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Wild About Harry and his Permanent Portfolio

Lazy Portfolio

Fooled by Randomness.

Michael Harris of Price Action Blog has written a couple of very thoughtful books and many helpful articles. I do not subscribe to the theory that market timing does not work nor do I believe that momentum has died because of over use.

However in broad terms I agree with a great deal of what he has to say about the absurdity of back testing and the futility of so many trader's and hedge fund managers endeavours.

From the perspective of a long term investor however some sort of decision has to be reached. Portfolio allocation is key as is re-balancing to retain the desired allocation.

This in itself is a systematic or quantitative approach.

So without further ado herewith a very crude version of Harry Browne's Permanent Portfolio. You will curse it when stocks are booming and you will bless it during a stock market crash.

Clone Algorithm
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Backtest from to with initial capital
Total Returns
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Alpha
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Beta
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Sharpe
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Sortino
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Max Drawdown
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Benchmark Returns
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Volatility
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Returns 1 Month 3 Month 6 Month 12 Month
Alpha 1 Month 3 Month 6 Month 12 Month
Beta 1 Month 3 Month 6 Month 12 Month
Sharpe 1 Month 3 Month 6 Month 12 Month
Sortino 1 Month 3 Month 6 Month 12 Month
Volatility 1 Month 3 Month 6 Month 12 Month
Max Drawdown 1 Month 3 Month 6 Month 12 Month
# Backtest ID: 57bab94b22710f0ffac376ad
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3 responses

This looks very good although the classic Permanent Portfolio uses long term treasuries (20+ year) rather than medium term (7-10 year). Substituting TLT for IEF gives slightly better results.

So without further ado herewith a very crude version of Harry Browne's
Permanent Portfolio. You will curse it when stocks are booming and you
will bless it during a stock market crash.

So true!

Since 1870 the CAGR on US 10 year T-Bonds has been 4.71%. I dont' have the figures for the 20 year long bond to hand.
US short term 3 month Treasuries achieved a CAGR of 3.97% (from the treasury yield culled from NBER and the Federal Reserve).
Given such similarity across the yield curve over time I'm not sure I' bother with longer dated bonds.

The volatility is huge on the long bond and yields have only one way to go.

Using 10-year Treasuries may be a better choice going forward; I don't know. But my point is that would be a variation on the Permanent Portfolio. Harry Browne's version uses Long Term Treasuries.