Permanent Portfolio is only for US

General Discussion on the Permanent Portfolio Strategy

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lordmetroid
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Permanent Portfolio is only for US

Post by lordmetroid » Fri Feb 12, 2016 9:08 pm

I think I figured  it out, the Permanent Portfolio can not work outside of the United States. Any local economic turmoil in a any other economy other than the super power wouldn't effect the gold. Europe stock markets peaked the 27th of April of 2016, far ahead of the US stock markets. However we didn't see any upswing in gold until the US-market followed suit in January. Local bonds and local stocks should of course work as predicted and react to the local economy.

Gold(green) Vs. Stocks(blue), 2015-04-27 to 2016-02-12
[img width=500]http://i.imgur.com/c4I3Fwb.png[/img]


So what does this mean for a Permanent Portfolio investor outside of the United States. Well it means that the outcome is unpredictable and not at all steadily climbing like a US portfolio does. These two charts from a Swedish and Japanese portfolio falsifies the Permanent Portfolio theory outside of the United States.


Swedish Permanent Portfolio(OMXS30 stocks / Gold / 3 month bills / 2-10 years bonds):
[img width=500]http://i.imgur.com/g0C3ujk.png[/img]

Japanese Permanent Portfolio:
[img width=500]http://4.bp.blogspot.com/-jLZBJlSnvMI/U ... _Japan.png[/img]
Last edited by lordmetroid on Sat Feb 13, 2016 6:04 pm, edited 1 time in total.
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frugal
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Re: Permanent Portfolio is only for US

Post by frugal » Sat Feb 13, 2016 1:25 am

No

EUPP is doing great

compare it with USPP


regards
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Re: Permanent Portfolio is only for US

Post by dualstow » Sat Feb 13, 2016 6:35 am

Interesting contrast of opinions.
Maybe it will work long term in Europe but perhaps Sweden is, for the time being, beyond help?
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Re: Permanent Portfolio is only for US

Post by LazyInvestor » Sat Feb 13, 2016 10:49 am

HB was emphasizing world crisis likes USD. USD crisis likes gold. Chinese, Russian, Australian, Canadian, South American, etc. currencies were all going down last year, and gold was just staying the same wrt USD. Any of these guys holding gold might have instead held USD and have the same effect in their PPs. However, last month even slight talk about crisis of USD, gold started shooting up. Exactly as per HB.

So, if you are holding a non-US PP, you should realize that the economy or currency of your PP might be going down, while US economy/currency is doing very well and money is running to USD rather than gold. In fact, you might be in a situation that your economy is tanking and that USD is doing so well that gold is also tanking. Don't underestimate US economy and the role of USD as the world reserve currency despite all the stories how the situation is supposedly changing (HB pointed out that this is a story that's being repeated last 30 years).
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Re: Permanent Portfolio is only for US

Post by Lang » Sat Feb 13, 2016 11:32 am

Japan has been in deflation for more than 20 years and even so the price of gold in yen has skyrocketed since 2004, which makes no sense whatsoever.

http://goldprice.org/gold-price-japan.html
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Re: Permanent Portfolio is only for US

Post by lordmetroid » Sat Feb 13, 2016 12:01 pm

Lang wrote: Japan has been in deflation for more than 20 years and even so the price of gold in yen has skyrocketed since 2004, which makes no sense whatsoever.

http://goldprice.org/gold-price-japan.html
Thank you for the hyperlink, did some research on the price charts and noticed price in GBP shows the same price pattern as can be seen in SEK and EUR.

So I got a hypothesis:
Gold is priced in USD worldwide. Your local currency exchange rate is then added on top of that. Because currency exchange rates are affected by a lot of other factors other than inflation. Gold doesn't show the same behavior outside of the United States.
Last edited by lordmetroid on Sat Feb 13, 2016 12:19 pm, edited 1 time in total.
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Re: Permanent Portfolio is only for US

Post by Pointedstick » Sat Feb 13, 2016 12:04 pm

I don't think a complete picture is painted when we talk about gold going up during inflation. Gold is more of a "crazy shit is happening" hedge, and high inflation is just one of many conditions that would fall under that umbrella. Sustained deflation and negative interest rates might be another one, since, yeah, if your deposits and cash are losing money, you might as well buy gold, which at least just sits there. And right now gold is soaring because people are afraid of the stock market blowing up. The big question is how often you see these kinds of events happening and how much they worry you. The more they dominate your thoughts, the more gold you'll intrinsically feel comfortable having.
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Re: Permanent Portfolio is only for US

Post by lordmetroid » Sat Feb 13, 2016 12:15 pm

1990, the Japanese economy is experiencing Ragnarok. Stocks markets are in free fall and a whole country of japanese people are panicking but no reaction in gold.

Nikkei 225, 1975 - 2015
[img width=500]http://sdw.ecb.europa.eu/servlet/quickv ... PDOWA.HSTA[/img]

Gold price in JPY, 1975 - 2015
[img width=500]http://i.imgur.com/7fDQpr4.png[/img]
Last edited by lordmetroid on Sat Feb 13, 2016 12:40 pm, edited 1 time in total.
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Re: Permanent Portfolio is only for US

Post by dualstow » Sat Feb 13, 2016 12:19 pm

I remember someone (Browne?) writing that gold can take some time, years even, to do its thing. Whether one thinks of it as an inflation hedge, a fear index or whatever, it will not necessarily respond quickly to events, let alone day-to-day happenings and perceptions of those happenings.
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Re: Permanent Portfolio is only for US

Post by lordmetroid » Sat Feb 13, 2016 12:39 pm

dualstow wrote: I remember someone (Browne?) writing that gold can take some time, years even, to do its thing. Whether one thinks of it as an inflation hedge, a fear index or whatever, it will not necessarily respond quickly to events, let alone day-to-day happenings and perceptions of those happenings.
In the case of the Japanese economy, 15 years? This is not a satisfactory explanation.
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Re: Permanent Portfolio is only for US

Post by dualstow » Sat Feb 13, 2016 3:49 pm

lordmetroid wrote:
dualstow wrote: I remember someone (Browne?) writing that gold can take some time, years even, to do its thing. Whether one thinks of it as an inflation hedge, a fear index or whatever, it will not necessarily respond quickly to events, let alone day-to-day happenings and perceptions of those happenings.
In the case of the Japanese economy, 15 years? This is not a satisfactory explanation.
I agree. 15 years is a long time. This suggests that gold might not reliably be counted on as a cure for stock markets in a free fall and panicking people. Don't get me wrong, it's still an important- an essential part of the pp. But neither gold nor the pp should be thought of as a cure-all for everything, even in the U.S. Rather, it's just the best thing out there so far, and an experiment in progress.
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Re: Permanent Portfolio is only for US

Post by frugal » Sat Feb 13, 2016 4:43 pm

Hello,

so, outside of USA what is the alternative to PP?

Thank you.
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