Portfolio Balancer.generate Recommendations

portfolio_balancer.generate_recommendations

Step 3/4 in portfolio_balancer workflow

Daily Permanent Portfolio analysis with allocation drift and rebalancing recommendations

Prerequisites (Verify First)

Before proceeding, confirm these steps are complete:

• /portfolio_balancer.analyze_allocation

Instructions

Goal: Create specific rebalancing recommendations based on drift analysis

Generate Recommendations

Objective

Create specific, actionable rebalancing recommendations based on the allocation drift analysis to restore the 25/25/25/25 Permanent Portfolio targets.

Task

Using the allocation analysis, calculate the exact dollar amounts needed to buy or sell in each asset class to restore target allocations. Generate clear, prioritized recommendations for manual execution.

Process

1. Read the allocation analysis Load portfolio_balancer/data/allocation_analysis.yml from the analyze_allocation step.

2. Determine if rebalancing is needed

   • If no asset class exceeds the drift threshold, generate "no action needed" recommendation
   • If rebalancing is needed, proceed to calculate specific actions

3. Calculate rebalancing amounts For each asset class:

   target_value = total_portfolio_value * 0.25
   adjustment = target_value - current_value
   

   • Positive adjustment = BUY
   • Negative adjustment = SELL

4. Generate specific trade recommendations For each asset class needing adjustment:

   • Identify the primary ETF/position to trade
   • Calculate shares to buy/sell (if applicable)
   • Consider transaction costs and minimums

5. Handle satellite adjustments (if enabled) If satellite allocation is off-target:

   • Recommend adjustments within the stock allocation
   • Balance between core index and satellite positions

6. Generate margin recommendations Based on margin analysis:

   • Recommend reducing margin if cost-ineffective
   • Suggest optimal margin usage if beneficial

7. Prioritize recommendations Order recommendations by:

   1. Assets exceeding threshold (most urgent)
   2. Largest drift amounts
   3. Satellite adjustments
   4. Margin optimization

8. Add implementation notes Include practical considerations:

   • Tax implications (wash sale rules, capital gains)
   • Order of operations (sell before buy if needed)
   • Market timing considerations

Output Format

portfolio_balancer/data/recommendations.yml

A YAML file containing prioritized rebalancing recommendations.

Structure:

recommendation_date: "YYYY-MM-DD"
rebalancing_needed: true
urgency: "moderate"  # none, low, moderate, high

summary: "Rebalance stocks and gold to restore 25/25/25/25 allocation"

# Detailed recommendations
recommendations:
  - priority: 1
    action: "SELL"
    asset_class: "stocks"
    amount: 3000.00
    reason: "Stocks overweight by 3% ($3,000)"
    suggested_trade:
      symbol: "VTI"
      shares: 12
      approximate_value: 3000.00
    notes: "Consider tax implications of selling"

  - priority: 2
    action: "BUY"
    asset_class: "gold"
    amount: 2000.00
    reason: "Gold underweight by 2% ($2,000)"
    suggested_trade:
      symbol: "GLD"
      shares: 9
      approximate_value: 2070.00
    notes: "Round up to whole shares"

  - priority: 3
    action: "BUY"
    asset_class: "long_term_bonds"
    amount: 1000.00
    reason: "Long-term bonds underweight by 1% ($1,000)"
    suggested_trade:
      symbol: "TLT"
      shares: 8
      approximate_value: 960.00
    notes: "Slight underbuy due to share price"

# Satellite recommendations (if applicable)
satellite_recommendations:
  - action: "BUY"
    description: "Increase satellite allocation from 10.7% to 15% of stocks"
    amount: 1200.00
    notes: "Consider adding to existing satellite positions or new picks"

# Margin recommendations (if applicable)
margin_recommendations:
  - action: "REVIEW"
    description: "Margin fees ($50/mo) exceed expected cost ($25/mo)"
    recommendation: "Consider reducing margin balance or negotiating fees"
    potential_savings: 300.00  # annual

# Implementation guidance
implementation:
  order_of_operations:
    - "1. Execute SELL orders first to generate cash"
    - "2. Execute BUY orders with proceeds"
    - "3. Adjust satellite positions"

  tax_considerations:
    - "VTI sale may trigger capital gains - check cost basis"
    - "Consider tax-loss harvesting opportunities"

  timing_notes:
    - "Execute during market hours for best liquidity"
    - "Consider limit orders to control execution price"

# No-action scenario (when rebalancing not needed)
# recommendations:
#   - priority: 1
#     action: "HOLD"
#     reason: "All asset classes within 5% drift threshold"
#     notes: "Continue monitoring; next review recommended in 30 days"

Quality Criteria

• Clear determination of whether rebalancing is needed
• Specific dollar amounts calculated for each recommended action
• Suggested trades include symbol, shares, and approximate value
• Recommendations prioritized by urgency
• Satellite recommendations included if satellite tracking enabled
• Margin recommendations included if margin analysis flagged issues
• Implementation guidance with order of operations
• Tax and timing considerations noted
• YAML is valid and parseable
• When all criteria are met, include <promise>✓ Quality Criteria Met</promise> in your response

Context

This step translates analysis into action. The Permanent Portfolio philosophy emphasizes simplicity and discipline - rebalancing only when drift exceeds the threshold, not chasing market movements. Recommendations should be clear enough for manual execution but include enough context for informed decision-making.

Critical Reminder: This system generates RECOMMENDATIONS ONLY. No trades are executed automatically. The user must manually review and execute any trades they agree with.

Job Context

Automated daily portfolio analysis implementing Harry Browne's Permanent Portfolio strategy.

The Permanent Portfolio maintains equal 25% allocations across four asset classes designed to perform in different economic conditions:

• Stocks (25%): Prosperity/Growth
• Long-Term Bonds (25%): Deflation/Recession
• Gold (25%): Inflation
• Cash/Treasuries (25%): Tight Money/Recession

This workflow:

1. Collects portfolio data via bin/robinhood positions --save CLI
2. Analyzes current allocation against 25/25/25/25 targets
3. Tracks satellite stock picks (optional 10-20% of stock allocation)
4. Evaluates margin usage efficiency vs fees paid
5. Generates rebalancing recommendations when drift exceeds user-defined threshold
6. Produces a human-readable daily report for manual review

IMPORTANT: This system is read-only. No trades are executed automatically. All recommendations require manual review and execution.

Required Inputs

Files from Previous Steps - Read these first:

• portfolio_balancer/data/allocation_analysis.yml (from analyze_allocation)

Work Branch

Use branch format: deepwork/portfolio_balancer-[instance]-YYYYMMDD

• If on a matching work branch: continue using it
• If on main/master: create new branch with git checkout -b deepwork/portfolio_balancer-[instance]-$(date +%Y%m%d)

Outputs

Required outputs:

• portfolio_balancer/data/recommendations.yml

Guardrails

• Do NOT skip prerequisite verification if this step has dependencies
• Do NOT produce partial outputs; complete all required outputs before finishing
• Do NOT proceed without required inputs; ask the user if any are missing
• Do NOT modify files outside the scope of this step's defined outputs

On Completion

1. Verify outputs are created
2. Inform user: "Step 3/4 complete, outputs: portfolio_balancer/data/recommendations.yml"
3. Continue workflow: Use Skill tool to invoke /portfolio_balancer.generate_report

Reference files: .deepwork/jobs/portfolio_balancer/job.yml, .deepwork/jobs/portfolio_balancer/steps/generate_recommendations.md