This is an excellent question, especially since Harry himself warned us against accepting historical performance as proof of concept.
Harry's explanations, particularly concerning the non-neutrality issue, left many of us dissatisfied. Nevertheless, the portfolio has continued to perform well. Why?
In my opinion, there is a fundamental economic explanation as to why the PP works. It relates to central bank intervention and the business cycle.
It is well understood that more money leads to higher prices. But what is often missed is the new money is never introduced uniformly into the economy. The new money is, instead, loaned and spent into circulation. This leads to some asset prices rising prior to others. Hence the profit opportunity.
The brilliance of the PP is that it holds asset classes that respond quickly to central bank action (stimulus or pullback). The act of rebalancing locks in these gains before they are eventually wiped out by the spread of inflation to other sectors.
Harry's 4 broad economic categories are not all encompassing conditions. Rather, they are periods within the Austrian business cycle. In anticipating the business cycle, the PP is actually a speculative portfolio.
I've published a podcast on this topic at
http://wbadvisors.com/harrybrowne. Anyone familiar with Harry's writings should skip directly to Part 2 or 3. Feedback is appreciated.