Let's say some time in the future, learning about the PP is a standard part of any High School curriculum.. and the current laws against market manipulation remain. How would you see the performance of the markets in general being affected in the future?
I still think there will be speculators out there who will not be satisfied with the PP's 5 - 15% annual returns and will take on more risky investments. Nevertheless, market volatility might decrease due to more people hanging onto their investments when the economy hits a road bump since they'll have more faith in the PP than holding stocks or even a stock index.
what do you think?
If everyone knew about PP, how will it perform?
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Re: If everyone knew about PP, how will it perform?
0 responses, I'll give it a shot...
Unlike momentum trading and other trend-following strategies, the Permanent Portfolio is a counter-trend trading strategy which systematically speaking provides a "negative feedback" that has a stabilizing effect overall.
If a significant amount of wealth i.e. 100+ trillions of dollars were allocated to PP worldwide, you would see a natural inflow and outflow from the various asset classes which would essentially render quasi-government entities like the Fed and ECB obsolete. Emergency funding would be made available to businesses during recessions automatically through re-balancing; funding haircuts (thru stock sales) would occur in prosperity; there would be no more bubbles as everybody would sell asset-classes on the way up rather than pile on and buy more.
*EDIT* apparently the PP is not for everyone... and it may not be for me, due to excessive real estate holdings. So I don't know that your "what if" scenario is really worth thinking about.
Unlike momentum trading and other trend-following strategies, the Permanent Portfolio is a counter-trend trading strategy which systematically speaking provides a "negative feedback" that has a stabilizing effect overall.
If a significant amount of wealth i.e. 100+ trillions of dollars were allocated to PP worldwide, you would see a natural inflow and outflow from the various asset classes which would essentially render quasi-government entities like the Fed and ECB obsolete. Emergency funding would be made available to businesses during recessions automatically through re-balancing; funding haircuts (thru stock sales) would occur in prosperity; there would be no more bubbles as everybody would sell asset-classes on the way up rather than pile on and buy more.
*EDIT* apparently the PP is not for everyone... and it may not be for me, due to excessive real estate holdings. So I don't know that your "what if" scenario is really worth thinking about.
Last edited by atrchi on Tue Apr 03, 2012 9:46 pm, edited 1 time in total.
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murphy_p_t
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Re: If everyone knew about PP, how will it perform?
if everyone had 25% gold in their holdings...the metal would do a moonshot
Re: If everyone knew about PP, how will it perform?
There are a few old threads on this subject, which is probably why you aren't getting very many responses.
My take: even if everyone knew about the PP, you'd never get anything close to a majority of investors using it. It's just very difficult to get a critical mass of people to all agree to something, even when there's overwhelming evidence that it's the right thing to do. Look at how many people still smoke and play the lottery. Or the failed attempts to get everyone to switch over to Esperanto or the metric system.
If we suppose for the sake of discussion that the PP did become near-universal, then I agree with Clive that the assets would become much less volatile and resemble short term Treasuries. Also as murphy_p_t said, that would make gold ownership far more prevalent which would increase its price immensely.
My take: even if everyone knew about the PP, you'd never get anything close to a majority of investors using it. It's just very difficult to get a critical mass of people to all agree to something, even when there's overwhelming evidence that it's the right thing to do. Look at how many people still smoke and play the lottery. Or the failed attempts to get everyone to switch over to Esperanto or the metric system.
If we suppose for the sake of discussion that the PP did become near-universal, then I agree with Clive that the assets would become much less volatile and resemble short term Treasuries. Also as murphy_p_t said, that would make gold ownership far more prevalent which would increase its price immensely.