PERM etf / Browne PP gets a write up - A for innovation B- for strategy

[gonetowindsurf]

But the author believes 2 asset classes need to be in "vogue" but I believe the premise is only one asset class needs to be in strong growth mode to offset decline and stagnation in other classes.
http://seekingalpha.com/article/404601- ... arketwatch

[clacy]

That was a very weak article.  The guy says the PP falls short because it doesn't include volatility and correlation as categories to go with growth and inflation/deflation, but doesn't say what asset classes should be added to include those categories or give any data to support his contention.

[longeyes]

Sorry, didn't see this thread before I posted the same on the "fund" column of this forum.  Yes, the author doesn't know the provenance of the strategy and offers some questionable "improvements."

http://seekingalpha.com/article/404601- ... olio&ifp=0

[MediumTex]

Sometimes I feel like a monk in the Shaolin Temple and I am observing people wandering into the temple, observing the meditation and martial arts techniques for 15 minutes or so and then confidently offering up a long critique of how things should be changed based upon their own casual impressions of what they have seen.

I suppose this is probably true for any investment strategy where patience and subtle understanding are the keys to success.  I'm sure people are constantly wandering in and out of other temples as well, filling the suggestion boxes with half-baked but well-intentioned recommendations before wandering on to the next thing.

I can't tell you how many times I have been explaining the PP to someone and they almost couldn't wait for me to finish before they launched into the way they would do it, along with all of the obvious things I am missing by following the basic PP recipe.  As I listen to their predictable lines of reasoning, I want to put my hand on their lips and say: "I know.  That's what I used to think, too.  What I am trying to tell you is that the PP is a way out of all of that."

[Alanw]

My experience has been very similar to MT's.  I live in a retirement community where most of my friends have long standing relationships with financial advisors.  When I try to explain my investment concept using the PP, and tell them what the yields have been, invariably they will want to run it by their financial advisor.  We all know where that leads.

Now I just mention the PP and give them the names Harry Browne, Permanent Portfolio and Crawling Road and tell them to Google each or a combination of the names and due their own research.  So far none have commented on the sites or the PP.

Oh well.  I guess you can lead a horse to water........or in this case the PP.

[MediumTex]

My experience has been very similar to MT's.  I live in a retirement community where most of my friends have long standing relationships with financial advisors.  When I try to explain my investment concept using the PP, and tell them what the yields have been, invariably they will want to run it by their financial advisor.  We all know where that leads.

Now I just mention the PP and give them the names Harry Browne, Permanent Portfolio and Crawling Road and tell them to Google each or a combination of the names and due their own research.  So far none have commented on the sites or the PP.

Oh well.  I guess you can lead a horse to water........or in this case the PP.

It's a strange thing for me, because I am the kind of person who really enjoys helping others.  I would never advertise the PP as the last word on investing, but there is a part of me that really wants to convey the simplicity and elegance of the overall approach (along with its potential for providing peace of mind) so that people can at least make a truly informed decision about whether it's right for them.

One of my least favorite parts of PP discussions is when people get that look on their faces like "ohhhhhhhh, you're one of those people.  You're one of those gold bugs/fools who buy 30 year bonds paying 3%/people who keep a huge chunk of their investments in cash/people who think that you can have good overall returns with a small stock allocation."  When I see that look I want to say no, I am not one of those people; what I am talking about is different from all of that.

Many investors imagine that successful investing is a matter of figuring out how to be a good speculator, as opposed to figuring out how to avoid the necessity of speculating in the first place.

It reminds me of the following Thoreau quote:

Not long since, a strolling Indian went to sell baskets at the house of a well-known lawyer in my neighborhood. “Do you wish to buy any baskets?”? he asked. “No, we do not want any,”? was the reply. “What!”? exclaimed the Indian as he went out the gate, “do you mean to starve us?”? Having seen his industrious white neighbors so well off — that the lawyer had only to weave arguments, and, by some magic, wealth and standing followed — he had said to himself: I will go into business; I will weave baskets; it is a thing which I can do. Thinking that when he had made the baskets he would have done his part, and then it would be the white man’s to buy them. He had not discovered that it was necessary for him to make it worth the other’s while to buy them, or at least make him think that it was so, or to make something else which it would be worth his while to buy.

I too had woven a kind of basket of a delicate texture, but I had not made it worth any one’s while to buy them. Yet not the less, in my case, did I think it worth my while to weave them, and instead of studying how to make it worth men’s while to buy my baskets, I studied rather how to avoid the necessity of selling them. The life which men praise and regard as successful is but one kind. Why should we exaggerate any one kind at the expense of the others?

To me, the life of the hopeful/fearful speculator is similar to what Thoreau is describing.  The fact that tools like 401(k) plans have turned the general public into hopeful/fearful speculators is unfortunate.

[Gosso]

It's a strange thing for me, because I am the kind of person who really enjoys helping others.  I would never advertise the PP as the last word on investing, but there is a part of me that really wants to convey the simplicity and elegance of the overall approach (along with its potential for providing peace of mind) so that people can at least make a truly informed decision about whether it's right for them.

One of my least favorite parts of PP discussions is when people get that look on their faces like "ohhhhhhhh, you're one of those people.  You're one of those gold bugs/fools who buy 30 year bonds paying 3%/people who keep a huge chunk of their investments in cash/people who think that you can have good overall returns with a small stock allocation."  When I see that look I want to say no, I am not one of those people; what I am talking about is different from all of that.

Maybe the Permanent Portfolio needs to be rebranded?  Take the focus off the "disgusting" innards, and place the emphasis on how it frees yourself from the financial system.  Call it the "Agnostic Portfolio" or the "Zen Portfolio"...this might fly with the new-age crowd.  Personally I could care less about the four components, but rather focus on how they work together to simply flow with the changing financial scene.

It's hard for people to understand "letting go" or "giving up control" when they have been programmed to do the exact opposite.

[Alanw]

Gosso,

The friends that I discuss the PP with have already given up control for the most part.  Their idea of control is telling their financial planner what percentage of stocks and bonds they would like to hold or if they  want to be in more control, tell them the sectors they want to be in, then call once a month, quarter, etc. to see how they are doing.

The other day one individual mentioned that his portfolio had gone up 6.5% last year.  He then asked me how my portfolio had done.  When I told him that my portfolio had gone up 11% last year and around 14% the year before, he wanted the name of my financial planner.  Then when I told him I didn't use a financial planner but  managed my own portfolio, he commented that I must be some kind of financial guru. I told him that I didn't have an extensive financial background but had discovered an investment concept called the Permanent Portfolio.

I then went on to describe the components of the 4x25% PP.  He asked if I had to juggle the components around all the time to get these returns.  I told him that I just left it alone and checked on it once a month or quarter to see if I had to rebalance.

He never did grasp the concept of leaving it alone and not tinkering.  As MT had mentioned before, he had been programmed to believe that his portfolio required constant monitoring and that there was no one better to do this than his financial planner who had been educated in the markets and had a vast array of professional designations. There was a look of disbelief on his face that something so simple could deliver these returns.


All I can try and do is help educate and hope that some will get it.  So far I have not been very successful.  Sometimes I even get suspicious looks.  I just smile and look like I know something everyone else doesn't. 

[Gosso]

Alanw,

You're right about some people giving up control to their financial planner and blindly accepting what this person tells them.  This is such a horrible idea that I didn't even consider it as an option.    In my age group (I'm 27) most of my friends are looking for the next big thing, and since it is so easy to access these markets through discount brokers and etfs we don't even think about the option of hiring a financial planner.  This could be a changing of the times?

So really what we need is for people to regain control and then give it right back.  I can understand why this process would be scary to many people, especially if they have had a financial planner looking after things for so long.

[KevinW]

Sometimes I feel like a monk in the Shaolin Temple and I am observing people wandering into the temple, observing the meditation and martial arts techniques for 15 minutes or so and then confidently offering up a long critique of how things should be changed based upon their own casual impressions of what they have seen.

The Shaolin Monk analogy really resonates with me.

I choose to live simply and deliberately, which always pushes me toward simple yet deep solutions.

But, like it or not, we live in a world of short attention spans, complex lives pulled in many directions, and patronizing authorities.  All that pushes people toward gaining a superficial sound-bite understanding of a topic and then delegating the solution to an expert with credentials.

A lot of my explanations start with something like "Looking back over all of recorded human history," or "Taking a holistic view," or "If you take fashion and ego out of the equation," and by the time I finish that sentence I've lost people.

[Alanw]

Alanw,

You're right about some people giving up control to their financial planner and blindly accepting what this person tells them.  This is such a horrible idea that I didn't even consider it as an option.    In my age group (I'm 27) most of my friends are looking for the next big thing, and since it is so easy to access these markets through discount brokers and etfs we don't even think about the option of hiring a financial planner.  This could be a changing of the times?

So really what we need is for people to regain control and then give it right back.  I can understand why this process would be scary to many people, especially if they have had a financial planner looking after things for so long.

I guess I never really thought about younger people growing up with computers and the internet and using these resources for investing and trading the markets.  For those of us older posters who did not have computers or the internet for immediate information, we relied on  "experts" for our information.  Most of us believed that we could not understand investing or the markets and had to rely on Financial Planners.

Over the years, some have found it very difficult to give up this practice and the markets still remain a mystery solved only by a select few (Financial Planners).  Others have taken it upon themselves to solve the mystery.  Finding the PP has simplified the process.

[craigr]

Honestly the proliferation of CPU power has made trying to beat the market just as much of an issue as it was in the past. Maybe even worse??? I just talked to someone this week that was doing a full regression analysis on past market data. It looked pretty sophisticated. He was convinced that the patterns in the past could predict future market moves. I asked a few leading questions about why a particular market movement could possibly predict the future and of course he had a very rational explanation for everything.

I have learned over the years that this kind of reasoning can't be talked out of someone. They need to get good and burned before they learn the lesson that market timing and guessing the future just doesn't work. And it makes me kind of angry and sad that this is how the industry works on people.

[Alanw]

The more sophisticated and difficult the "experts" make investing appear, the harder it is for the lay person investor to believe they can do it themselves or that passive investing minus the fees, would give them equal or superior returns.  The industry has relied on this concept for years.  Maybe in time, with the new wave of younger, more savvy investors, the industry will have a harder time recruiting.

As for the PP, I don't know if it will continue to work in the future.  I do know that it has instilled in me an investing calmness that I never had before.  For that I thank you.

[lazyboy]

The more sophisticated and difficult the "experts" make investing appear, the harder it is for the lay person investor to believe they can do it themselves or that passive investing minus the fees, would give them equal or superior returns.  The industry has relied on this concept for years.  Maybe in time, with the new wave of younger, more savvy investors, the industry will have a harder time recruiting.

As for the PP, I don't know if it will continue to work in the future.  I do know that it has instilled in me an investing calmness that I never had before.  For that I thank you.

I quite agree and I second that thank you to craigr, MT and everyone else who has contributed to my investing calmness. You may not be able to convert everyone but you can still generate calmness for those that will listen. That in itself is a remarkable achievement. I like to compare the wisdom of the PP and Harry Brown to that of the old Taoist master Laotzu.
From The Tao Teh Ching (The Way of Life) verse 47:

There is no need to run outside
For better seeing,
Nor to peer from a window. Rather abide
At the center of your being;
For the more you leave it, the less you learn.
Search your heart and see
If he is wise who takes each turn:
The way to do is to be.

[Gosso]

Maybe in time, with the new wave of younger, more savvy investors, the industry will have a harder time recruiting.

I wouldn't necessarily call young investors more savvy.  There are many traps that we can fall into as well...for example I seriously debated whether I should start day trading, but somehow talked myself out of it. 

With the internet it is now extremely easy to access new information (if you know where to look), so there is a greater chance that we'll stumble on Bogleheads or the PP, and save ourselves from the financial game.

Lazyboy, that is a good quote (if I understood it correctly).  I'll have to add The Tao Teh Ching to my reading list.

[KevinW]

I'll have to add The Tao Teh Ching to my reading list.

It's a good read. It's on the short list of books that I make a point of rereading every few years.  It's amazing how human nature is so consistent across time, space, and culture. I'm not a practicing Taoist, but  Taoism does have a lot of worthwhile things to say about detachment and accepting rather than trying to control the nature of the universe. It dovetails nicely with the PP and Browne's political views.

[6 Iron]

It's a good read. It's on the short list of books that I make a point of rereading every few years.  It's amazing how human nature is so consistent across time, space, and culture. I'm not a practicing Taoist, but  Taoism does have a lot of worthwhile things to say about detachment and accepting rather than trying to control the nature of the universe. It dovetails nicely with the PP and Browne's political views.

Kevin, is there a translation or commentary of this that you have preferred? My exposure has been limited to scattered quotes, but I would like a more thorough understanding.

[KevinW]

Last time I read the translation available free on Project Gutenberg: http://www.gutenberg.org/ebooks/216

There are many translations and strong opinions about which is best. It's perhaps analogous to the situation with translations of the Bible. Once I read a version that I found to be more poetic and freer-flowing than the Gutenberg edition, but sadly I returned it to the library without writing down which it was. 

[Tyler]

I've found that when it comes to money, most people are brainwashed into a single way of viewing the world.

- You take out a bunch of debt to go to college.

- You get a full time job, and pour your life into maximizing income.

- You buy as large of a house as your lender will allow, and drive a nice car reflective of your lifestyle.

- When you do have leftover savings, you invest it by picking winning investments that will beat the market. You do that by either paying a financial planner, or researching stocks yourself.

- When your income increases or you make a great trade, you upgrade your material lifestyle because you've earned it.

- You work until 60.  (very few people I know think much about that financially very far ahead of time)

In general, questioning any one of those tenants of financial faith draws strange looks from people walking the path.  Go so far as to explain how you personally went a different direction, and some people actually can get quite nasty in explaining how you just don't "get it."

[clacy]

I've found that when it comes to money, most people are brainwashed into a single way of viewing the world.

- You take out a bunch of debt to go to college.

- You get a full time job, and pour your life into maximizing income.

- You buy as large of a house as your lender will allow, and drive a nice car reflective of your lifestyle.

- When you do have leftover savings, you invest it by picking winning investments that will beat the market. You do that by either paying a financial planner, or researching stocks yourself.

- When your income increases or you make a great trade, you upgrade your material lifestyle because you've earned it.

- You work until 60.  (very few people I know think much about that financially very far ahead of time)

In general, questioning any one of those tenants of financial faith draws strange looks from people walking the path.  Go so far as to explain how you personally went a different direction, and some people actually can get quite nasty in explaining how you just don't "get it."

It seems this is the prevailing wisdom, financially speaking.  I suppose this is reflective of the period of prosperity (1980-2006) that benefited from the baby boomers coming of age (spending) and the tech boom.  I fee like this attitude is a fairly recent one however, with no long term track record that I could gather a lot of confidence from.

We will see how well this works out for the Gen X'ers and those that follow as we likely won't have all three of these to fuel our lifestyle:

easy credit
low taxes
deficit spending

[lazyboy]

Last time I read the translation available free on Project Gutenberg: http://www.gutenberg.org/ebooks/216

There are many translations and strong opinions about which is best. It's perhaps analogous to the situation with translations of the Bible. Once I read a version that I found to be more poetic and freer-flowing than the Gutenberg edition, but sadly I returned it to the library without writing down which it was. 

Here's the translation of verse 47 from the Gutenberg edition:

47. 1. Without going outside his door, one understands (all that takes
place) under the sky; without looking out from his window, one sees
the Tao of Heaven.  The farther that one goes out (from himself), the
less he knows.

2. Therefore the sages got their knowledge without travelling; gave
their (right) names to things without seeing them; and accomplished
their ends without any purpose of doing so.

I like this one, too. It does remind me of a George Harrison song, which is probably where he got it. There are so many translation. The one I have at home was translated by Witter Bynner, FWIW. Finding the "best" one is elusive. Kind of reminds me of our search for the perfectly optimized portfolio. Better to set up the PP and let it rest.

[MediumTex]

Last time I read the translation available free on Project Gutenberg: http://www.gutenberg.org/ebooks/216

There are many translations and strong opinions about which is best. It's perhaps analogous to the situation with translations of the Bible. Once I read a version that I found to be more poetic and freer-flowing than the Gutenberg edition, but sadly I returned it to the library without writing down which it was. 

Here's the translation of verse 47 from the Gutenberg edition:

47. 1. Without going outside his door, one understands (all that takes
place) under the sky; without looking out from his window, one sees
the Tao of Heaven.  The farther that one goes out (from himself), the
less he knows.

2. Therefore the sages got their knowledge without travelling; gave
their (right) names to things without seeing them; and accomplished
their ends without any purpose of doing so.

I like this one, too. It does remind me of a George Harrison song, which is probably where he got it. There are so many translation. The one I have at home was translated by Witter Bynner, FWIW. Finding the "best" one is elusive. Kind of reminds me of our search for the perfectly optimized portfolio. Better to set up the PP and let it rest.

There is a book called "Wen-Tzu: Further Teachings of Lao Tzu" that I have enjoyed immensely for many years.  If you think of the Tao Te Ching as Harry Browne's "Fail Safe Investing", Wen-Tzu is like "Why The Best Laid Investment Plans Usually Go Wrong."  It's a much more detailed and expansive description of the principles in the Tao Te Ching. 

It looks like there are 11 reviews on Amazon, and they echo my feelings about the book for the most part.  You might take a look at them.

Also, Thomas Cleary, the fellow who translated Wen-Tzu (as well as many other Chinese classics), is a very talented translator.  He is able to capture in his translations many subtleties that can easily be lost when translating esoteric material like Tao writings.

[lazyboy]

Thanks MT, I'll check those out. Good translations do make a big difference contrary to what I've posted. Sometimes the meaning can be distorted or lost with a bad one ...More Tao Teh Ching. Years ago I saw this one posted in a bathroom mirror at a Buddhist retreat center in Carmel Valley. For some reason it really grabbed me. Now I think Harry Browne must have been a Taoist is some ways (if such a thing really exists):

verse 18
 
When people lost sight of the way to live
Came Codes of love and honesty,
Learning came, charity came,
Hypocracy took charge;
When differences weakened family ties
Came benevolent fathers and dutiful sons;
And when lands were disrupted and misgoverned
Came ministers commended as loyal  

[lazyboy]

Many thanks, MT. Wen- Tzu is a great recommendation. I ordered it from Amazon after reading several pages in the search inside option. It's a treasure; stunning clarity. I have another book on my shelf translated by Thomas Cleary, The Secret of the Golden Flower, that I've enjoyed before and now I think I will reread it.

[MediumTex]

Many thanks, MT. Wen- Tzu is a great recommendation. I ordered it from Amazon after reading several pages in the search inside option. It's a treasure; stunning clarity. I have another book on my shelf translated by Thomas Cleary, The Secret of the Golden Flower, that I've enjoyed before and now I think I will reread it.

Wen-Tzu has acted as a mental chiropractor for me many times.