Well, let's think about this logically. If you are using your Permanent Portfolio money every day, if that is the money you're using every day, then it would make sense to take that into big-time consideration. If not, then.... why should you?frugal wrote: If you are using EUROS everyday you should hold a 100% EU-PP.
That's what theory says, no?
If my Permanent Portfolio is just going to sit there for decades, why would it matter what currency it's in? It can be in Martian Bowlhawkles, as long as I can easily convert it into usable money whenever I need it, what do I care? If it is giving a good return, that's the bottom line.
Where I could run into problems is if my currency that I'm going to spend has some wild fluctuations vs. the Bowlhawkle. And the currency market can be very volatile. But, long-term, things will all even out and rough purchasing power parity will be maintained between my currency and the Bowlhawkle. So long-term, no problem.
Shorter-term, there will be increased volatility. So, I am trading off increased volatility in exchange for... what? For, in my humble opinion, a portfolio that is more all-weather, more bullet-proof. If the Euro crashes, people will likely flee into the dollar. If the dollar crashes, people will likely flee into gold. So, gold is a super winner if there's inflation in the dollar. It will go up even more than the dollar falls. It's almost like it's leveraged. Gold can still serve as a hedge against inflation in other smaller currencies like the Euro, but will not be as effective in carrying the entire portfolio.
Thus, if you need things to be smooth and steady in smaller time increments, that is, if you're going to need your money soon, say, in less than five years, it would probably make sense to go with a localized PP-ish portfolio, especially if you guesstimate the chances of your currency experiencing high inflation in that time period are very low.
If, on the other hand, your time horizon is longer, fifteen years or more, I think you can count on the currency fluctuations, wild as they can be, all averaging out by then and so your returns will be the good predictable ones we've all come to expect from the PP. In that case, I personally think creating a US-based PP would be a better option. Others will differ with me; that's just my personal opinion.