Mad Money Machine

by Paul Douglas Boyer

MMM-186: The Future is Unknowable. Invest Accordingly

  • We announce the Winner of the Lazy Portfolio Smackdown for 2011
  • Simba’s spreadsheet shows how lazy portfolios performed against each other.
  • Park City UT has enough snow for me.
  • TOOL: Podcaster app for iPhone
  • GURU: Ron Paul’s risky investing strategy. Here is the WSJ article. Here are his holdings (account required)
  • Can gains still be had in long term bonds?
  • September 17, 2012 will be the 225th anniversary of the signing of the US Constitution by 39 delegates who stayed around at the Federal Convention in Philadelphia. George Mason, Edmund Randolph, and Elbridge Gerry did not sign.
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Mon, February 13 2012 » Podcasts » Comments Off on MMM-186: The Future is Unknowable. Invest Accordingly

Lazy Portfolio Results, With Dividends

The dividend results are in, and I’ve updated the numbers, graphs, and tables. Not much change in the relative performance of the portfolios, but the year-end percentages did rise.

2011 Lazy Portfolios Monthly Results

And here is the table:

 2011 Lazy Portfolio YTD Returns

Wed, January 18 2012 » Analysis, Blog » Comments Off on Lazy Portfolio Results, With Dividends

2011 Lazy Portfolio Results (Preliminary)

Another year bites the dust and Harry Browne once again wins.

Here are the Lazy Portfolio Smackdown results for 2011. Note: these numbers are preliminary because mutual fund dividends have not yet been reported. So those lazy portfolios that hold mutual funds that pay dividends in mid to late December will probably end up about 1% higher than these numbers.

Incredibly, the Harry Browne Permanent Portfolio wins again. It beat all other non-permanent portfolios by at least 5.5%! Have a look at the chart:

2011 Lazy Portfolio Results

Click on the image to get a larger, more readable graphic.

To see the components of each Lazy Portfolio, visit the Professional Lazy Portfolios page.

Look how steadily the Harry Browne Permanent Portfolio (HBPP) gained during 2011. Especially when compared to the rest. Look at the wild ride they would have put you through from April until September. Tough to stomach that!

And for those of you who love a more tabular look:

image

 

Breaking down the HBPP, here are how the individual components performed for 2011:

image  WOW, who would have thought that long-term treasuries would go up 34%? And look at gold, up almost 10%, which also marks its 11th consecutive year of gains. Holy bullion Batman! Even cash money did you better than your bank account, up 1.4% in short-term Treasuries.

Thank you Harry Browne!

How about the losers? Well, the silly Dilbert portfolio, all stocks, dropped almost 10%. Scott Adams recommended this (google it), but it is pretty dumb. Not much less dumb is the portfolio I put out a few years ago, also all stocks, that sought to mimic the IFA Portfolio 100, their riskiest plan. So in a year when risky stocks did poorly, portfolios that invested in all risky stocks stunk.

How about something more reasonable? Good old Rick Ferri, the guy who says his “best investment in gold was his wedding ring” how did he do for you in 2011? Here is his portfolio (prior to December dividend reporting)

image

He puts 40% into a broad bond index, thinks REITs are cool, and adds some international equities for spice. The portfolio gained you less than if you had put the whole thing into SHY, the short-term treasuries fund. (But dividends for December are still coming) That’s pretty stinky. And as you can see from the chart, you got a pretty wild ride in 2011 to boot. And he makes money doing this?

Which non-Permanent Portfolio did best in 2011? That would be the Scott Burns Couch Potato Portfolio, up 5.9%. (And remember that December dividends aren’t yet included in this result.)

image

Two funds: stocks and TIPS. Stocks flat-lined. TIPS made you some money. And the ride wasn’t too wild, especially when compared to the others. But HBPP was better in both performance and risk.

I don’t want to wrap up this year-end review without mentioning the poor performance of PFPFX, the Permanent Portfolio Fund. With HBPP up 11.5%, you’d expect that the mutual fund loosely based upon his philosophy would be close to that, but you’d be wrong. PRPFX was up only 2.2% (including December dividends) for 2011. Why? Because it deviates from HBPP in risky ways including Silver, Swiss Francs, and growth stocks. And of course it has a 0.77% expense ratio for its management fees. That is disappointing. But THEY got $118 million, based upon having $15.4 billion invested. I’m not liking this.

Gee whiz, I wish I could create a mutual fund that invested in VTI, 30-year Treasuries, IAU, and short-term Treasuries. I’d pay something like 0.08% and would charge you people 0.20%. Let’s see, with $15 billion dollars under management, I’d take in $18 million each year. Easy money!

Sat, December 31 2011 » Analysis, Blog » Comments Off on 2011 Lazy Portfolio Results (Preliminary)

MMM-185: Treaty of the United Countries

  • Something different for this episode!

Imagine that a group of respected people from various Countries got together recently at some National Summit meeting (let’s say, in Philadelphia) for the explicit purpose of modifying their previous UN treaties and agreements with each other. At the outset of the Summit, it was declared that no one was allowed to talk about the Summit outside the meeting. They met for four months, in a closed Summit hall, in complete secrecy. But instead of doing what they said they were going to do and modify previous agreements, they cleverly decided to create a completely new Treaty of the United Countries, seeking to establish a single world government comprised of legislatures, judges, and even a president of the world.

The people who met at the Summit decided that in order for this new United Countries Treaty to come into being, that 9/13ths of the Countries would need to sign it. But instead of requiring signatures from the various legislatures, it just asked for signatures from special Country Summits.  At the end of the Philadelphia Summit, even though not everyone at the Summit agreed on the wording or ideas in the Treaty, they stated that the attendees “having written the Treaty decided unanimously to send it to the Countries for approval.” Heh heh, get it? They decided unanimously to send it. Clever. Thinking this would confuse ratifiers into believing the Treaty was unanimously agreed to. The wording of their new Treaty began with the phrase, “We the people of the Unified Countries…” But shouldn’t it have read, “We the countries of the Unified Countries?”

The people in favor of the new Treaty decided to take the name “Nationalists” for themselves and for everyone who agreed with this new world government, even though “Globalists” might have been a more accurate name. They called anyone that disagreed with them “Anti-Nationalists.” (Clever!) After their Summit, three of the key authors of the Treaty wrote Op-Eds in the New York Times under pseudonyms so that no one knew they were the Treaty’s authors. Clever! Their goal was to convince the Countries to agree to the Treaty. The 85 articles they wrote came to be called, “The Nationalist” or “The Nationalist Papers.”

In them they said that this new “National Government” was needed to combat a common threat. They didn’t specify the threat exactly, but perhaps it was a global environmental threat or astroid collision or lone-wolf terrorists or threat of alien invasion.  Whatever it was, this threat was a CRISIS! The Countries must act immediately to ratify the Treaty. Some even begged that time need not be taken to debate the Treaty in detail, just agree to it and trust the respected people of the Summit that it is the right thing to do for the Countries.

Some of the articles in the Treaty stated that they would need to impose taxes to fund a defense against the threat. A militant force would be assembled to fight the threat. Land for a headquarters of 10 square miles would have to be established. There was a clause that said that the new National Government could enact laws that were “necessary and proper” for executing their powers. Another one said that the new Congress would have the power to “promote the general welfare” of the United Countries.

Some things not explicitly stated in the Treaty would happen anyway: People would be employed to collect the taxes.  A World police would come about to enforce the collection of taxes. After some time, agencies would eventually rise such as the National Bureau of Investigation (NBI), World Security Agency (WSA),  The World Guard, External Revenue Service (ERS), World Reconnaissance Office (WRO), National Emergency Management Association (NEMA), Department of World Education, Department of World Energy, et cetera…

Eventually, this new National Government would grow so large as to make the governments of the individual Countries somewhat meaningless. If a Country’s police did not enforce by the new “National” laws, the NBI would be brought in to sweep down and arrest the offenders.

As time went on, the people would eventually forget that the Treaty was supposed to restrict the size of the National Government.

The Anti-Nationalists lost their argument, and the people of the World lost their liberty.

——————–

GURU Roulette:

The following is a letter, written by one of the Summit attendees, an anti-nationalist, to his country’s ratifying convention:

——————–

Gentlemen,

I am honored to enclose, pursuant to my commission, the Treaty proposed by the National Summit.

I did not agree with the system and I will submit my objections to the honorable legislature.

It was painful for me, on a subject of such global importance, to disagree with the respected members who signed the Treaty. But I believed that the World’s liberties were not secured by the new system and that it was my duty to oppose it.

Here are my main objections to the plan:

  1. The people are not adequately represented.
  2. They have no security for the right of an election.
  3. Some powers of the legislative branch are ambiguous, and others are indefinite and dangerous.
  4. The executive branch is blended with, and will have an undue influence over, the legislature.
  5. The judicial branch will be oppressive
  6. Regulations of the highest importance can be formed by the President, with the advice of two-thirds of a quorum of the Senate
  7. The system does not have the security of a Bill of Rights.

These are objections do not apply to just a specific locality, they apply equally to all of the countries.

Since the Summit’s purpose was for “the sole and express purpose of revising existing agreements, and reporting to Congress and the several legislatures, the alterations and provisions that will render the National Treaty adequate to the needs of government and the preservation of the Union of countries,” I did not imagine that these powers extended to the formation of the proposed plan. But the Summit had a different opinion, so I reluctantly accepted it, being fully convinced that in order to preserve the Union, an efficient government was absolutely necessary, and that it would be difficult to make proper amendments to the existing agreements.

The proposed system has few, if any, national features. Instead, it is a system of global government. Nevertheless, in many respects, I think it has great merit, and, by proper amendments, could be adapted to the “needs of government and preservation of liberty.”

The question on this plan involves others of the highest importance:

  1. Will the UN be closed down?
  2. Will the national governments be changed so much that they will effectively be dissolved?
  3. In lieu of the UN and national governments, will the proposed global Treaty be substituted in their place without any amendment?

Never, perhaps, were a people called upon to decide a question of greater magnitude. If the citizens of the world adopt the plan as it now stands, their liberties may be lost. But if they reject it altogether, anarchy might result. It is clear, therefore, that their decision should not be made hurriedly. The subject should be well understood. Otherwise, they might have to refuse to support the government after having hastily accepted it.

Regardless of whether they are for or against the Treaty, if discussions about it remain moderate, they will provide a great deal of information and the result will be a happy one.

Some may urge that we have total confidence in the Summit. But no matter how respectable the members may be who signed the Treaty, only a free people are the proper guardians of their rights and liberties. The greatest men can make mistakes, and their mistakes are sometimes the largest.

Other people might assume that the Treaty can be safely adopted because of the provisions it contains to amend it. But can’t this better be done before it is ratified than after it? Should free people really adopt a form of government knowing that it needs amendment?

Some others might think that if the people do not adopt the plan, that they will not unite in another plan. But surely, while they still have the power to amend it, they do not need to completely reject it.

I have been delayed here longer than I expected, but will leave here in a day or two for America. When I arrive, I will submit the basis for my objections (if required by the legislature).

I will only add that, since the welfare of the Union requires a better Treaty than the UN Treaty, I believe it is my duty as a citizen of America to support whatever is finally adopted, sincerely hoping that it will secure the liberty and happiness of the world.

Sincerely,

E. Gerry.

***September 17, 2012 will be the 225th anniversary of just such an event happening…***

TOOL: Word Substitution
  • Replace Summit with Convention
  • Replace Country with State
  • Replace National with Federal
  • Replace World or Global with National or Nation
  • Replace UN with Confederation
  • Replace Treaty with Constitution
  • Replace UN Treaty with Articles of Confederation
  • Replace America with Massachusetts
Music: Casting Crowns I Heard the Bells on Christmas Day
I ENCOURAGE you to Download this show thru iTunes! Subscribe with iTunes!But, if you just cannot deal with that then go ahead and Play the new show right now

Got Feedback? Try any one of these methods:

  • email: feedback AT MadMoneyMachine DOT com
  • Hook up with Mad Money Machine at FaceBook.com/MadMoneyMachine
  • voicemail: 571-366-7121
  • Twitter me at Twitter.com/MadMoneyMachine
  • Take the MMM Survey

Wed, December 7 2011 » Podcasts » Comments Off on MMM-185: Treaty of the United Countries

Lazy Portfolios YTD Thru October

How do ya like ridin’ the roller coaster?  I prefer the Slow Train Comin’. Looks like the Permanent Portfolios are still victorious. Two months to go!

 

Lazy Portfolios YTD Thru October

 

And for your tabular view:

Table of Returns

Tue, November 1 2011 » Analysis, Blog » Comments Off on Lazy Portfolios YTD Thru October

I want some Bitcoins!

I gotta admit, I am intrigued by Bitcoin. I love gadgets as much as the next guy. I spent my early years programming computers and designing information systems. I also love the idea of friction-free money. And of a currency that is, possibly, hyper-inflation proof.

The innovations in the Bitcoin realm are coming quickly. And since I last looked, they now discourage mining bitcoins on your own. And also since I looked, there are now physical Bitcoins! I just read an article asking whether they might be considered illegal.  These things look great and help push their acceptance forward.

So I finally installed the Bitcoin app and have a Bitcoin address for you to send me some:

1NTsbjZH4HnqeQKK5dpFzfjJvGjr61N1ps

Not to bribe you or anything, but I figure if I can get a couple of coins from my (diminishing) audience, I would be encouraged enough to do another MMM show.

Thu, October 27 2011 » Announcements, Blog, Fun » Comments Off on I want some Bitcoins!

Updated Taylor Larimore 3 Fund Lazy Portfolio Results

The Lazy Portfolio by Taylor Larimore with just three funds had the following performance, ending 30 Sept 2011:

1-mo: -5.2%

2-mo: -8.3%

YTD: -5.2%

Since 12/31/09: 5.4%

Sat, October 15 2011 » Analysis, Blog » Comments Off on Updated Taylor Larimore 3 Fund Lazy Portfolio Results

Errata: Larimore Portfolios

I just received word that the Taylor Larimore 3 Fund and 4 Fund lazy portfolios that I have listed on this site are in error.

There should only be a 3 Fund portfolio comprised of the following (and the %’s vary for individual investors):

40% Vanguard Total Stock Market Index Fund (VTSMX)
20% Vanguard Total International (VGTSX)
40% Vanguard Total Bond Market (VBMFX)

I will correct this in future portfolio analysis updates.

Sat, October 15 2011 » Analysis, Announcements » Comments Off on Errata: Larimore Portfolios

It was an ugly September

Here’s your monthly Lazy Portfolios update (not that you’re watching that often).

Lazy Portfolios thru Sept 2011

click for full-size ugly graphology

Let’s look at 1 and 2 month returns just for fun, ok? First, returns for September 2011:

image

Next, returns for August and September 2011 combined:

image

Ouch Rick Ferri! I think it was this time last year when I went to the Bogleheads convention and Rick Ferri laughed at the idea of owning gold. Who’s laughing now, Ricki? Difference between bottom and top is almost 22%. That’s shocking.

And of course, full Year-To-Date returns for 2011 through September:

image

Wow, only two Lazy Portfolios are positive this year. Guess who???

It is striking that the PRPFX mutual fund is off so significantly from the pure Harry Browne ETF version. It is probably due to the fact that PRPFX holds some silver, which got killed, and foreign currencies, which were down against the dollar. 

Harry Browne, thank you.

Sat, October 1 2011 » Analysis, Blog » Comments Off on It was an ugly September

A (slightly) Longer Term View

Whoosh, getting whipsawed in 2011. Let’s step back and take a slightly longer term view of the performances of the Lazy Portfolios. (Caution, none of these portfolios were rebalanced!)

Lazy Portfolios 2010-2011

One thing that is particularly striking is that PRPFX took a much sharper dip so far in September than the pure Harry Browne 4xETF portfolios.  I suspect this is partly due to the fact that PRPFX owns some silver (down very sharply) and also some foreign currencies (down due to rising dollar).

Me still likey the Permanent Portfolio, even though what was once up about 12% for 2011 is now up (only) 6.5%.

Biggest Losers on the chart (caution, not rebalanced) were Dilbert (-1.9%) and Vanguard Windsor (-1.5%), and MMM Do It Yourself Funds (-0.7%). Glad I got out of that idea.

Mon, September 26 2011 » Announcements, Blog » Comments Off on A (slightly) Longer Term View

MMM-184: Is Gold in a Bubble?

  • Summer: Broke 80 three times, 9.3 handicap, won some tournaments.
  • Lazy Portfolio results since 12/31/2009:
    • Harry Browne PP up 30%
    • Paul Boyer PP up 29%
    • PRPFX up 28%
    • next highest was David Swenson Yale up 15%
    • lowest was Vanguard Windsor up 1.6%
    • Rick Ferri Core Four up 10.7%
  • If you are investing new money right now, isn’t now a bad time to put money into gold, stocks, or long bonds?
  • GURU: Bond King Bill Gross sold his US Treasuries last March
  • Mancation at Myrtle Beach
  • Trading Currencies: find a government of lower debt!
  • Is Gold In A Bubble?
  • Need gold? Try eBay Bullion Center: http://goldandsilver.ebay.com/
  • TOOL: http://www.goldcoinbalance.com/
  • Ron Paul: Excellent performance in SC debates. Is Mitt Romney trying to become Ron Paul? Ron Paul’s investments.
  • Ron Paul will run as the Libertarian candidate, with son Rand as his VP.
  • Is it worth my time to write an iPhone app that will make me $100?
  • How about the Obama Countdown Clock app?
  • Recommended: Go see Wicked! But listen to the album first!
  • Spotify or Rdio? How about Grooveshark?
  • How to get Adjusted Historical Stock quotes into a spreadsheet on my Mac?
I ENCOURAGE you to Download this show thru iTunes! Subscribe with iTunes!But, if you just cannot deal with that then go ahead and Play the new show right now

Got Feedback? Try any one of these methods:

  • email: feedback AT MadMoneyMachine DOT com
  • Hook up with Mad Money Machine at FaceBook.com/MadMoneyMachine
  • voicemail: 571-366-7121
  • Twitter me at Twitter.com/MadMoneyMachine
  • Take the MMM Survey

Wed, September 7 2011 » Podcasts » Comments Off on MMM-184: Is Gold in a Bubble?