Just found an interesting Gold prediction in Bogleheads

[Gebo]

"Rick Ferri wrote:
I have absolutely no interest in 'researching' the Browne portfolio."

This was a followup question:

If you have no interest in researching or understanding a portfolio that has, for decades, achieved the objectives for which it was designed, how can you then possibly come here and call it "voodoo"?"


This was his reply:

I am not tooting my own horn here, but 20 years doing research on asset allocation, 5 books in low cost investing and asset allocation, dozens of articles, thousands of correlation studies, after a attaining a CFA, a MS in finance, and a whole bunch of other stuff that I forgot, I really do not need to do 'research' on a portfolio that has 4 simple asset classes.

I call it voodoo because it is. I KNOW what the results are, and know WHY the results WERE that way in the recent past, and WHY it is pure speculation and complete wishful thinking that the results will come anywhere close to those returns in the future. The nation can only come off the gold standard once. It does not happen twice. Good luck!

Rick Ferri

PS. Since you are speculating in returns, here is my speculation. Gold is in a huge bubble due to gold ETF buying by retail investors (dumb money chasing returns and incredible hype in the media). I speculate that gold will drop below 700 per once by 2010, and below 500 per once by 2011.

[Gebo]

Notice the very last 2 sentences....

[Pointedstick]

Man, I wish he'd been right! Can you imagine $500/oz gold again? I'd buy it by the bucket.

[WildAboutHarry]

Craig interviewed Rick in one of Craig's podcasts.

Worth a listen.

[stone]

I thought the gold price was driven much more by the purchasing power of Asian gold buyers than by US ETF buying. The gold bull market is really a reflection on the increasing relative prosperity of people in Asia. The Indian Rupee has been slumping this year. I thought that that was why the gold price has been subdued over the past 12 months. Didn't Harry Browne always emphasize that gold was a global asset and that the 25% gold part of the PP was why the PP could ignore foreign stocks and just hold domestic stocks? I wonder whether Rick Ferri has any idea how many hundreds of tonnes of gold are imported by India and China each year.

[dualstow]

I really like Rick Ferri.
I feel the same as Pointed S: I would love to see his prediction come true. I'd run, not walk, to my local gold coin guy.

[MediumTex]

I call it voodoo because it is. I KNOW what the results are, and know WHY the results WERE that way in the recent past, and WHY it is pure speculation and complete wishful thinking that the results will come anywhere close to those returns in the future. The nation can only come off the gold standard once. It does not happen twice. Good luck!

And yet there have been TWO secular bull markets in gold following the end of gold convertibility, separated by 20 years.

The 2000-present secular bull market in gold would seem to disprove Ferri's thesis.

In any case, we all know the PP is not about gold--it's about safety in all economic environments.

[MachineGhost]

I call it voodoo because it is. I KNOW what the results are, and know WHY the results WERE that way in the recent past, and WHY it is pure speculation and complete wishful thinking that the results will come anywhere close to those returns in the future. The nation can only come off the gold standard once. It does not happen twice. Good luck!

He does sort of have a point.  The PP historical returns are front-loaded due to gold's outperformance in its early years.  The gold is the most risky as well as the most gainful of the four assets.

Its like how PRPFX is overweighted to real assets, so its very sensitive to both inflation and deflation.

It has probably never been quantified, but the PP may not be ideally -flation neutral in the sense of a perfect hedge.

[blackomen]

"Rick Ferri wrote:
I have absolutely no interest in 'researching' the Browne portfolio."

This was a followup question:

If you have no interest in researching or understanding a portfolio that has, for decades, achieved the objectives for which it was designed, how can you then possibly come here and call it "voodoo"?"


This was his reply:

I am not tooting my own horn here, but 20 years doing research on asset allocation, 5 books in low cost investing and asset allocation, dozens of articles, thousands of correlation studies, after a attaining a CFA, a MS in finance, and a whole bunch of other stuff that I forgot, I really do not need to do 'research' on a portfolio that has 4 simple asset classes.

I call it voodoo because it is. I KNOW what the results are, and know WHY the results WERE that way in the recent past, and WHY it is pure speculation and complete wishful thinking that the results will come anywhere close to those returns in the future. The nation can only come off the gold standard once. It does not happen twice. Good luck!

Rick Ferri

PS. Since you are speculating in returns, here is my speculation. Gold is in a huge bubble due to gold ETF buying by retail investors (dumb money chasing returns and incredible hype in the media). I speculate that gold will drop below 700 per once by 2010, and below 500 per once by 2011.

Rick, I'm afraid you're in violation of the CFA Institute Code and Standard: "Diligence and Reasonable Basis": http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2010.n14.1



(see Pg. 2)

[Ad Orientem]

Rick Ferri is a very smart guy. Unfortunately he has a low tolerance for contrary opinions that sometimes comes across as snarky arrogance.

[MediumTex]

Rick Ferri is a very smart guy. Unfortunately he has a low tolerance for contrary opinions that sometimes comes across as snarky arrogance.

In many ways Rick Ferri seems like the epitome of the modern investment advisor--very smart, strong personality, skilled salesman and supremely confident in his own beliefs (whether they are right or wrong).

[Reub]

This is what sets Harry Browne apart. He understood how we are human and very fallible. He understood how little we know about things, especially when it comes to predicting the stock market. His humbleness and lack of arrogance is embodied in his final product.

[HB Reader]

This is what sets Harry Browne apart. He understood how we are human and very fallible. He understood how little we know about things, especially when it comes to predicting the stock market. His humbleness and lack of arrogance is embodied in his final product.

Well put, Reub.  It was too bad he was virtually ignored by the public and investment community in his later years.  I don't know if it was his political activities/leanings or if he was just slightly out of step with our media culture.  His musings in the 1980s and 90s about how little we know and how the future is unpredictable are remarkable for someone who seemed so prescient in the 1970s.  He was also a very good writer. 

[clacy]

I personally am totally fine with the mainstream public shunning the PP for whichever reason they choose. It suddenly the entire investing public "figured it out" the PP would probably lose its volatility edge completely

[Lone Wolf]

This is what sets Harry Browne apart. He understood how we are human and very fallible. He understood how little we know about things, especially when it comes to predicting the stock market. His humbleness and lack of arrogance is embodied in his final product.

You're exactly right, Reub.  Browne's viewpoint is, when you really think it through, an obvious truth.  Yet it's one that few are actually comfortable actually expressing out loud.

Once I stopped trying to play hobbyist oracle I was a much freer person.  Rather than trying to figure out which way the wind's blowing, I just spend my time enjoying the breeze.