Revisiting the Permanent Portfolio

Dear Mr. Market:

It’s been seven years since we last reviewed the Permanent Portfolio. Please click here to view the original article.

Why do we bring up this article now? Lots has changed but lots has not! More than anything we believe that our current environment has so many unknowns embedded in it after one of the wildest rides in stock market history. We won’t dig into the weeds too much but one could easily make the case that any of the following scenarios could take place over the next year:

  1. The Stock Market could absolutely continue to defy odds and climb higher.
  2. We could see another market crash like we saw in the spring this year as there are plenty of issues that have not gone away (Covid-19, political unrest, handcuffed economy, geopolitical concerns)
  3. A deteriorating dollar, inflation on the horizon, a ticking time bomb of debt, and more fear of a prolonged recession, negates any appeal for stocks for quite some time.
  4. We trade up, down, and basically sideways as this market consolidates and digests one of the most tumultuous years in history.

Without rehashing all that has transpired in 2020, we believe that being properly allocated and prepared for just about anything that comes our way seems like a wise way to go. The market is almost always unpredictable but there are times when reading the tea leaves and figuring out clear direction is even more difficult; we believe that’s exactly where we’re at right now.

If you didn’t read our old article from 2013, the basis for the Permanent Portfolio strategy is simple at face value: You divide your portfolio into four distinct and fairly uncorrelated asset classes (Cash, Bonds, Gold, and Stocks). Ideally at any point in most economic cycles one of these asset classes will stink it up but the others could compensate and outperform. During prosperous times Stocks should win. When there is inflation a case can be made for Gold. Should the opposite occur and we get deflation you would ideally see long-term Bonds do well. Lastly, during a severe recession Cash is perhaps your best friend. When coupled together you may never hit a home run but this approach can mitigate disaster and still produce modest long-term returns.

Continue reading

Economic Outlook: The voice and face behind Dear Mr. Market

Dear Mr. Market:

We’ve written you hundreds of letters over the past decade and on occasion it’s nice to put a face with the name! Last week, Matt Pixa of My Portfolio Guide, LLC, was given the honor and opportunity to present an Economic Outlook to the Seal Beach Chamber of Commerce.

We share it with you here and look forward to your feedback and questions!

PS- Click here to view the entire presentation but the “meat” of the show starts exactly at the 10 minute mark. Enjoy!

Manic Market

Dear Mr. Market:51Xur1KZWKL

For some of our newer readers it might serve us well to remind everyone of who you are and what this “Mr. Market” character is all about. If you haven’t read Benjamin Graham’s book, The Intelligent Investor, you need to. Even though it was written in 1949, much of what Graham wrote is still applicable today and it’s simply one of the best books on the stock market ever written. Warren Buffett himself loves the book and says that it changed his life. Here’s a summary from Buffett and his description of our very own “Mr. Market”: Continue reading

Why buy Gold and Why Now?

Dear Mr. Market:download

We have commented many times on how people have short memories. In the case of recent stock market behavior, however, there is no way one could forget what a ride we’ve all been on. Our job today is not to draw attention to the very obvious past but to one area of the market that is not always directly connected to stocks or bonds.

Do you have gold in your portfolio and if so, should you buy more, hold on to what you have, or dump it? Continue reading

Should I convert my IRA to a Roth IRA?

Dear Mr. Market:download-2

With regard to investing, sometimes no action is the proper action…but not always!

Now might be a very good time for a very specific act: converting assets from a traditional IRA to a Roth IRA. Here a few reasons why: Continue reading

Best Oil Stocks after the Coronavirus & Stock Market Crash

Dear Mr. Market:Oil Stocks

We won’t rehash what’s happened to the stock market due to the global pandemic of COVID-19. Like many right now, it’s been overwhelming and just hearing the word “Coronavirus” with constant updates has become all-consuming in everything we do. That said, there will of course be areas of the stock market that continue to get punished but others that provide opportunity once we get through this.

We believe the broad market will recover to the full levels we recently saw within the next three years. Some economic sectors, however, will struggle more than others as have a few additional conflicts to resolve. One such sector is oil and with the Saudi Arabia and Russian trade spat we saw U.S. oil prices drop -34% in one night! Which stocks will survive and which have the best chance to recover?

Continue reading

Is there any Good News on COVID-19?

Dear Mr. Market:download

We obviously live in a crazy world with a news cycle that is non-stop. We read this a few years ago but for every piece of “good news” there are 17 being reported of bad news. This is not strictly related to Coronavirus / COVID-19, but with news in general.

Earlier this week a client of ours sent us some articles and pieces of good news with verifiable links to support the stories we perhaps don’t hear enough about.

Finally some better news with documentation…

There is light at the end of the tunnel and here is some news worth taking a peak at: Continue reading

Has the Stock Market reached Capitulation?

Dear Mr. Market:Worst Days Ever for S&P 500

We are living in scary times, as investors and as human beings in general. With stock markets cratering and the uncertainty surrounding Coronavirus, it’s hard to remember when things were this bad or uncertain. How and when will things get better?

Regarding the market, there are no absolute rules, but it’s generally agreed investors have to fully capitulate before a bear market downturn can find its low point and eventually turn back the other way. The idea is that all the bad news, expectations and fear have to hit their worst point, so there is finally nothing else to drive the market lower. After that, anything remotely positive or even just “not bad” starts the base for the ensuing bull, and the market can begin climbing again.

The dilemma is that no one sounds an “all-clear” signal to let you know when that point has been reached. Think about the low point of the last bear, March of 2009. President Obama was freshly inaugurated (cause for optimism or pessimism, depending on your political leaning). Chrysler, GM, and Ford were near bankruptcy. Unemployment was climbing. A massive stimulus package had just been signed, but no on knew how effective it might be. Investors wondered if their portfolios would ever recover to where they had been. Those were troubling times, but we all know the market turned sharply upward that month and the bull continued for 11 years. It’s all much more clear looking back in the rearview mirror but at the time it was certainly not so.

Returns 1,3,5,& 10 years after Worst Days

Stock Market returns 1,3,5, and 10 years after Worst 1 Days Ever

There is no saying what will bring about capitulation with the current market. In our last column we noted how drawn out the 2000-2002 bear was. Things could get worse before they hit their inflection point. But it will come…if it hasn’t already. Yesterday was the third worst day in the history of the stock market and many threw in the towel. We’ve also advised that panic is never a strategy, and keeping your head as an investor right now is absolutely the right thing to do. One cannot change the past or the fact that this event took on disastrous proportions that nobody could have imagined. This is different than a standard bear market in that it’s more like an unforeseen natural disaster but in this case one that is not specific to some other part of the world; it’s truly global and caught the entire globe flat footed.

Human instinct is to seek shelter when danger is imminent, and that gives us the urge to abandon our better instincts. Sell all your stocks! Go to cash! End the pain! This might provide short-term comfort or relief, but assuming you need some amount of growth to reach your goals, you now have the dilemma of when and how to get back in.

We would advise staying the course, while being prudent. Strategic rebalancing can make sense, but not drastic changes to your allocation. If you have a plan in place that you felt good about during the market highs a month ago, stick to it, and revisit it if needed. Heavyweight boxing champ Mike Tyson famously said, “Everyone has a plan until they get punched in the face.” The market is definitely throwing some serious punches right now. How will you answer the bell?

Lastly, we’re seeing two sets of behaviors right now; one group of people is scrambling to buy toilet paper while another is doing whatever they can to buy stocks. Mark our words in that this will be an inflection point and one where your decisions/behavior today will truly impact where you sit 10 years from now.

The Best Worst Days Ever

Dear Mr. Market:IMG_1253

Behind the curtain of this investment blog and our series of letters to a fictional market character (Mr. Market)…there are actual human beings. We’re certainly not hiding behind a fluffy topic, but on days like today we want to share how life can parallel with things like the stock market; it can also really put things in perspective as we look back at where we were at certain points in life. Additionally, it sometimes helps people know that unlike many other articles and financial advisors you’ll find on the internet, My Portfolio Guide doesn’t cut and paste regurgitated garbage or use a ghost writer to relay our message.

Today is March 13th…Friday the 13th! Today it’s also me, Matthew Pixa, who is writing to you and letting you know that it’s the day my daughter Isabel turns 18. Perhaps we’ll do more of these personal articles but it won’t hurt our feelings if you don’t want to read about my baby girl’s birthday when the stock market is down -25%. You be the judge, but please read on and see where I’m going with this. Continue reading

Panic is never a strategy…

Dear Mr. Market:5 years

Today marks the anniversary of the stock market bottom 11 years ago. How ironic is it that on March 9th 2009, when the market and everyone in finance was curled up in a fetal position, we now are witnessing a market drubbing like we haven’t seen in years on that same anniversary date? For those with short-term memory lapses, 11 years ago the Dow Jones went from 14,164 in October of 2007 down to 6,547 on March 9, 2009. The “Financial Crisis” of that period effectively saw a -53.77% decline in the stock market.  What has ensued since then happens to be the longest bull market run in history. Continue reading