Setting up an ETF PP

Discussion of funds that implement the Permanent Portfolio strategy

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LC475
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Re: Setting up an ETF PP

Post by LC475 » Fri Dec 19, 2014 9:00 am

KevinW wrote: I'd definitely use VTI and not VT.
Agreed.  VTI (total US stock market) is Permanent Portfolio.  VT (total world stock market) isn't.  The world stock market is not linked to any of the four exhaustive economic states.  Well, rather, only 50% linked, since the US market is 50% of the world market.  The US economy can be in any one of four states at any given time.  The genius of the PP is to have an asset that will be doing well at all four times, except for recession.  VT is an asset that messes that up.

You could say, "No, world stock market is up when the world economy is in prosperity."  OK.... then we need a whole new portfolio built for a whole new thing in order to have 100% temporal coverage.

World prosperity: all stocks in the world.  Check.
World deflation: ???????
World inflation: ???????
World recession: ???????

I am not even sure what the terms "world deflation" and "world inflation" would mean.  How would they be measured?  Not with the greatest of ease, that's for sure.

So, if we can come up with three new assets that will do well, or as well as possible, in these three other time periods, then we will have a new thing called a World Permanent Portfolio.  Until then, there is only one actual Permanent Portfolio, in my opinion: the US Permanent Portfolio.  All others are confused mis-extensions which are not ideal and will not provide the same protection.
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