The year is 1900. What is your "permanent" portfolio?

[blue_ruin17]

The year is 1900: The West is stable, at peace, and is the utterly undisputed hegemonic power of the world. Seems like Europe has finally learned to co-exist and mutually reap the benefits of prosperity, maybe for good? "The Federal Reserve", what's that? Petroleum? Seems like it has some upside potential. East Asia? Frontier market, at best, uninvestable backwater at worst. Russia? Lots of room for explosive growth if only someone would push that damn Czar out...

But that's all speculation. You really have no idea what 1901 will actually hold in store, let alone, the rest of the century. No one can predict the future, afterall.

What does your asset allocation look like? What is your "permanent" portfolio?

[Hal]

Hmmm. I think I would go with what has worked in the past.

Jim Rickards interviewed some "old money" in Europe recently and the answer was:

<snip>
We talk about the ‘old money’ in the U.S. , the 100 year money, and the ‘new money’. When you go to Europe, some of that money is 400 or 500 years old…and you say how did you survive the Thirty Years War, Napoleon and World War I etc. and they will say…

A third — a third — a third…

One third gold.

One third art.

One third land.

And a little cash to run your jet and your yacht” he jested.

“That’s how you preserve wealth for the long run.

If you want a short pop go buy some stocks.”

<snip>

Normally I just sit back in my residence and enjoy life !!

[blue_ruin17]

Seems like a legacy portfolio for the uber-wealthy, though. I don't think you would recommend that allocation to the average investor.

[Hal]

For the average person

1. Without the benefit of hindsight

Probably just a 50/50 stock bond portfolio as per Benjamin Grahams principles. No ETF's then so you would actually get to use the valuation methods in his book. I think almost all countries were on a pure gold standard then with the exception of China which was on a Silver Standard. Probably would have invested most in Britain which was the pre-eminent power at the turn of the century

2. With the benefit of hindsight (British stock market was closed for a few years and some countries went off the pure gold standard - from memory)

Mixed, major economic countries shareholding of 50% (using Grahams principles)
20% Physical Gold held in different Countries
10% Pound Sterling and USD paper notes
20% Longest term Government Bonds denominated in USD and British Pounds

Now I think there may be a few lessons there.......

What if the stock market is closed again, or the currencies are significantly devalued etc

[blue_ruin17]

I've never heard of the British stock market closing???

[Hal]

A bit of the history here....

https://www.globalfinancialdata.com/gfdblog/?p=2750

[blue_ruin17]

A bit of the history here....

https://www.globalfinancialdata.com/gfdblog/?p=2750

Permanently bookmarked for future reference, thanks for that.

[dualstow]

That's very interesting about the stock market closing. This thread has already paid for itself with that.

I think the precious metals portion of my permanent portfolio would include some silver, as it would predate the Hunt Bros' misadventures. I wouldn't know any better.

[LazyInvestor]

Talmudic portfolio 1/3 business 1/3 land/real estate 1/3 gold

[Kriegsspiel]

When I think about what information and learning materials I'd have had available, I think I'd have been pretty close to a Talmudic portfolio too.

- Since there was no internet or index mutual funds (or... any mutual funds), I'd probably have invested in companies in the Dow, since I'd be able to see them in the newspaper.

- Money was gold, so that probably wouldn't have been a consideration, I'd have owned treasuries and savings bonds, and money in a bank like a normal person.

- Real estate is something you'd learn about in your locality, and without the regulations and financing of today would have been even easier to get started in.