Transcription of Friday’s “Market Situation Report”

This email is a full transcription of Friday's "Market Situation Report". We all synthesis information differently…and for some text is best.

I hope you enjoy Friday's transcription. If you would prefer the video format, you can find it here.

 Why Your Retirement Account Balance Looks a lot like it did 12 years ago…

This is RC Peck the Sage of Silicon Valley and the creator of the Fearless Wealth Portfolio. 

My Situation Report last week was about an email that I recently received.  The email was in regards to how this one person was feeling. 

The email struck me in a way that made me think that maybe there are other people feeling the same way as the author of the email.

The email has to do with a behavior that hurts people’s portfolio’s, their futures, even their security.  And I want to speak about it with you. 

I titled the Situation Report “Why Your Retirement Account Balance looks a lot like it did 12 years ago…” If in fact that is true…

The Situation Report to you is really about the number 1 reason people have lost money for the past 12 years.

But before we get to The Report, as far as what has happened this week in the markets.  I don’t see a lot of things happening in the market.

The 10 year treasury went below 1.5%.

The 30 year treasury is right about 2.5% AND the market sideways to slightly up.  

Oh yeah, Facebook is continuing to fall, and Wal-Mart is continuing to go up.

So there is my market wrap for you! Yes, I know not a lot of detail because more detail doesn’t necessarily lead to better returns.

So back to the Situation Report, What is the number one reason people have lost money over the past 12 years? 

Let me read you the email and see if you can find the one thing to pull out as the reason why people lose money.

Now this email came to me from a fellow member.  This person’s name is Elaine.

“Hi RC,

… I don’t like that I do not feel I have gotten any successful recommendations from you yet.  You earlier said the markets are in a bear and likely to fall and now the DOW is over 13,000.

You recommended the Permanent Portfolio but it’s essentially flat this year. 

It doesn’t feel like there’s truly good guidance yet.  Seems like most of your postings are marketing rather than actionable steps.

Thanks for listening,

I want to talk about this email.  Just so you know I love feedback.

I don’t think I have very many sacred cows.  I do enjoy getting feedback from active members. 

What I want to point out to you is how the human brain often thinks in too short a time period. 

The more stressed, the more concerned the human brain gets, AND the shorter and shorter time period it looks at. 

So much so, that if the human is getting chased by an animal with large teeth the brain is looking at literally seconds ahead to ensure survival. 

You get it, more stress and more uncertainty makes the brain think in shorter and shorter time periods.

Over the last 12 years people have gotten more and more stressed about their portfolios and that is making their brain look at shorter and shorter time periods. 

This is why people get into option trading and Forex trading.  Because they have the experience that time-condensing is actually what they need.

So if they can become a good option trader, which 99% of the world cannot, they can make up for lost ground. 

I want to point out how this behavior is the exact opposite of what successful people are doing.

In Figure 1 you will see a price chart. I will be showing you 10 price charts. In each there will be a blue line and a red line.

The blue line will represent the Permanent Portfolio, an investment that I suggest today and have suggested for a long time.

The red line represents the S&P 500.  I want to go back in time by blocks of 36 months.  For a total of ten 36-months blocks of time.   

Let’s look at how the Permanent Portfolio has fared against the S&P 500. 

Figure 1 is the first block.  The S&P is up 41% (I’m just going to round these numbers) the Permanent Portfolio went up 35%. 

So we will give this first block to the S&P over the Permanent Portfolio beating it out by six percentage points.  


Figure 1:  Block 1

In Figure 2 we go back another block:  Permanent Portfolio goes up 32%.  The S&P goes up 7%.  That is a significant difference there.  Permanent beats S&P by 25 percentage points!

Figure 2: Block 2


In Figure 3 we go back yet another block:  the Permanent Portfolio goes up 21% and the S&P goes up a  -24%.  That is a difference of 45 percentage points in favor of Permanent Portfolio.

Figure 3: Block 3


Figure 4 is the next block of 36 months:  the Permanent Portfolio goes 33% and the S&P goes up 5%.  The difference is Permanent Portfolio beats S&P by 28 percentage points.

Figure 4: Block 4


Remember “we” own the blue line, and the S&P owns the red line.

Figure 5 goes back another block of 36 months:  the Permanent Portfolio goes up 35% and the S&P goes up 28%.  Again, the Permanent Portfolio beats the S&P by 7 percentage points this time.

Figure 5: Block 5


Figure 6 We go back another block of 36 months from mid-2003 to mid-2006:  the Permanent Portfolio goes up 43% and the S&P goes up 30%. Again, the Permanent Portfolio wins by 13 percentage points this time.

Figure 6: Block 6


Again, we go back another block of 36 months (Figure 7):  the S&P goes up 45% and the Permanent Portfolio goes up 43%.  This is only the second time that the S&P beats out the Permanent Portfolio, and only by two percentage points.

But notice each time it beat it, the difference was 2% to 6%.

Figure 7: Block 7


For Figure 8 we go back yet another block of 36 months:  the Permanent Portfolio goes up 34% and the S&P goes up 2.5%. The permanent Portfolio beats the S&P by 32 percentage points.

Figure 8: Block 8


One more step back in time (Figure 9) for another 36 month bloc of time.  The Permanent Portfolio goes up 25% the S&P goes up  -25%.  This time the Permanent Portfolio beats the S&P by a wopping 50 percentage points.

Figure 9: Block 9


Then our tenth and last step back in time (Figure 10), the Permanent Portfolio goes up 10% the S&P goes down -45%.  Again, the Permanent Portfolio beats the S&P, this time by 55 percentage points

Figure 10: Block 10

In look back in 36 month blocks of time, the Permanent Portfolio lost to the S&P only two out of ten times…and only by a small margin each time.

The two times the S&P beat the Permanent Portfolio, it was only 3%-6%. 

And when the Permanent Portfolio was winning, it was winning by a huge margin. Not every day, not every month and maybe not even every year, but when stepping back and letting the strategy do its job, then one can really see the difference.

The Permanent Portfolio is just one investment that makes up the Fearless Wealth Portfolio, a portfolio that has handed its followers an average of 15% a year for 12 years, while the S&P has been flat.

BUT, and this is important, the Fearless Wealth Portfolio did not beat the S&P every year during the past 12 years.

Remember, investing has everything to do with strategy and very little to do with ticker symbols or even asset class.

Let me quote Dalbar Research to prove my point: 

 “From 1984 to 2000 the average mutual fund investor made 5.32% a year while the S&P 500 racked up annual gains of 16.9%” (Boston-based, Dalbar Research).   

So this means that during the biggest bull market in world history in stocks, the average investor grew their money more than 3x slower than if that person would have put their money in the stock market.

What that tells you is it wasn’t about asset classes or ticker symbols.  It wasn’t even about bull market or bear markets.

It was about strategy. 

And strategy is driven by how people behave.

What you might be noticing is how your brain wants us to focus on shorter and shorter blocks of time, yet your money wants you to have an adaptable strategy that can…well…adapt.


My next gathering is August 14th.  The title is “The Next 1,000 Trading Days”. The talk is about how the next 1,000 trading days will determine your next 10,000 days of your life.  

We have some fun stuff coming out in the next 2 weeks, including the Monthly Forecast and a great interview to share with you.

And if you want to do any bonus work, notice what time frame your brain is naturally wanting to invest within…a day, a week, a month, a quarter, a year, ten years…

I’m willing to bet that the worse the past ten years has been for an investor the shorter time period that investor’s brain is working within.

It’s that time already and I need to hit the pause button.

Thanks for being here, I look forward to speaking with you next time.

Together, we are growing and protecting your wealth,

RC Peck, CFP 

Fearless Wealth | Investment Independence
Helping Individuals Reach Financial Independence Sooner, Faster, Safer.

Do you want to know more about what makes up the Fearless Wealth Portfolio and how it has generated the returns it has without “pick of the month” ticker symbols or daily monitoring of postions? If so, then you can follow me here.