6 years in: How has Karl’s Permanent Portfolio performed compared to the DOW or S&P500?

It was August 21, 2015, when I published a buy and hold portfolio which is designed to weather both good times and bad while being static (no trading). The purpose of publishing the portfolio is for educational purposes only, and readers should review the disclosures at the top of the portfolio’s page. I do not make any money on publishing this and even this blog brings me zero income. This is simply information for the public to do with as they wish or to throw in the digital trash. The portfolio has been called “eclectic” because of its diversification and inclusion. With standard-bearers such as Berkshire Hathaway and gold, it also includes Bitcoin and various foreign currencies. I designed it to be static — true buy and hold. The only change was regarding the ending of CurrencyShares Singapore Dollar Trust earlier this year, and I converted that to actual Singapore Dollars. I designed the portfolio to have little tax and fee consequences during its growth.

One can start with $1,000 and add to the portfolio periodically as they wish or not. This is not an ETF, though in retrospect, perhaps I should have created a fund; but this is something anyone can do or follow. The portfolio began with NVR, BRK.b, and PayPal as its top three holdings and a few of its smallest holdings started with Bitcoin and the Singapore Dollar. Since there is no periodic rebalancing of the portfolio, there have been many changes to the top three and bottom three holdings.

It has now been six years, let’s see how it’s done! Over the last six years, the DOW has gone up 113% and the S&P 500 has risen 125% while my permanent portfolio has risen 790% (an average of 131% per year). This return does not consider dividends, etc. Had you invested $10,000 in what the portfolio put forth, it would have increased in value to $79,000 (exclusive of dividends, etc.) Bitcoin has been the highest performing in the portfolio, along with PayPal, NVR, and the iShares Gold Trust, respectively. The worst performing was the Swiss Franc going down almost 3% over the last six years. I do not expect future returns to be anywhere near as rosy as 131% per year (that is unsustainable), although it has always outperformed the DOW and S&P 500. Prior years have shown the following CUMULATIVE returns: YR1 12%, YR2 79.4%, YR3 125%, YR4 159%, YR5 252.3%, YR6 790%.

You can thank the financial mismanagement by our federal government for these above-average returns as “quantitative easing,” raging federal deficits, federal debts, etc have helped to propel this portfolio to new highs. So long as our government acts irresponsibly, my version of a Permanent Portfolio will continue to excel.

My top 5 stock picks for 2021

If you wanted to add another, go with Alphabet (GOOGL) Class A

I will post the 2021 Portfolio’s prices on January 1, 2021, and then update six months later, then again on 12/31/2021. Let’s see how it performs, positive or negative.

For information on my Permanent Portfolio which has well outperformed the market averages over the last five years go here: https://karldickey.wordpress.com/karl-dickey-investment-portfolio/

Disclaimer: The material provided on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Also, note that such material is not updated regularly and some information may not, therefore, be current. Please be sure to consult your own financial advisor when making decisions regarding your financial management.

Five year performance review of Karl’s Permanent Portfolio

So, it was August 21, 2015 when I made public my permanent portfolio so we will do a full five-year review along with why I chose each investment. The portfolio page can be found here along with all its lengthy financial disclosures, more details, etc. The portfolio was put out publicly for educational purposes.

Photo by Pixabay on Pexels.com

The foundation for the portfolio was Harry Browne’s Permanent Portfolio; however, I made some adjustments based on my experience. I designed the portfolio to protect against inflation with an eye on capital appreciation and very low annual income tax exposure. The portfolio is static, so there is no trading involved unless you do what I recommend and dollar cost average into the portfolio with consistent contributions. This is a buy and hold portfolio with some esoteric investments. The figures below do not include dividends, which are minimal anyway, but would boost the total return slightly higher.

So, let’s get right into it.

From August 21, 2015-2021:

DOW was up 69.69% (16,459 to 27.959)

S&P was up 72.4% (1,970 to 3,397)

Karl’s Permanent Portfolio was up 252.3% ($1,000,000 to $3,522,744)

Now for the individual stocks and investment assets:

PayPal Holdings (PYPL) is a solid company, and I am surprised someone like BRK hasn’t swallowed them up. It was originally around 10% of the portfolio and is now just shy of 17% of the portfolio after growing 462% over the last five years. I like this company because of its solid track record, no dividend, and felt it had great growth potential.

Berkshire Hathaway (BRK.b) does not produce a dividend but does produce capital appreciation. While everyone has been naysaying Buffett about how he’d lost his touch and was too old to run such a large company, he has recently showed them. Since the 1960s BRK has been an excellent investment vehicle that does not offer a dividend but reinvests its profits. I went with the “B” shares rather than the “A” shares as I felt the “B” shares are priced for the everyday person whereas the “A” shares are now priced at over $300,000 per share. BRK started in the portfolio at almost 14% of the portfolio and is now 5.8% of the portfolio after rising 51.4% over the last five years. This is mostly because of some heavy negative hits; however, it seems to be getting its mojo back.

Dow Jones New Zealand Index (NZDOWD) is a way to diversify away from the U.S. Dollar. As noted in previous posts, it would be better to physically have New Zealand Dollars; however, for the portfolio, I went with the next best thing. I never expected this to be a growth play, but a protection against a falling U.S. dollar. With recent trillions being added to the U.S. balance sheet, owning foreign currency has proven to be a smart move. NZDOWD started off as around 3% of the portfolio and is now 1.6% growing 83% over the last five years.

Singapore Dollar is another small protection against a fall of the U.S. Dollar. The portfolio started with 2.84% of its value invested in FXSG; however, it is no longer publicly traded, so we converted to the actual Singapore Dollar. It has only gained 2.8% over the last five years.

Guggenheim Currency Shares Swiss (FXF) is based on the Swiss Franc. Again, better to hold the physical Swiss Franc and I chose FXF to be an easy vehicle for most to invest as a protection against a falling U.S. Dollar. FXF used to be called Guggenheim; however, is now Invesco. Held over the last five years, the investment has been flat after recovering recently from losses. It had a loss of .01% over the last five years, though over the last three months it has risen over 6% because of worries of the U.S. adding trillions to its debt.

The NYSE Bitcoin Index (NYXBT) is perhaps the most controversial investment in the portfolio. Again, better to own the actual digital Bitcoin, and it has taken over the portfolio. Like the foreign currencies, it started out as only 3% of the portfolio, and it is now 43% of the portfolio with extraordinary gains of 4,912% over the last five years. Although I felt Bitcoin would appreciate in value, I never expected this level of rise. As people demand a decentralized currency, Bitcoin and a few of its popular alternatives will continue to rise in value as it has a set number that will be issued unlike the U.S. Dollar which our government continues to abuse.

iShares IBoxx $ Invest Grade Corp Bond Fund (LQD) is an investment I almost kept out of the portfolio as I am not a lover of bonds, either government or corporate. I feel you can get better growth through equities and other vehicles. But in the interest of diversity, I put 1.74% of the original portfolio in LQD and it has risen 17.6% over the last five years (not inclusive of dividends).

Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX) is a convenient way to own mid-cap stocks, and I put a little over 10% of the portfolio in it. It has given back over 44% over the last five years. Vanguard is one of the lower fee mutual fund companies with a long, solid history. So in adding mutual funds to the portfolio, I chose Vanguard for the three positions.

Vanguard Small-Cap Index Fund Admiral Shares (VSMAX) is a convenient way to invest in small capitalization stocks. Initially putting 8.25% of the portfolio in VSMAX has produced over a 36% return.

Vanguard Global ex-U.S. Real Estate Index Fund Admiral Shares (VGRLX) is another diversity play which invests in foreign real estate stocks. Originally just under 10% of the portfolio, it has done horribly as it is down 5.4% in its return over the last five years. You’d have done better throwing the money away at a local bank certificate of deposit. This, and the Swiss Franc are the only positions that lost money, and the Franc was only down .01%.

iShares Gold Trust ETF (IAU) is another investment, though I would recommend people own the physical gold. For the portfolio, I used IAU as a logical alternative. Originally 7.4% of the original portfolio, it has returned just under 66% for the last five years. This investment didn’t do much until this year when the U.S. starting “printing” trillions of Dollars and is now up 26.49% year-to-date.

iShares Silver Trust ETF (SLV) is the same situation as with the above IAU. Starting at 7.47% of the portfolio it has risen more than IAU and over the last five years has returned 71%.

NVR, Inc. (NVR) is one of two real estate investments in the portfolio. NVR has a unique real estate business model that I appreciate and it does not through off a dividend which I also appreciate. It is also a solid company. Starting as 15% of the original portfolio, it is now representing about 12% of the portfolio and has returned over the last five years over 174%.

So that is it. The portfolio over the last five years. Some of these investments have been consistent during that time, others would require some Pepto-Bismol if you watched it every day. And that is the purpose of this portfolio, to buy it and forget it. Buy and hold. Brokers don’t like it because there is no trading profits for them.

I will keep the portfolio page up and perhaps do yearly updates. A true long-term investor would look at 10 year returns, though 5 years is a good gauge as to a portfolio’s strength — especially in the turbulent times we have endured over the last five years.

Put your BUY orders in for Berkshire Hathaway

The material provided on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. I am not in any way a licensed anything and some people think I am a bit of a dolt.

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While there are numerous news headlines telling you that Warren Buffett has lost his touch and you should abandon Berkshire Hathaway (BRK), I feel investors should do the opposite.

This is the time to be buying BRK while it has been beaten down to the tune of around 17% over the last year and over 25% these past few months. It is a conglomerate worth owning that does not pay a dividend and has a proven positive track record lasting decades. Whether one has $1,000, $100,000 or $10,000,000 to invest, it should be directed to BRK over the next five months so long as one does not need a dividend and is seeking capital appreciation over the long term (ten or more years).

BRK comes in two versions; the “A” shares and the baby “B” shares and they mostly trade in concert with one another. Most Americans will buy the $170 +/- BRK.b shares which trade an average of eight million shares daily. But if you are able, purchase the BRK.a shares which are at around $250,000/share, and trade a little over 400 shares daily. This is a long-term stock, one to own for your retirement and potentially hand down to your beneficiaries when you pass.

It is my opinion, one should dollar-cost-average this stock over the next five months. So, as an example, if you plan to put $10,000 into BRK.b, buy either $2,000 worth each month or even better: buy around $500 each and every week for the next five months. Your future self will thank you.

BTW, here is a link to my most recent permanent portfolio update.

My COVID beard has gone a bit too far; time to get out the razor!

Permanent Portfolio Update

I was not planning to do another update to my Permanent Portfolio until August 21, 2020, which would be the five year anniversary I made this portfolio public, but with all that is going on, I thought we’d do a quick check-in.

So, we have had one change regarding the CurrencyShares Singapore Dollar Trust. This is no longer on the exchange so hereon, I will use the actual currency exchange rate between the Singapore Dollar and the U.S. Dollar. It had almost no effect as the Trust never moved very much and you will see at 71SD to 1USD, it is precisely the same value it was in 2015.

Moving on to the portfolio as a whole, much to my surprise, it actually ticked up since the beginning of the year. It went up 1.3% YTD while the S&P and DOW have been down YTD. Perhaps the most disappointing so far this year has been Berkshire Hathaway, NVR, Vanguard’s Small Cap Index Fund, and Vanguard’s U.S. Real Estate Fund. These have taken a dive. It is for these reasons I strongly recommend dollar-cost-averaging so you are buying shares each month or each quarter – sometimes at a lower price and sometimes at a higher price. This portfolio; however, is designed to be static (no trading).

From August 21,2015 through May 1, 2020, the portfolio has returned a gain of 163% (exclusive of dividends) while the S&P has returned 43.7% and the DOW 44%. The portfolio has continued to outperform even in times of turmoil, which is how it was designed to perform.

The next update will happen on August 21, 2020.

June 2019 permanent portfolio update

Here we are with another update of the Permanent Portfolio and it has been performing well. Overall, it has increased in value of 159% with an annualized return of 27.47% (inclusive of dividends). During the same time frame, the DOW has increased in value by 50.7% and the S&P has increased by 39.6%. The relatively small original investment in Bitcoin (3%) has taken over a disproportionate percentage (41.1%) of the portfolio due to its dramatic rise over time. The portfolio’s worst performers have been investing in the Swiss Franc (a loss of almost 9%) and silver (a loss of over 6%). Besides Bitcoin, the best performers in the portfolio are NVR (108%), PayPal (over 213%), and the New Zeland Dollar (over 51%).

As said in the intro, this portfolio is designed to remain static (no trading) while also keeping one’s tax bill and fees to the lowest levels. I feel it would have been prudent to have trimmed the Bitcoin investment so it didn’t “take over” the portfolio with its wild swings. But we’re in for the long haul on this one, so it will be interesting to see its progression. Next update will be on the four-year mark – August 21, 2019.

See the portfolio page here.

Permanent Portfolio Update

Update 12/31/2018: (link to permanent portfolio page)

We thought with the last market fluctuations and it is the end of the year, it would be good to do a quick update/comparison with the portfolio compared to the DOW and the S&P. Since the start of this portfolio (August 21, 2015) it has risen just over 80% while the DOW has risen 34.5% and the S&P has risen 23% over the same period.

The portfolio remains strong with an average return of over 26% per year.

 

Three Year Update to Permanent Portfolio

So, although the portfolio is doing well overall, I almost feel like Warren Buffett during the late 90s runup of tech stocks. The portfolio has taken a hit over the last six months, while the overall market is running on all cylinders. NVR and Bitcoin are notable hits and the overall portfolio wiped out 50% of gains over the last six months. It is still up over 125% since I posted it three years ago which is an average of over 42% per year. That sounds great, but the original 3% of funds to buy Bitcoin messes with the numbers a bit as it has now grown to be 37% of the portfolio. Not that that is bad, as it was originally a speculative investment, but in the real world I would have sold off a large chunk of it. The four main contributors to the growth of the portfolio have been PYPL, Bitcoin, VSMAX, and NVR. As well, there have only been two securities which have turned in a loss, and those losses are tiny (around $5,000 of a $1 million portfolio). This portfolio is meant to be truly static so Bitcoin will remain whether it goes to zero or to $500k a piece. The portfolio has not fully been tested and for that we will need to wait over time and/or a serious challenge to the traditional markets, not just a correction.

See here: https://karldickey.wordpress.com/karl-dickey-investment-portfolio/

Paul Tudor Jones rolls out “JUST” ETF with Goldman Sachs in effort to ‘modernize capitalism’

Today, June 12, 2018, legendary macro investor Paul Tudor Jones did a commercial free interview on CNBC to promote tomorrow’s rollout of the new ETF “JUST”. Jones is someone I have followed for decades and is someone worthy of respect as he has built a multi-billion dollar fortune while privately preserving thousands of acres of land around the globe. Jones has long had the confidence of life and business strategist Tony Robbins and recently opened offices on Palm Beach, Florida.

“JUST” is based on backtesting the performance of socially responsible companies based on a nationwide poll of Americans to their definition of what it means for a company to be socially responsible. Based on that backtesting it is projected to outperform the Russell 1000 and the S&P 500. As one can imagine, there is a wide array of opinions about social investing and conscious capitalism.

First and foremost, there is nothing wrong with conscious capitalism and I personally would subscribe to many of its standards. Conscious capitalism is completely in tune with the base term of capitalism though some try and twist its true meaning. Before going further, I welcome JUST to the ETF stage so this is simply a brief examination of Jones’ interview and whether we need to “modernize capitalism.”

During the interview, Jones took issue with the Milton Friedman philosophy that the responsibility of a corporation is to return profits to its shareholders. Jones said, “When Milton Friedman said, that tax rates had just come from 91 percent to 70 and income inequality was one-fifth of what it is today. You can see how it was relevant at the time but fast forward to where we are today, it’s a different deal.”

I would argue that trying to redefine “capitalism” or “modernize” the word is an unneeded exercise. People need to understand what capitalism actually is as opposed to the distortions made by many. Capitalism is only the free voluntary exchange of value from one to another. That is it. There is no other valid definition. Where we run into the weeds is when we confuse cronyism and government force with capitalism. When a company uses government force or taxpayer money in the name of “economic development” to advance itself over its competition then that is NOT capitalism. When are corporate uses fraud and other deviant means to profit, then that is NOT capitalism.

An interesting fact not asked of Jones during the interview is that arguably the best investor alive today is Warren Buffett and he has long held through his Berkshire Hathaway (BRK) the same opinion of Friedman. Buffett holds that it is the duty of the corporation to profit well, compensate employees & stockholders, and through an employee’s personal income and investor’s profits of stock to donate to their preferred charity. It is not the corporation’s responsibility to be charitable, but to maximize profits. BRK and Buffett do not believe corporations should give charity directly but it is expected of their employees and shareholders to perform charity on their own terms.  So, while Buffett is personally the single most charitable man in America, one would be hard-pressed to find any meaningful charity from BRK. It is because BRK has grown to such a level that Buffett is able to personally be as charitable as he is.

It is important to bring up Buffett because he is mostly an equities investor as JUST will be as well, while Jones is more of a macro investor which extends far beyond equities. It will be interesting to see how JUST develops and performs over the coming years in its returns to investors and society as a whole. And by the way, although I hold Buffett in high esteem, he is not without his own flagrant crony capitalistic exploits.

Jones and Buffett do agree that the government is a horrible redistributor of capital and it is best to leave it to private business through voluntary exchange rather than forced government takings. Buffett has said, “The free market’s the best mechanism ever devised to put resources to their most efficient and productive use. … The government isn’t particularly good at that. But the market isn’t so good at making sure that the wealth that’s produced is being distributed fairly or wisely.” On the same issue of government redistribution, Jones said during the interview, “THAT’S THE WORST OF ALL OUTCOMES BECAUSE THAT’S THE WORST WAY TO REDISTRIBUTE INCOME.” Through JUST and his other causes, Jones is looking to redistribute wealth organically, outside the inefficiencies and force of government.

Karl’s Permanent Portfolio – 2 year update

So it has now been exactly two years since I made my version of the Permanent Portfolio public and it has outpaced the DOW and the S&P. The net return has been 79.4% while the DOW has had a return of 31.9% and the S&P 23.2% during the same time period. And, for the naysayers regarding my small investment in Bitcoin for the portfolio then one would have to say the same about NVR and PYPL, etc. But if one was to remove Bitcoin from the mix completely, the investment would have been within a point of the DOW’s return without any of the risks in holding just 30 equity stocks or a single ETF for the DOW. This portfolio is eclectic, to say the least, but is designed to weather some heavy financial storms as well. It also has a minimum 10-year horizon, so at two years, it is still in its infancy.

See the full page here: https://karldickey.wordpress.com/karl-dickey-investment-portfolio/

 

The Future of U.S. Economic Growth event on Dec 4th in D.C.

Featuring Edmund Phelps, Columbia University; Brink Lindsey, Vice President for Research, Cato Institute;Erik Brynjolfsson, Massachusetts Institute of Technology; Edward Glaeser, Harvard University; Robert Gordon, Northwestern University; and Dale Jorgenson, Harvard University.The Great Recession ended over five years ago, so why does the U.S. economy remain so sluggish? Fears are mounting that growth rates well below the long-term historical trend line may now be the “new normal.” Labor-force participation has been falling, while growth in labor skills has slowed considerably. Furthermore, the main engine of innovation — the “creative destruction” of entrepreneurial dynamism — appears to be sputtering, as the rates of both gross job creation and destruction and new firm formation have been declining steadily. Meanwhile, some experts even argue that the low-hanging fruit of major transformative breakthroughs has already been plucked and that, consequently, technological progress itself is winding down. The purpose of this conference is to assess the long-term growth outlook of the U.S. economy and explore what policy changes might be needed to arrest and reverse the growth slowdown. We will bring together top economists and other experts for a full-day conference on these vital issues, with the first three sessions devoted to diagnosis of the key problems and the final two sessions focused on prescriptions for growth-enhancing policy reforms. CLICK HERE TO REGISTER AND FOR MORE INFORMATION

Thursday, December 4, 2014 at 9:00 a.m. Reception to follow Cato Institute, 1000 Massachusetts Ave., N.W., Washington, D.C. 20001

Tony Robbins’ new book is out this morning. Get this book!

It has been 20 years since Tony Robbins has released a book and this morning, 11/18/2014, is the debut of his new book “MONEY Master the Game: 7 Simple Steps to Financial Freedom.“

Tony Robbins' new book is out this morning. Get this book!

It has been 20 years since Tony Robbins has released a book and this morning, 11/18/2014, is the debut of his new book “MONEY Master the Game: 7 Simple Steps to Financial Freedom.“

You need Tony Robbins’ new book MONEY Master the Game: 7 Simple Steps to Financial Freedom

You need this new book by Tony Robbins – MONEY Master the Game: 7 Simple Steps to Financial Freedom. Although I am not much of a fan when promoters use words like “secrets to wealth”, this book is excellent! Pre-order NOW!

You need Tony Robbins' new book MONEY Master the Game: 7 Simple Steps to Financial Freedom

You need this new book by Tony Robbins – MONEY Master the Game: 7 Simple Steps to Financial Freedom. Although I am not much of a fan when promoters use words like “secrets to wealth”, this book is excellent! Pre-order NOW!