Does Harry Browne contradict himself with the PP advise?

[MiniB]

I'm relistening through all the archived radio shows.  One show Harry describes investment advisers who come up with new schemes, based on past results.

Doesn't the PP rely entirely on past results?  Historically there is a low correlation between stocks, gold, LT Bonds, and cash.  Does this mean that this will necessarily continue going forward?

Harry says, anything can happen, but nothing has to happen.  Couldn't that mean that all 4 assets could go down relative to commodities like food and gas and none of the 4 assets preserve buying power?

I'm not knocking the PP.  I like it and plan to implement it in the near future.  I'm just wondering if Harry contradicts himself.

[craigr]

Actually this question was asked of him. I forget what show. His answer basically was that he came up with the idea to protect his own money and that he encourages people to question everything. This is because they need to live with the consequences good or bad because it is their money, not his.

To an extent all investing systems rely on past results. The thing is though that past results are only good really at showing you what didn't work. They can't prove anything going forward. What we can use the information though is to prove or disprove investing ideas.

For instance when I looked at the data years ago I came to the conclusion that a stock/bond only portfolio doesn't work. It has too much variability and chances of zero real growth for a decade or longer because this has happened in the past (and again it looks like for the 2000s).

When I looked at the Permanent Portfolio it at least passed this initial test. This doesn't prove it will work going forward, but at least it hasn't broken yet (which is more than what other models have done). At that point you need to apply your own analysis to the strategy to see if it makes sense to you and what risks you think could impact your investments. If it passes the sniff test then I would move onto a deeper failure analysis and worst-case scenario evaluations. No guarantees of course doing this, but at least try to think of ways it can break and see what the possible effects are.

But in terms of Browne, he is an advisor but I doubt he was making any serious money from his advice on the show. You're talking about an internet podcast basically and radio network that at the time had very little market share. He wasn't a fee-based manager and was just stating what he does and why. I also doubt his investing book sales were a major income producer at the time when he did his show. He also never pushed the mutual fund that much either (he actually seemed to downplay it quite a bit). So in that sense I consider his advice fairly neutral.

Honestly, when I first heard his advice I thought he was nuts (25% gold? Long Term bonds? Crazy!). But after I did my own exhaustive review I came to conclude (obviously) that the strategy was pretty solid. In terms of accommodating a wide variety of market possibilities (good or bad), it's solidly thought out.

But you know it could fail going forward. All you can do is try your best. However I find the odds that all four assets would decline together to be rather small. An event like that may be bad for the Permanent Portfolio, but it would utterly wreck most other investing strategies.

[Pkg Man]

But you know it could fail going forward. All you can do is try your best. However I find the odds that all four assets would decline together to be rather small. An event like that may be bad for the Permanent Portfolio, but it would utterly wreck most other investing strategies.

Well said craigr.  If the PP doesn't work then I seriously doubt any other long investment strategy will either.