phone (Ding!)
Software: (“It will be like an iPhone with some iWork apps available for download” DING! DING!) It actually runs iPhone apps like I expected.
Books: (“They will probably start selling books through iTunes.” DING! DING!)
GPS and big maps (DING!)
Cameras: (BZZZZZT!) Not three, not two, not even one camera. Maybe version 2?
Cost? I said $899 dropping to $699. I assumed it would have a 3G card installed. Their price for 3G? $629 to $829. Plus you want to buy the keyboard, case, and adapters. So I give myself a DING! for the price as well.

So I think I got most everything right. Big misses on cameras and USB port. Bottom line is that the iPad is pretty much exactly what I pictured it to be in my mind. I will own one (or more).

MMM-173: iPad Predictions

Paul Douglas Boyer — Wed, 13 Jan 2010 18:08:38 +0000

The devaluation in Venezuela. Lazy Portfolio analysis. The Riskcog.com portfolio analysis tool. iPad predictions.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

The devaluation of the bolivar in Venezuela.
Randy Stonehill’s The Sky is Falling and Venezuela.
I review the analysis I recently did (here on these pages) of adding gold to lazy portfolios.
Using Excel Solver to find the best portfolio from the past.
TOOL: Riskcog.com Reduce Risk
I give my wish list and predictions for the upcoming Apple iPad (iTablet, iSlate, or iBook?)

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Time To Talk Tablet: iTablet, iSlate, iBook, iPad

Paul Douglas Boyer — Wed, 13 Jan 2010 03:57:32 +0000

Take your pick of names but we are all awaiting the next holy product to be announced from Apple. After “The Jesus Phone” which had people literally weeping in their seats upon its unveiling, the Apple Table is set to be the next revolutionary gadget that we didn’t realize we couldn’t live without.

I have a small window of time before the official announcement is made before which I can make my own predictions, wish lists, and observations about the new miracle device. Apple is expected to announce it on January 27th at a media event. I guess there is not enough time for them to get all my wish list items incorporated into the thing, but at least they will have my wish list for their 2nd generation of it by 2011.

First, my preferred name for the thing is the Apple iPad. I like the way it rhymes with iPod and it is alliterative with iPhone as well. iSlate is my 2nd choice just because it sounds cool. iBook would be my 3rd choice as it would fit into the MacBook line nicely, but iBook places too much emphasis on this thing being just an eReader and not enough on the other things I want it to do. Read on. iTablet? Sounds like something Dell would call it.

Form factor. The iPad will have the 10” screen everyone is expecting and will basically be a “Honey I Blew Up the iPhone” looking thing. A home button at the bottom and that’s all you see physically. Aluminum back, buttons and holes along the edges. Nice places to put your fingers as you hold it in portrait or landscape orientation.

Buttons and holes will include those found on the iPhone: Headphone/microphone jack, volume buttons, mute switch, sleep button. But it will also include USB. The BIG question is will it include a power hole or a iPod dock hole? You see, it makes a difference in deciding if the iPad will SYNC with a computer or will BE a computer. Will your iTunes library still be on your MacBook and you have to sync it with the iPad, or will the iPad have enough storage to hold all your music by itself? My guess: it will BE a computer and can run iTunes on its own. It could still share music with your MacBook with that family sharing route and it could share photos and files and so forth. So my money is on it having a nice magnetic power adapter with all kinds of neat accessories we can buy like a car charger and external battery. PLEASE let me use the same magnetic adapter as my MacBook. My guess: they won’t! (They make TONS of money on those things!) And make some kind of adapter that lets me plug it into all my various iPod connectors in the car and external speakers.

The USB adapter will allow commonly needed connections like cameras, flips, and, wait for it… iPhones! And yes, i want to be able to charge my iPhone from the battery of my iPad. You won’t need USB for the external keyboard and mouse because those will connect via BlueTooth. And while you are typing and mousing on your iPad, you will need it to somehow stand up, won’t you? So I’m wondering if this thing will have some sort of picture-frame-like stand on its back that lets you sit it on a desk or table either in portrait or landscape orientation.

I keep harping on orientation. For me this is key to the iPad: being able to read books and long pdfs on it in portrait mode. Already it is more useful than a MacBook for that reason alone. I find reading books in landscape to be too small a window into the text. I don’t know how many others are like me, but the first thing I do on a new computer is move all of those dock or taskbar things from the bottom of the screen over to the left side. That gives me a little more reading room on my MacBook. And I try to trim menu bars and status bars away as well. With the iPad in portrait mode I will be in reading heaven even on a smaller 10” screen.

How will this thing get on the Internet is a key question. Of course it will have Wi-Fi. But will it be on the 3G and EDGE networks as well? Will I have to buy more service from ATT Wireless? Will it tether through my iPhone? Will the iPad BE a phone? My hopes are that it will BE a phone that uses the same phone number as my iPhone, that I can talk on either one, that I can switch between one and the other during a call, that I can surf the net on the iPad while talking on the iPhone, that it can let me make and receive calls with my BlueTooth headset, and that it can act perfectly well as a desktop speakerphone. Not too much to ask, right? If iPhone was the “Jesus Phone” then what would this iPad be, the “GOD” phone?

But my guess of what will actually happen is more limited. I think for this first release it will have Wi-Fi and 3G and EDGE DATA networking only. You will have to add some sort of appendage to your ATT Wireless iPhone plan to get remote internet on the thing. No calls, talking is for iPhones and that is the way we say it will be, says Apple. Maybe in a later release they can figure out if it makes sense to add a phone or not. Perhaps too many people will end up using the data plan to make Skype calls and they will come around.

What about software? Is the iPad a small MacBook or a big iPhone? Wow, this is a tougher one to call. I can make a good case for both. You want to be able to run iWork on the thing, right? But yet Apple wants you to buy 10 billion apps for the thing too. So like a flash it hits me: it runs MacOS but with an iPhone mode so you can do BOTH. But the iPhone OS is all about limiting what you can do. Will Apple want to limit what you can do in the iPad? If so, it will be more like an iPhone with some iWork apps available for download. Actually in that case they will probably throw in some iWork apps for free but you gotta buy all the other cool stuff.

How will you use this thing if you already have a MacBook and an iPhone like I do? You will have your iPhone in your pocket, your MacBook on your desk, and your iPad in your hands. On the couch, in a seat, or in bed. This is the “media comes to me” device. Read a book? Sure, the iPhone already has the Kindle app from Amazon so you can buy thousands of books for $9.99 and start reading. Knowing Apple, they will probably start selling books through the iTunes store. Don’t wanna miss a market, right? But I better be able to get pdfs onto this thing easily and freely or it goes in the trash.

You will also of course watch movies, listen to music, surf the net, and make blog postings. Standard fare. It is the book reading thing that makes the iPad so special. And of course it will be the first successful touch screen computer from Apple. The iPhone set the stage, but now we will have pinch and zoom super-sized. We’ll be using our arms more to see those details from the satellite view. Ah yes, GPS. Big maps finally. Would this thing be appropriate on the dashboard? Not unless it has a camera that can show what is in FRONT of the car! And speaking of cameras, it needs at least two: One on back like normal on the iPhone for taking vids of others and one on front for taking vid of you. Maybe one on the side just to be sly. And I’d really love it if the one on the front is actually UNDER the center of the screen, invisible to us but fully able to see us nonetheless. That way on video calls people will be looking AT YOU instead of somewhere off into space.

Finally, the dreaded question: How much will they want for this thing? Remember when the Jesus Phone first came out how much they charged? Same deal here, waayy more than what we want to pay. They will really put it to those early-adopter guys, hahaha! I expect that early price to be $899. Gasp! With netbooks retailing for $399! Yep, but it will drop after a few months to $699 and everybody will be like, “Whew, now I can afford one at last.”

So prepare for the iPad invasion. Prepare for the weeping, shaking bodies to behold not the iTablet being brought down from the mountain but the iPad being unveiled on Steve’s stage. I can’t wait.

Longer Term Look at Gold in a Portfolio

Paul Douglas Boyer — Tue, 12 Jan 2010 11:39:52 +0000

The previous post looked at the effect of gold in a portfolio for the 10-year period 1990-2009. Some may say that 10 years is not statistically long enough to be meaningful. So in this post I take a look at the 38 years from 1972 through 2009.

To start, I selected a widely-followed portfolio of stocks and bonds. The Fund Advice Vanguard Moderate portfolio has the following composition:

Fund	Symbol	%
Large Cap Value	VIVAX	6
Large Cap Blend	VFINX	6
Small Cap Value	VISVX	6
Small Cap Blend	NAESX	6
REIT	VGSIX	6
Int’l Developed	VDMIX	12
Emerging Mkt	VEIEX	6
Int’l Value	VTRIX	12
5 Yr. T-Bills	VFITX	20
TIPS	VIPSX	8
2 Yr Treasury	VFISX	12

(Fund Advice recently split their recommended 12% of VDMIX into 6% VDMIX and 6% VFSVX, the All-World ex-US Small Cap index.)

The Fund Advice portfolio placed 32% in fixed-income and 68% in equities. For the period 1972 through 2009, the portfolio achieved a compound annual growth rate (CAGR) of 10.95% with a standard deviation (risk) of 11.6%. This works out to a Sharpe ratio of 0.51.

Let’s now see what would have happened if instead of 100%, we placed 75% of our investment in the Fund Advice portfolio and the remaining 25% in gold. We would have achieved a CAGR of 11.09%, a risk of 10.08%, and a Sharpe ratio of 0.58. So gold did add to the returns for the period while reducing the risk. How could that be since gold itself was very risky over the period? Gold by itself returned only 8.62% while being a whopping 26.88% risky.

How about instead of investing the 25% in risky gold, we had placed the 25% in safe but similarly rewarding Treasury Money Market fund? The Vanguard VMPXX by itself for 1972 through 2009 had a CAGR of 5.66% with a risk of only 3.03%. The resulting combination with the Fund Advice portfolio shows a CAGR of 9.75%, a risk of 8.77%, and a Sharpe ratio of 0.5.

The return vs. risk of the three portfolio mixes and the individual components gold and money market (MM) are shown in the following graph.

Portfolio	CAGR	Risk	Sharpe
Fund Advice	10.95%	11.60%	0.51
Fund Advice + Gold	11.09%	10.08%	0.58
Fund Advice + Money Market	9.75%	8.77%	0.50

So against our intuition, investing in risky gold actually reduced risk in the overall portfolio while adding to the returns. It even beat a comparable portfolio that invested in money markets. This is the power of Modern Portfolio Theory in action showing that while some assets zig, others zag to combine in wonderful ways.

Sources: Vanguard.com, Simba’s spreadsheet (with 2009 data added), Bogelheads.org, FundAdvice.com.

Portfolios: Gold or No Gold?

Paul Douglas Boyer — Mon, 11 Jan 2010 20:51:47 +0000

Should a portfolio own gold? I am on the quest to obtain the definitive answer to that question. Here are the results of one exercise in which I take a model Vanguard portfolio and compare it with the same portfolio with a 25% allocation to gold for the time period 1999 through 2009.

Here is the model portfolio composition which is based on the IFA Index Portfolio 25 (source). We will call this the Vanguard 25 portfolio:

Vanguard Index for Vanguard 25 Portfolio	Symbol	% Allocation
Vanguard S&P 500	VFINX	7%
Vanguard Large Cap Value	VIVAX	7%
Vanguard Small Cap	NAESX	3.5%
Vanguard Small Cap Value	VISVX	3.5%
Vanguard REIT	VGSIX	3.5%
Vanguard Developed Markets	VDMIX	7%
Vanguard Emerging Markets	VEIEX	3.5%
Vanguard Short Term Bond	VBISX	65%

I am going to use the time period from 1999 through 2009 for the analysis. Crunching the numbers in Simba’s spreadsheet (Revised with 2009 data added. More info about the spreadsheet at the Bogleheads forum.) I come up with a compound annual growth rate (CAGR) of 5.6% with a average annualized standard deviation (risk) of 7.1%. This works out to a Sharpe ratio of 0.41 for the time span.

So, what if instead of having 100% of our total investment in the Vanguard 25 portfolio we placed just 75% of our investment in it and placed the remaining 25% in gold? Running the numbers in Simba’s spreadsheet (Simba uses this source for gold’s annual return.) I come up with a CAGR of 7.5% with a risk of 6.9% resulting in a Sharpe ratio of 0.70. Call this one Vanguard 25 w/ Gold. The following chart plots these two results. As a reference I also show on the following charts the Harry Browne Permanent Portfolio which is comprised of 25% each of Total Stock Market (VTSMX), Long Term Gov’t Bond (VUSTX), Money Market (VMPXX), and Gold.

Also shown in the chart is the same exercise but instead of placing 25% in gold we substitute a Treasury bill money market fund (VMPXX) for the 25%. The portfolio with money market fund added resulted in a CAGR of 5.0%, risk of 5.3%, and a Sharpe ratio of 0.41. Call it the Vanguard 25 w/ T-Bills. Note that the Sharpe ratio is the same as the original portfolio because in a Sharpe ratio calculation we subtract out the risk-free rate of return of money markets. So adding money markets to a portfolio does not change the ratio of return vs. risk.

The next chart adds the individual return vs. risk of gold and money market for the same time period showing the higher risk with accompanying higher return of gold for the period.

This next chart adds the individual return vs. risk of all of the other components of the Vanguard 25 portfolio for the same time period.

And for the fun of it, I computed the optimal portfolio for the time span based upon the highest Sharpe ratio and as computed by Excel Solver. This tool allows you to specify an attribute you wish to maximize while varying the percentage amounts of the various funds. In this case, we chose to maximize the Sharpe ratio and allow Excel Solver to pick which combination of which funds achieved it. The following table shows the result.

Vanguard Index for OPTIMAL Portfolio	Symbol	% Allocation
Vanguard S&P 500	VFINX	7%
Vanguard Large Cap Value	VIVAX	-
Vanguard Small Cap	NAESX	-
Vanguard Small Cap Value	VISVX	-
Vanguard REIT	VGSIX	1%
Vanguard Developed Markets	VDMIX	-
Vanguard Emerging Markets	VEIEX	-
Vanguard Short Term Bond	VBISX	79%
Gold	-	14%

The OPTIMAL portfolio resulted in a CAGR of 5.8%, a risk of 2.6%, and the resulting Sharpe ratio of 1.12. Its addition to the first chart is shown below.

How about continuing to optimize with a high Sharpe ratio yet obtaining greater return? To do that I subtracted some short-term bonds and added some gold leaving the other two components the same. That is, gold at 35% and bonds at 57%. This resulted in a CAGR of 7.6%, risk of 7.7% and Sharpe ratio of 0.99 and can be seen in the following chart.

Vanguard Index for OPTIMAL Portfolio	Symbol	% Allocation
Vanguard S&P 500	VFINX	7%
Vanguard Large Cap Value	VIVAX	-
Vanguard Small Cap	NAESX	-
Vanguard Small Cap Value	VISVX	-
Vanguard REIT	VGSIX	1%
Vanguard Developed Markets	VDMIX	-
Vanguard Emerging Markets	VEIEX	-
Vanguard Short Term Bond	VBISX	57%
Gold	-	35%

Therefore, to answer the original question, “Should a portfolio own gold?” it appears that for the period 1999 through 2009 the answer would have been a resounding “yes.” We find that adding gold to the portfolio resulted in higher returns with less risk.

I caution that this process is called data mining and should only serve as input into future portfolio analysis and not serve as the only decision regarding future investments. In subsequent analysis I will not limit the possibilities to just the Vanguard 25 fund set but will open it up to Vanguard funds available since 1972 and/or 1985.

Sources: Vanguard.com, Bogleheads.org, IFA.com, and http://www.finfacts.ie/Private/curency/goldmarketprice.htm

Lazy Portfolio 2005 – 2009 Return vs. Risk Chart

Paul Douglas Boyer — Wed, 06 Jan 2010 22:55:55 +0000

Let’s go back and gather up the gains for 2005 and 2006 to add to our analysis with this chart.

As you can see, the Harry Browne Permanent Portfolio still has the best “top-leftedness” of these select Lazy Portfolios. It had an annualized return of 8% with an annualized standard deviation of 8.8%. That results in a nicely high Sharpe ratio of 0.75, assuming a risk-free rate of return of 1.37% for all 5 years (not likely).

The HBPP’s out-performance is due to the stellar performance of gold through all of these years. I am still not convinced this is the one for all seasons. So I will be performing some analysis of this portfolio for the years that were most favorable to equities and not gold and see how the HBPP would have held up.

MMM-172: The Year We Make Contact

Paul Douglas Boyer — Tue, 05 Jan 2010 18:23:48 +0000

The Gift Card Store. Lazy Portfolios analyzed. Cheap Gas! 2010 (the movie). The tax on gold. End the Fed.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Bruce Cockburn’s Making Contact
How about a gift card to the Gift Card Store?
Lazy Portfolios reviewed for the past 3 years
Risk vs. Return on select lazy portfolios
Game: Race for the Galaxy (#12 at Boardgamegeek.com) Very Fun!
the tax on gold
Change for $6.18
Inspectd.com gone bye-bye
Foliodex.com gone bye-bye
Tool: Cheap Gas! on the iPhone
A trillion is a million million
End the Fed. Read it.
Check out MoveYourMoney.info
IFAradio.com is a new podcast with the same guys from Sound Investing podcast.
2010: Odyssey Two and 2010 (The Year We Make Contact)
I hope you have a happy… (2010 and twenty teens.) [Audio file cut off a couple of seconds early.]

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Risk vs Return Chart 2007 – 2009

Paul Douglas Boyer — Mon, 04 Jan 2010 23:59:27 +0000

Here is a chart that sort of goes with the previous posting’s table. I have taken just a few of the portfolios of interest and computed their standard deviation for the time period of three years. Then plotted their ANNUALIZED return on the Y axis vs. their annualized standard deviation along the X axis.

Remember that you’d want your portfolio to be at the top left of the chart because their you get the higher return with the lower risk.

So for the three year period from 2007 through 2009 the Harry Browne Permanent Portfolio showed the best return and the least risk of any of the featured lazy portfolios. More analysis to come…

Lazy Portfolio Results for 3, 2 and 1 Years

Paul Douglas Boyer — Mon, 04 Jan 2010 18:24:08 +0000

Here’s an early look at how the professional Lazy Portfolios have performed for the past 3, 2, and 1 years ending 31 December 2009. These are cumulative returns, with dividends reinvested. Data comes from Yahoo! Finance into my spreadsheet. There may be errors in the data. Some funds may not yet have reported dividends for 2009, for example. I have sorted the results by the 3-year performance.

Lazy Portfolio	3 years	2 years	1 year
Permanent Portfolio Fund (PRPFX)	21.7%	8.3%	18.2%
Harry Browne Permanent Portfolio ETFs	20.1%	4.6%	7.5%
Bogle Tax-Sheltered	2.7%	-5.9%	16.0%
Scott Burns’ Couch Potato Portfolio	1.3%	-6.8%	18.4%
FundAdvice Ultimate Buy & Hold	-2.4%	-9.7%	19.2%
Scott Burns’ Six Ways from Sunday Portfolio	-3.1%	-12.1%	23.3%
Scott Burns’ Margarita (also Andrew Tobias) Portfolio	-3.8%	-13.0%	23.3%
Andrew Tobias’ Lazy Portfolio	-3.8%	-13.0%	23.3%
Ted Aronson’s Lazy Portfolio	-3.9%	-14.3%	33.3%
William Bernstein’s No Brainer Cowards Portfolio	-4.4%	-8.6%	22.8%
Bill Schultheis’ Coffeehouse Portfolio Vanguard	-4.6%	-7.4%	19.0%
Scott Burns’ Five Fold Portfolio	-4.9%	-10.1%	20.7%
John Wasnik’s Nano Investment Portfolio	-5.8%	-10.1%	19.9%
Frank Armstrong’s Ideal Index Portfolio	-7.2%	-12.3%	22.3%
William Bernstein’s Basic No-Brainer Portfolio	-7.9%	-12.9%	19.9%
David Swensen’s Lazy Portfolio	-8.1%	-12.6%	23.0%
Bill Schultheis’ Coffeehouse Portfolio Three ETF	-8.4%	-12.7%	19.5%
Bill Schultheis’ Coffeehouse Portfolio ETFs	-8.5%	-9.0%	17.5%
Scott Burns’ Four Square Portfolio	-11.0%	-14.6%	24.5%
Jim Lowell’s Sower’s Growth Portfolio	-11.8%	-19.1%	33.3%
Merriman Vanguard Equity	-15.9%	-20.9%	32.4%
MMM SMILER Funds	-16.1%	-20.1%	37.2%
IFA Index Portfolio 100 Bright Red	-18.7%	-20.7%	33.4%
MMM Do It Yourself Funds	-17.5%	-20.4%	33.5%
MMM Do It Yourself ETFs	-19.5%	-21.2%	31.6%
Ben Stein Retirement	-34.0%	-24.3%	19.7%
Ben Stein 2007	N/A	-16.2%	26.9%
WisdomTree	N/A	-21.9%	28.0%
(Results computed with data from Yahoo! Finance. IFA Data comes from ifa.com.)

Here are some takeaways from the table:

These portfolios have different objectives, different asset class mixtures, and different risk profiles. Simply comparing them on historic returns is not a way to pick one for an investment.
Therefore, a better way to view these would be to look at them on a return vs. risk graph where risk is defined as the standard deviation of the portfolio. Then we could see at a glance which portfolio has the more desired “top-leftedness” (meaning it had higher return for its level of risk).
Only two of the portfolios invested in gold, the two top performers. Future results may vary.
I believe most funds have no load.
I changed the Harry Browne Permanent Portfolio cash holding from VFISX to SHY which results in a slightly lower return (about 1% less). I would prefer to hold it in a money market fund, but Yahoo! Finance does not give me historical returns for them.
Remember, this table probably has errors!

MMM-171: Last Show of the Decade

Paul Douglas Boyer — Wed, 16 Dec 2009 21:54:09 +0000

Tiger’s Song. Tool: EzBacktest. Scary movies. Impact of inflation on stock prices. Improved Permanent Portfolio? Paul Samuelson.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Tiger’s Song. I predict he will play in the Master’s this year.
Scary movies: Food, Inc. (on DVD) and Collapse (not yet on DVD)
What would be the impact of runaway inflation on stock prices?
Tool: EzBacktest Needs the ability to measure risk and not just returns.
Can we do just a little bit better than the Harry Browne Permanent Portfolio? How about using IFA Index Portfolio 25 for the stocks, bonds, and cash portion?
Guru: Paul Samuelson (flashback to show 52) and read the requiem.
Hook up with Mad Money Machine at Facebook

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MMM-170: The Dollar Meltdown

Paul Douglas Boyer — Sun, 06 Dec 2009 16:22:05 +0000

Tiger Woods reads Physics book. Santa Got a Bailout. GoogleFinance’s closeyest attribute. Guru is Charles Goyette and his book Dollar Meltdown.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Song: Our Winter Wonderland from Sunshine Collective.
Tiger Woods reading a Physics book?
TOOL: =GoogleFinance(symb, “closeyest”)
Song: Santa Got a Bailout from Eddy Delbridge
GURU: Charles Goyette and his book The Dollar Meltdown
We are entering Tax-Loss Harvest season

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Music from MusicAlley.com:

Our Winter Wonderland from Sunshine Collective

Santa Got a Bailout from Eddy Delbridge

MMM-169: The Deer Hunter

Paul Douglas Boyer — Thu, 19 Nov 2009 16:41:41 +0000

Twenty hours in the woods. The Lost Symbol. The Lost Voice. Q-School. Gerald Celente. V. Big Break. Matrix. Mad Max.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

My tale of the invisible deer.
Dan Brown’s The Lost Symbol
My Lost Voice
Tiger wins a golf tournament.
It is Q-School season.
TOOL: Deer Hunter
GURU: Gerald Celente
V, The Big Break, Matrix, Mad Max
Berkshire B to spit 50:1. Wanna buy 49?

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MMM-168: Carry Trade

Paul Douglas Boyer — Wed, 11 Nov 2009 19:49:48 +0000

Cramer’s 12 Stocks to Play in Recovery. Carry Trade and You. Wegman’s. Vitamin D3. Phil’s whiff.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Cramer’s 12 Stocks to play in the Recovery. From his book Getting Back to Even and from his web site (google it). Follow the portfolio in Icarra.
Carry Trade. When dollar stops falling, watch out, says Roubini. Karl says there is a direct inverse correlation between the dollar index and the S&P 500 index.
Wegman’s
Vitamin D3
Phil’s Whiff.

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MMM-167: Mad Golfing Machine

Paul Douglas Boyer — Tue, 03 Nov 2009 23:26:48 +0000

CNBC viewership plunges. Golf is like investing. Investing is like golf. TOOLS I use daily. New China ETF. GURU Jim Rogers.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

CNBC Viewership PLUNGES y/o/y in October
Golf is like investing. Investing is like golf.
TOOLS: Bloomberg, Kitco Gold, Wunderground, PGA Tour, SportsTap, GolfShot all for iPhone and then the Dollar Index chart.
AlphaShares launches China All-Cap Index and Claymore announces a matching ETF with symbol YAO
GURU: Jim Rogers Bullish on China. Bearish on Bernanke. Bullish on Commodities. Bearish on the Dollar.

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MMM-166: Excuses

Paul Douglas Boyer — Wed, 14 Oct 2009 17:06:42 +0000

A review of Lazy Portfolio performance. Excuses of why no show. Atlas Shrugged review and excerpt. Inclined to Liberty excerpt. Would they call Neo a kook? Is FRB evil?

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

A review of the Lazy Portfolios performance.
Excuses of why no show.
Ayn Rand’s Atlas Shrugged review and excerpt.
I encourage you to read Inclined to Liberty
I read http://Market-Ticker.org http://globaleconomicanalysis.blogspot.com http://lewrockwell.com and listen to Adam Curry’s No Agenda show.
What would have happened if Neo had friends and family inside the Matrix? Would they have thought he was a kook when he tried to explain that the Matrix was a hoax?
Is Fractional Reserve Banking evil?

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MMM-165: It’s Not Nice to Fool Mother Nature

Paul Douglas Boyer — Tue, 25 Aug 2009 00:22:05 +0000

Economic Revival! Spitzer says it is a Chumps Game. Trapster. GolfShot. $1 an hour? Along for the Ride. An update on the Lazy Portfolios.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

It’s all fun and games until someone gets their eye poked out.
GURU: Elliot Spitzer writes in Slate: Still A Chumps Game.
TOOL: Trapster for the iPhone
TOOL: GolfShot for the iPhone
Would you accept $1 an hour to work at a car wash?
It’s not nice to fool Mother Nature!
Danny O’Keefe: Along for the Ride
Coastline covers it too.
Lazy Portfolios are on a tear for 2009!

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MMM-164: Inflated Stocks

Paul Douglas Boyer — Tue, 11 Aug 2009 01:41:21 +0000

Google Chrome OS. Golf, Tiger, PGA Championship, PGA iPhone App. Driver vs 3-wood. Back pain. Glen Echo Park. Why have stocks risen so much since March? I have the answer. Apple Mac Tablet.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Google Chrome OS
Golf, Tiger Woods, PGA Championship and iPhone app
Water hazards, lateral water hazards, and where to drop. See rulesofgolf.com rule 26.
Driver vs. 3-Wood
Hitting driver off concrete sure hurt my back.
Visit Glen Echo Park. Neat Art Deco styles. Visit Paul at the glassblower building.
Why have stocks risen so much since March? I have the answer.
Apple’s new Mac Tablet computer.
Two iPhone Apps I wanted to write.

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MMM-163: Twenty Lessons for the Next Generation

Paul Douglas Boyer — Thu, 23 Jul 2009 18:23:47 +0000

Wish you knew then what you know now? Wow, wish Tom would have won. Tiger injured? Don’t be a pigeon. Why gold is money. Mojo and Mystie.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

I sure wish Tom Watson had made that putt.
Did Tiger Woods have an injured hand?
I found my golf books.
The story of the Pigeons. Don’t be a pigeon.
DH podcast. Don’t they know why gold is money?
Our two new kittens. One is "Mojo." The other? "Mystie?" We’ll see…

Twenty Lessons for the next generation:

1. Don’t listen to the media. In fact, make a habit of turning off the TV. And if you must watch, at least skip the ads. All TV is trying to sell you something. Doesn’t matter what it is… news, business, comedy, sports. And if you have to be sold something, it is usually something you shouldn’t want. Especially CNBC. Don’t listen to politicians for the same reasons.
2. Learn to think from the perspective from the other person not just yourself all the time. Do they really have your best interest at heart? Be wary of anyone to whom you are paying money. Doctors, dentists, lawyers, accountants, financial planners, realtors. You have to assume they did not go to the trouble of setting up their professional career just to help you personally or to be your friend. Also, think about what they may actually be needing. How can you help supply it?
3. Think for yourself. Don’t let your peers con you into thinking math is boring, for example. Recognize peer pressure and revel in your ability to thwart it without being obnoxious.
4. Try to do the opposite of the first three. Try to help people at a reasonable fee, don’t get into a position of having to sell something to someone.
5. Don’t worship people: celebrities, actors, musicians, athletes, or even their ideas. As for people, they do not possess godlike powers. They are not smarter than you. Maybe they just worked hard on something. They do not deserve your worship. Instead, pay attention to the people you actually come in contact with. As for ideas, you may later learn you were wrong. Hedge your bets.
6. Be selective in your friendships. There are different levels of friends: brother or sister, close, proximity, acquaintance. Make sure you choose brotherly and close friends that are good people. Still, don’t be disappointed if they sometimes disappoint you.
7. If someone is angry with you, take a break before trying to calm them. Time heals.
8. Don’t wait to be educated. There is just about nothing that you cannot learn on your own with all the resources available today. Books everywhere, blogs, online video. Before you sign up for classes, think about self-training first.
9. Work hard. Nothing comes easy. 10,000 hours to get great. Work on the important things. Work on things that will have a meaningful result. If you are going to spend you time anyway doing something anyway, why not spend it on something that in the end you’ll have something? Guitar, piano, painting, golf, volunteering, building. Anything worth doing is worth doing right.
10. Everything in moderation, even moderation.
11. Set yourself up for happiness by setting your expectations low, then be pleasantly surprised if they are exceeded. Every year before we go to the beach we say, "It sure is going to be stinky weather this year."
12. Watch out for one-way functions. You can’t unbreak glass. Pause before you make a long term commitment. Time shares. Club memberships. New cars. Cell phone plans. Subscriptions. Cable TV. Then don’t make it.
13. Optimize delayed gratification. Most money should be saved. Yet you do need to have some fun today. Try to have fun in inexpensive ways. This can help smooth out pain of not having enough money or time later on to have fun. The more you do early in life, the harder it is to exceed it later.
14. Learn the difference between food and candy. Eat food. Go to your local farmer’s market. Plant an earth box.
15. Buy used. Houses, cars, golf clubs. But make sure you know the real reason they are selling.
16. Be alert to things that might not go the way you expect. Car breakdown. Power outage. Sickness. Then be prepared.
17. Take pictures. Your first car, your kittens, your friends, that special moment. iPhone helps here. Copy exceptional ones to a special folder.
18. Learn about the time value of money. Learn what money is. Learn how to use money efficiently to maximize your lifelong happiness. Don’t spend beyond your means.
19. Check your assumptions. Consider alternatives. Just because something has always been done that way does not necessarily mean it is the right way. Feel free to innovate.
20. Embrace the freedom you do have. Recognize that most jobs make you a slave to someone. Even if you own your own business you are enslaved to your customers. All people have to be enslaved to something in order to get food: either hunt it, farm it, or trade for it. Try to find an enslavement that you can make fun.

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MMM-162: Freedom in an Unfree World

Paul Douglas Boyer — Sun, 12 Jul 2009 21:55:38 +0000

Working at WalMart. Books. Carbohydrates are the bad thing. Your parent, the gobmint, bans bottled water. Myrtle Beach economic index. iPhone improvements. Loss aversion: in golf. Harry Browne.

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Topics in this week’s show include:

Listen to EconTalk podcast interviewing Platt who took a job at WalMart
Books Read:
- Atlas Shrugged by Rand
- Primal Body, Primal Mind by Gedgaudas
- Stumbling on Happiness by Gilbert
- Good Calories, Bad Calories by Taubes
Bundanoon bans bottled water.
the Myrtle Beach economic index
iPhone 3.0 software improvements
Wireless stereo bluetooth headset: Plantronics Voyager 855
GulagWealthFund.com: Invest in the out of control government!
Loss aversion in investing and in GOLF ! Link to the original study .
Harry Browne: How I Found Freedom in an Unfree World .

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MMM-161: Liar Test

Paul Douglas Boyer — Fri, 03 Jul 2009 18:05:07 +0000

Liar test. Myrtle Beach. Golf simulator. Assetplay.net.

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Topics in this week’s show include:

Liar Test
Myrtle Beach
Martin’s PGA Tour Superstore golf simulators
TOOL: Assetplay.net

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Ping.

Paul Douglas Boyer — Thu, 25 Jun 2009 03:03:38 +0000

Hey folks, I’m still here. Been doing a lot of golfing, amusement park going, beach combing, etc. I love summer and hot weather and don’t want to waste it by being indoors. This is just a ping to let you know everything is fine and that you can expect a show 161 probably next week. It would help if we got a rain day or two.

MMM-160: Prosperity, Apocalypse, or Just Muddle Along?

Paul Douglas Boyer — Fri, 29 May 2009 17:33:15 +0000

Sell off in bonds. Hyperinflation is certain? Fat Head the movie. Word of the Week: Redoubtable. TOOL: Toodledo.com. REHAB: IFA Returns Matrix

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Topics in this week’s show include:

10-yr bonds selling off. What is the impact?
Marc Faber is 100% sure of hyperinflation in US.
We don’t like deflation?
Watch Fat Head .
Gold up, Dollar down.
GM: Government Motors
Word of the Week: Redoubtable.
TOOL: Toodledo.com
Not TOOL: RecessionBlocker.com
REHAB: IFA Returns Matrix
Royksopp: What Else Is There?

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MMM-159: The Gone Fishin’ Portfolio

Paul Douglas Boyer — Fri, 22 May 2009 17:48:48 +0000

Outliers says you need to do something for 10,000 hours to be great at it. I’m up to 80. MMM Match Play Golf Classic. Gold vending machine. Stock Pickin’ Blues

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Topics in this week’s show include:

Opening Music: Covert Operation by Deathgunn
Outliers says do something for 10,000 hours to be great.
MMM Match Play Golf Classic (From Feb 2007)
A Gold vending machine .
Someone restocked our Geocache!
Stock Pickin’ Blues
GURU: Alexander Green and his Gone Fishin’ Portfolio
REHAB: IFA’s amazing Flash charts.
Emails from Rob, Martin, and Kevin.

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MMM-158: Avoiding the Cartel

Paul Douglas Boyer — Fri, 15 May 2009 18:05:41 +0000

HR 1207 is moving! Word of the Week: Cartel. Should you invest with IFA? Warren Buffet. Buying Puts on FAS.

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Topics in this week’s show include:

HR 1207 is up to 162 co-sponsors. Make the Fed Cartel more transparent.
MMM Word of the Week: Cartel
Email from Ed that I answer on this show:
Hi Paul,
I’m a long time listener to your podcast. Thanks for putting out such great shows.

I’m looking for a place to set up an IRA account and transfer my old 401-K plan. I looked at IFA’s web page and I have a couple questions.

1. In the unlike event that IFA goes belly up will my investment be protected?

2. Why should I go to IFA instead of signing up with a better known company like Merrill Lynch (yes they’re still around offering IRAs) or directly with Vanguard and cut out the middleman?

Thank you
Ed
REHAB: I take you on a tour of IFA.com/Step1
GURU: Warren Buffet says buy index funds.
Didn’t hear today’s Paul Boyer Show? How to get it in iTunes: Go to the Podcasts section. Find Mad Money Machine. Click it. Then click Settings. Check Every Day. Don’t use Default. When New Episodes are Available: Download All. Episodes to Keep: ALL. Press OK.
Then use the triangle to expand Mad Money Machine and if any are greyed out, press the Get button.
My Active Investment Relapse: Puts on FAS.
TOOL: Bloomberg on iPhone.

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Paul Boyer Show, 15 May

Paul Douglas Boyer — Fri, 15 May 2009 18:05:19 +0000

Got my Radius earphones. Want wireless ones though. Google Tasks outliner improvements. Losing weight. Podshifter.com works. Our geocache got muggled. HP MediaSmart backup server.

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Topics in this week’s show include:

My replacement Radius earphones arrived. Love ‘em. I used electrical tape to reinforce the junction points of the wires to the connectors.
I’m looking forward to getting WIRELESS stereo earphones for my iPhone. (AH, I just now remembered, it needs to have a microphone too!)
Google tasks keeps getting better. Now larger screen, hotkeys, calendar support. Need EXPAND/COLLAPSE though! Is there offline support?
New Year’s Resolution: Lose 30lbs. I’ve lost 18 so far… SmartForLife.com is the place for info. Costco.com is the place to purchase (cheaper).
PodShifter.com is working again. I like it.
Our geocache got muggled.
HP MediaSmart EX487 is great. Not perfect. But adding a 1TB drive to it was dumb-simple.
We bought a portable screen room. Poor Man’s Florida Room.
And more…

Music from music.podshow.com from Theory in Motion’s songs Perfect Day, Wake Up. Kean Spiraling. Snow Patrol Take Back the City.

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MMM-157: The SIMPLER Portfolio

Paul Douglas Boyer — Sat, 09 May 2009 08:06:20 +0000

This show goes into lots of fun topics. Don’t miss this one! SIMPLER Portfolio. Harry Browne. REHAB. Etc. on and on and on forever.

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Topics in this week’s show include:

Do you really need show notes? Lemme know if you miss ‘em!

Small Cap: VB

International: VSS

Micro Cap: PZI or BRSIX

Precious Metals: GLD

Large Cap: VTI

Emerging Markets: VWO

REITS: VNQ

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The Paul Boyer Show for May 8th, 2009

Paul Douglas Boyer — Sat, 09 May 2009 02:28:18 +0000

Earthbox update. Harry Browne. Great Music. Interesting Topics. Where’s the flu? Government, bah. Montana guns. Repeal the income tax amendment.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Do you really need show notes? Lemme know if you miss ‘em!
And more…

Music from music.podshow.com from Theory in Motion’s songs Perfect Day, Wake Up. Kean Spiraling. Snow Patrol Take Back the City.

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MMM-156: Investing in Smith & Wesson

Paul Douglas Boyer — Fri, 01 May 2009 22:10:43 +0000

The impact of Swine Flu. An additional quote from Dollar Crisis. GURU: G. Edward Griffin tells us where the money comes from to pay the bank’s interest. GoogleFinance function.

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Topics in this week’s show include:

Another quote from Richard Duncan’s The Dollar Crisis .
GURU: G. Edward Griffin: Where does the money come from to pay the bank’s interest?
the impact of the Swine Flu pandemic alert.
Survivalblog.com and Barrons’ both have a "BUY" on Smith & Wesson (but for different reasons).
REHAB: Riskese takes a look at the THREE factors that explain stock returns.
TOOL: =GoogleFinance(EWZ)

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The Paul Boyer Show – PlanetBoyer

Paul Douglas Boyer — Fri, 01 May 2009 22:09:52 +0000

Running Barefoot. Buying a Chevy. A trip to the dentist. iPhone earphones reviewed. A tip for your iPhone microphone.

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Topics in this week’s show include:

What TWiT sounds like to me
Running barefoot, more healthy? Check out the Vibram Five Fingers running shoes.
Buying a Chevy?
Superglue my Tooth?
iPhone Earphones
iPhone Earphone Microphone tip
And more…

Music from music.podshow.com from Theory in Motion’s songs Perfect Day, Wake Up, and Devil’s Playground.

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MMM-155: Dollar Crisis

Paul Douglas Boyer — Fri, 24 Apr 2009 09:24:04 +0000

Solin vs. Cramer. Toxic Leveraged ETFs. Efficient Markets. Marylin answers. iPhone tool. GURU Richard Duncan.

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Topics in this week’s show include:

Dan Solin vs. Jim Cramer
Ben Stein says , "I DON’T blame Mr. Cramer for trying to act as if he knows the future. That’s his gig. But the most that economic seers can do is apply broad, generally acceptable principles to current situations and try to go from there. When I stray far from that, I hope that thoughtful readers will call me to account."
Leveraged ETFs are Toxic. See my mathematical proof . But of course, they work in your favor if the underlying index does nothing but go your way.
REHAB: What does Efficient Market mean?
Subscribe to Index Funds Advisors podcast to get the DFA "What Should Investors Do Now?" episode?
Marilyn answers, "Where did the money go?"
Thomas Woods from his book Meltdown explains why the amount of gold we have can cover it all.
TOOL: Get WSJ app in your iPhone.
GURU: Richard Duncan’s The Dollar Crisis .

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090422 PlanetBoyer

Paul Douglas Boyer — Wed, 22 Apr 2009 17:29:24 +0000

NY Times losing $$. Texas Secession. Susan Boyle. Baptist checkpoint crosser. FRE CFO. Pirate advice. Twitter. iPhone radar. Golf adventures.

I ENCOURAGE you to Download this show thru iTunes! But, if you just cannot deal with that then go ahead and Play the new show right now

Topics in this week’s show include:

Advice for the NY Times.
Checks and Balances: Texas is checking Federal power.
Baptist preacher stopped at checkpoint, beaten.
Susan Boyle is a staged event.
Freddie Mac CFO found dead.
What is this Twitter thing all about anyway?
Garage door update. Strange sounds.
Golf adventures.
iPhone Tech Tip: i.wund.com and click on Interactive Radar. When that full page radar appears, click + at the bottom and say Add to Home Screen. An icon will appear among your iPhone apps to get you there quickly.
See you Friday on the Mad Money Machine.

Music from music.podshow.com from Theory in Motion’s songs Perfect Day, Wake Up, and Devil’s Playground.

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Levered ETFs are Toxic. Here’s Why.

Paul Douglas Boyer — Mon, 20 Apr 2009 14:29:10 +0000

Leveraged Exchange Traded Funds (ETFs) such as FAZ, FAS, and SKF are designed to multiply the DAILY PERCENTAGE change of the underlying index by factors of 2 or 3. They are thus toxic to your wealth and must not be held. Here’s a simple explaination of why. Take the FAS which is the 3X of XLF, the Financials fund. When XLF rises 1% in a day, the FAS is supposed to rise 3%. When things are going your way, everything is fine. But when the XLF drops, very bad things happen to FAS.

Have a look at this table:

On day 1, XLF rose 10% so FAS rose 30%. Great, you’re in the money.

But on day 2, XLF dropped back down to its starting price of $10.00, a decline of 9.09%. The bad news is that FAS declined 3X this amount or -27.27%. This takes its share price down to $9.45 instead of the $10 that you might expect.

So whereas XLF is unchanged after 2 days, FAS is down 5.45% after those same two days.

Why? The power of daily compounding instead of cumulative compounding. The leveraged ETFs are structured in a way that they compound on daily percent changes, not cumulative price changes. The day 2 decline of FAS should only be 23.08% to take it back to its original $10.00 per share price. But because it is 3X of XLF’s daily change, instead it declines 27.27%.

Said another way, the leveraged ETFs operate on the daily percent change not on the price of the underlying index.

Definitely not a buy and hold type of ETF! Not even for one day. Traders: set tight stops!