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The perfect hedge against financial collapse will probably turn out to have one fatal flaw in the end -- everybody else will be trying to take it from you when they realize their mistake in not owning it themselves. There are plenty of cases where currency risk showed up but the zombie apocalypse d...

And, as Larry S has already pointed out, the PP does not incorporate major risk dimensions as it is a play on just market risk - or beta. I'd just point out that most market portfolios that incorporate academic perceptions of risk often ignore two of the biggest: Political and currency risk. Those ...

I don't disagree with what RodC is saying. I've said it many times myself that a lot of investing advice derives its proof from a very tiny sample set. Historical data can't be used to "prove" anything going forward. It can though be useful to disprove ideas. I am fond of saying: Investing...

to craigr What do you think is the best way to rebalance the PP? bands? how big? edited for misspelling Harry Browne advised splitting the assets 25% into each. You would rebalance when one asset fell to 15% or less, or rose to be 35% or more. I find these are reasonable figures to use because: 1) ...

At any moment, there is some investment somewhere that is going to outperform the Permanent Portfolio. It's like nailing jelly to the wall trying to defend against every possible permutation of things that could do better. But the design of the portfolio is not to chase the latest hot returns. It's ...

A few things I would probably point out: 1) The Permanent Portfolio has a much different objective than a lot of stock heavy portfolios. The Permanent Portfolio is designed to grow and protect your life savings at moderate rates, it is not designed to swing for the fences. Harry Browne (and myself),...

I grow more convinced with each thread I read that a lot of people here do not understand why their bonds have been a good investment in the past for reasons that cannot apply to the future. Or the readers have seen situations like Japan happen where LT rates fell even lower. So in the face of unce...

I posted "EDV up 2.01% vs BND up 0.13% 4/12 AM" 4/12 AM - Vanguard extended duration treasury index ETF EDV up 2.01% vs Vanguard total bond market index ETF BND up 0.13% Perhaps it should have been on a thread like this one. Please discuss. The EDV fund is zero coupon long treasuries. It ...

It's interesting that I see so many bond doom threads now while the stock market is at an all time high. In fact, I think I saw a 100% equity thread here recently. Curious...

First we should understand that the system we have today in terms of central bank management is *vastly* different than what we had during WWII. Also during WWII there was rationing, price controls, etc. Comparing these situations is simply not possible. As bad as Treasury bonds could be, I don't se...

Bogleheads: Today's Miami Herald has this story (shortened and underline added): Shaun Rogers, a 34-year-old defensive tackle for the New York Giants, told police Monday that he was in town (Miami Beach) with two friends the previous night. He said he was bejeweled with diamond earrings, two wristw...

Who cares what other people think. In my experience, people who wear Rolexes care very much what other people think. That's why they buy a Rolex Or they may simply like the history and look of a mechanical watch. I don't own a Rolex so I don't have a dog in the fight. But I understand why someone m...

Just get one. You've been wanting one for 40 years and can afford it. Who cares what other people think.

Zack Miller of Tradestreaming interviewed me about the Permanent Portfolio and investing strategy in general. In this interview we cover: - My background in investing and entrepreneurship. - The background of Harry Browne and the Permanent Portfolio. - Investing for uncertainty. - Assets of the Perm...

If someone is comparing gold to the stock market, bond market, etc. they are simply wrong. So, In Larry Swedroes's terms, you think gold is savings (a secure cash equivalent), not an investment (in equities, bonds, etc.)? Keith Pretty much, yes. Gold doesn't produce interest and dividends so it is ...

And what does the Permanent Portfolio do during that rise? I have no idea. I'm not discussing the Permanent Portfolio in any of my replies. I am simply saying that a stock and bond portfolio should hold some hard assets and a really good hard asset to own to counter currency risk is gold. Also I am...

The paper is making a strange claim that an investor in Brazil would have been better off holding cruzeiros vs. gold? I don't get what they are saying. Someone holding gold in that situation was tremendously better off vs. someone just holding cruzeiros. See -- that's what I mean about not botherin...

I can't seem to find the quote that you attribute to Erb & Harvey, since you didn't include a page reference. However, I did find this quote which seems to contradict what you ascribe to them. They don't seem to be saying that the gold stnadard regime in the U.S. produced a zero inflation rate:...

Here's my summary on this topic in terms of gold, currencies and the duplicity of the arguments against gold as an asset in a diversified portfolio:

But I thought there were supposed to be fundamental economic arguments for owning gold -- you keep bringing them up. But you punt when it comes to the Erb & Harvey research paper that debunks all these arguments and argue instead that it's the correlations with other assets that really count an...

Might be a good idea to read the work of Erb & Harvey before deciding to jump onto the gold bandwagen. In a new working paper titled "The Golden Dilemma", the pair take up the key drivers of gold and put them to the test. According to the authors of the paper, some of the most common ...

Unfortunately, I think you would agree, most investors don't act that way. The real benefit if there is one from gold is from rebalancing. I agree that a lot of investors can't rebalance rationally. Emotions run high when you are expected to buy into a sinking asset when your others are high flyers...

There’s a reason every major central bank on the planet holds it and it isn’t because they have nothing better to do with their vault space. I’ve asked this question about why central banks hold gold when it is supposedly worthless as an inflation hedge and I usually get either no response, or some...

Gold is an insurance asset. It’s not perfect (what is?), but when currencies are having a problem people want gold. It’s interesting because some often describe the use of gold as the mythical ‘long time horizon’, but the actuality is much different. The lifespan of paper currencies is short and bru...

Craig, obviously you've never heard of TIPSs . The government has promised us a positive real return, so we have nothing to worry about. Everyone's views on this particular subject are heavily influenced by their own life's experiences. In the U.S. we have not had seriously bad inflation for at lea...

Andrew Ang - 'Real' Assets, September 29, 2012, Columbia Business School Research Paper Gold, surprisingly, has been a poor inflation hedge. That paper has some problems in his assumptions and data. For example: Erb and Harvey (2012), however, document that over the extremely long run, gold may be ...

Why 25% gold? Why not 10% or 50%? I'm not here to argue with Excel Solver and endless backtests of arbitrary dates and asset percentages selected to make a specific point. Finding what did best in a portfolio backtest is easy and there are infinite combinations. But you know people point out these ...

That's the point Craig. Low cost, tax efficient, diverse. Which is not a constant choice, it will vary from year to year. It is not possible to model the complexity of taxes on a portfolio as it would apply to each person. It is not possible to even guess what the tax impacts will be going forward ...

Were these expenses considered when calculating the hypothetical Perm Portfolio return? No they weren't because nobody else applies those expenses to their portfolio testing either. Not everyone just looks at gross nominal. Net real is something that should be more widely adopted IMO - even if thos...

Were these expenses considered when calculating the hypothetical Perm Portfolio return? No they weren't because nobody else applies those expenses to their portfolio testing either. As a matter of course, so to keep the benchmark consistent, we don't apply expenses as they are too variable. We disc...

I’ve just finished reading “The Permanent Portfolio”, and I have a few questions and observations: Thanks for reading the book [disclosure: I'm one of the authors] 1. On page 25 the returns of a 60/40 portfolio are compared to the Permanent Portfolio. Was the 60/40 portfolio rebalanced over the tim...

Optimizing based on past data is fraught with peril. Even doing volatility weighting has big problems because volatility is radically different over the time chosen. A couple things: 1) The barbell of cash/bonds is deliberately there because the cash is very stable in value no matter what the market...

Despite all the arguments in favor of owning gold, none of them to my knowledge have established that one-fourth of your wealth should be invested in it. The argument is really simple. You want to own enough of an asset to help you when you need it to, but not enough to blow things up when it's hav...

I would say why go back only 130 years.. I believe he said that gold bought roughly the same amount of wheat in ancient Assyria that it does today. ( Of course, my memory may be wrong and I will have to defer to anyone that has a copy of the books.) His disciples now seem to sing a different tune t...

Tax question: If we put together a PP, isn't the gold taxed at a higher "Collectable" rate? Gold is taxed at a collectibles rate, or your marginal rate, whichever is lower. Most people are not likely to pay the full collectibles rate on gold, and even then you rarely need to rebalance it....

Let me start by saying I'm not sure the Permanent Portfolio is really the best portfolio, but I'm going to start with that opinion and see if I can be convinced otherwise by other on this forum who are much more experienced and well versed investors than I. Well I'm pretty big on the portfolio (I c...

Thanks Craig - I read many of you other postings . Many miners have large gold price exposures in a variety of currencies. I think economics justifies some correlation between expected gold prices and miners performance. The correlation may not always hold though ... thus I view your comments on th...

I'm sorry but mining stocks do not serve the same purpose as gold bullion in the Permanent Portfolio. The gold bullion acts a a currency diversifier against the cash and bond components. Also it acts as an insurance element against other problems that can roil markets. Miners do not do this. Also, g...

Does the book discuss what form of gold should be held or if silver should be mixed in as well? Imagining a Mad Max-style apocalypse, it seems like having some silver around for smaller purchases would be nice. Gold is the best because it is a monetary metal and the high value to small size makes s...

This book is worth a read. Thanks for reading the book. We spent a lot of time on it updating Harry Browne's ideas to the products and situations of today. My main quibble: Governments like to outlaw gold, over the past 100 years, about 42 percent of the time in the US, the PP was illegal as I unde...

The initial idea was first brought forward by Harry Browne in his newsletter in the late 1970s. It became the foundation for his book with Terry Coxon "Inflation-Proofing Your Investments" published in 1981 and eventually the mutual fund that started around the same time. What do you make...

craigr - thanks for the historical background on the PP. Do you know when PRPFX originated - 1982? Yes. It was the first mutual fund to incorporate hard assets along with conventional assets such as stocks and bonds from what I was told by one of the founders of the fund (John Chandler). Harry Brow...

Despite the historical data on the PP dating back to 1972 (when gold was liberated from the dollar), as far as I can tell it seems to be a relatively recent portfolio strategy in terms of being implemented by investors. The initial idea was first brought forward by Harry Browne in his newsletter in...

The 25% allocation to each asset that people get concerned about (especially gold) is because the portfolio wants to hold enough of each asset to help the portfolio during a bull market, but not so much to get badly burned during a bear market in that asset. So the 25% figure hits this sweet spot ve...

I recently updated my MacBook Pro laptop to a Crucial 512GB SSD. The performance difference is dramatic and well worth the cost. It is almost like you get a new laptop out of it due to the performance increase. I know it's not an Acer, but I posted my results of the swap here including benchmarks be...

Aberration 1 Gold did aberrantly well during this time period. Over the last 210 years gold has increased on average by 1% over inflation. During the last 40 years it has done much better. Gold was the dollar. Dollar was gold. It was a fixed exchange rate until 1971. Then I hear that Gold "doe...

nisiprius wrote:

craigr wrote:...what other form of money can you find from the days of the Roman Empire that is still valued today just for the content alone?

Salt and pepper, to name two.

Central banks don't store salt and pepper in their vaults.

Gold bugs hate the fact that the portfolio holds long-term bonds. Stock bugs hate it because it doesn't hold enough stocks. Etc. Frankly I'm so use to getting stones thrown at me from all sides that I think I'm probably right in the spot I want to be in terms of balanced diversification. ;) The real...

That certainly seems like a sensible argument and I can't dispute it. But it is also an a posteriori argument. If we're allowed to play that game I can probably explain why any number of portfolio allocations haven't worked out exactly like they were expected to. So, on that basis, how do we decide...

I also don't agree that the PP has always worked - it didn't work for two decades out of the last four. No it worked fine. If you are targeting real inflation adjusted returns there are no problems with the portfolio. Honestly. If you are trying to chase 15% CAGR because your neighbors are bragging...