Changing to global stocks and gold only

[Rien]

but how could gold become worthless in your opinion?

If we discover an unconstrained energy source. Unlikely of course, but that would do the trick eventually.
Since however the constraints on our energy are ever getting higher, it follows that.....

[Kshartle]

but how could gold become worthless in your opinion?

If we discover an unconstrained energy source. Unlikely of course, but that would do the trick eventually.
Since however the constraints on our energy are ever getting higher, it follows that.....

Please forgive my ignornace but what do you mean by "unconstrained" energy source and why would people stop valuing gold if such a source were discovered?

[LC475]

I have 3 portfolios:
1) A tweaked 10,20,30,40 PP portfolio (80%)

Which assets are which?  I am guessing stocks are 40%, bonds 30%, gold 20%, and cash 10%?  Do I win?

[LC475]

All gold's value could disappear. 

It's obvious why a currency could go to zero or a stock....but how could gold become worthless in your opinion?

It is, in my opinion, the least likely of the four to go to zero.  The scenarios I can come up with in which it would become worthless are truly far-fetched.  Highly successful asteroid mining would just make the price go down (assuming demand staying equal), not go to zero.  Likewise alchemy or something -- it would increase supply, perhaps a million times over, but as long as there is still demand for it, the price will not go to zero.  To go to zero, all monetary demand for it as well as all demand to use it as a commodity would have to disappear.

Actually, no.  I take that back.  We value air, we need it, we use it, but it is, in most cases, super-abundant.  There is so outrageously much of it, its price is zero.  Its value is not zero in an absolute metaphysical sense, but in a praxeological sense it has no value because it has no value that we act on.  We don't have to rank air in our hierarchy of preferences, because it's just there.  Since it's not in our preferences at all, since we never demonstrate with our actions that we prefer air to some other end or good, its value in that (very important) sense is actually zero.  And because of that its price is zero.  The exceptions would be scuba diving, space travel, and high pollution that creates localized scarcity of a sort.  In those cases, we actually do pay a price for air: we buy a scuba apparatus, we design and build a space suit, or we wear a bandana or gas mask.

So, gold could become valueless (and again, I think this is so vanishingly unlikely as to be beyond unlikely) if it likewise enters a super-abundance situation.  A ridiculous increase on the supply side is one way to get there -- alchemy.  Gold is lying around everywhere.  The whole Rocky Mountain range has been converted to solid gold.  We build our buildings out of gold because it's cheaper than wood or steel.  There's just piles of gold laying around all over the place.  In that case gold is worthless.  A demand change is another way to get there.  If civilization collapsed and people lost the knowledge of the industrial uses of gold, and they no longer liked the way it looked, then it would become worthless.  Oil used to be just a noxious liquid weed.  Just something that annoyed farmers.  Selenium was obviously worthless in ancient societies.  They had no idea it existed, and no idea what to do with it.  So gold could become just a random shiny substance that shows up every once in a while but that no one is interested in.  That means these people must not like shiny things, which seems unlikely, but is hardly unimaginable.

We see then that gold (and any other commodity or substance) could be worthless in two ways:

1. like air is today (increase in supply), or
2. like oil was three hundred years ago (decrease in supply)

Both amount to this: a much larger supply than anyone has any interest in using, much less exhausting.

[Kshartle]

All gold's value could disappear. 

It's obvious why a currency could go to zero or a stock....but how could gold become worthless in your opinion?

It is, in my opinion, the least likely of the four to go to zero.  The scenarios I can come up with in which it would become worthless are truly far-fetched.  Highly successful asteroid mining would just make the price go down (assuming demand staying equal), not go to zero.

This is the one I was thinking of. I actually visited the website of the company "Planetary Resources" this week. I think this a super interesting concept and was interested in opportunites with the company. I've been in Areospace Engineering with a fortune 500 for seven years and I wanted to see what they had available. I guess you have to move to Seattle and the current opportunities are limited. They are targeting a mission to near Earth asteroids in 2025.....very cool.

[Pointedstick]

Gold is lying around everywhere.  The whole Rocky Mountain range has been converted to solid gold.  We build our buildings out of gold because it's cheaper than wood or steel.  There's just piles of gold laying around all over the place.  In that case gold is worthless.

One of the premises of Neal Stephenson's The Diamond Age is that matter replication technology has advanced so far that everything is made of diamond. It's just a building material, and it's the logical choice since it's so hard and durable.

If we could perfectly replicate any element, I think gold's value might actually be at least reasonably safe. It's a great conductor, it doesn't corrode, and it's a good reflector of electromagnetic radiation, but it doesn't have a ton of useful properties other than that. My guess is that nobody would want to replace steel (or diamond ) with gold for building purposes due to its softness, even if it was superabundant. I certainly wouldn't want to build a skyscraper with gold I-beams.

[LC475]

One of the premises of Neal Stephenson's The Diamond Age is that matter replication technology has advanced so far that everything is made of diamond. It's just a building material, and it's the logical choice since it's so hard and durable.

Of course, it's just nano-technology, not alchemy.  The nanobots aren't transmuting one element into another.  They're just doing micro-construction projects with the raw materials they're fed.  Diamond is just specially-arranged carbon.  And carbon is cheap.

If we could perfectly replicate any element, I think gold's value might actually be at least reasonably safe. It's a great conductor, it doesn't corrode, and it's a good reflector of electromagnetic radiation

  Air has useful properties, too.  It is incorporated into many countless consumer and industrial products.  But no one pays for it, because it's just lying around everywhere.  There's more than anyone can use.

[Rien]

Please forgive my ignornace but what do you mean by "unconstrained" energy source and why would people stop valuing gold if such a source were discovered?

Unconstrained means that there are no limits on extracting that energy. Neither in time or place. A truly unconstrained energy source would enable infinite productivity and thereby infinite consumption. In this case there would be no reason what so ever to hoard anything, including the yellow metal.

[Kshartle]

Please forgive my ignornace but what do you mean by "unconstrained" energy source and why would people stop valuing gold if such a source were discovered?

Unconstrained means that there are no limits on extracting that energy. Neither in time or place. A truly unconstrained energy source would enable infinite productivity and thereby infinite consumption. In this case there would be no reason what so ever to hoard anything, including the yellow metal.

How does an "unconstrained energy source" mean productivity is infinite? Everything else is still scarce. How can consumption be limitless? 

[Rien]

Please forgive my ignornace but what do you mean by "unconstrained" energy source and why would people stop valuing gold if such a source were discovered?

Unconstrained means that there are no limits on extracting that energy. Neither in time or place. A truly unconstrained energy source would enable infinite productivity and thereby infinite consumption. In this case there would be no reason what so ever to hoard anything, including the yellow metal.

How does an "unconstrained energy source" mean productivity is infinite? Everything else is still scarce. How can consumption be limitless?

If you refer to a limited earth, yes, there will be limits. But I believe these limits to be quite far away from the current limits. In comparison to today, that would seem to be limitless.
With limitless energy mining, production and recycling could provide anything we really need and thus provide for the elusive certainty most people crave for. Hence the value of gold could easily fall to zero.

[Marc De Mesel]

I self attacked after failing with silver and precious mining stocks in 2008. I threw in the towel. Said things to myself like 'how the fuck did I get this wrong again', 'speculation is just so hard', 'I can't afford to lose this money'. Indeed I started doubting myself. Did not dare to trust my logic anymore.

Do you think that this could happen to you again with your current strategy?

I'm sceptical whether your questions are out of curiosity or are meant to transfer your opinion in an indirect way?

I wonder if you have gotten any value from my previous answer to your question?

[AdamA]

I'm sceptical whether your questions are out of curiosity or are meant to transfer your opinion in an indirect way?

25% curious.  75% to transfer my opinion in an indirect way.

I wonder if you have gotten any value from my previous answer to your question?

I don't really see how this is different than your previous silver trade.

ie, what is different about your strategy this time?

[Gumby]

Thanks so much for making me aware of this.

MediumTex, Craig, and all the others suggesting PP is for growth as well, seems even Harry Browne did not see nor sell it as such.

And I am being fought for saying exactly the same. Feeling pretty pissed about this. 

Why does this bother you?

Thanks for asking.

It angers me because it is misleading and has costed me in missing an opportunity I clearly saw.

You may be familiar with the anger you feel when losing money due to poor speculative decisions?

The inverse is equally true. Not putting money on an opportunity you clearly see hurts when it comes to fruition and you miss out.

Marc, I think you've mischaracterized the advice from Harry Browne, MT and Craig.

I honestly don't know how you can accuse anyone of misleading you into believing that the Permanent Portfolio is a growth portfolio. Harry Browne's #1 Golden Rule of investing was, literally, to use your investments to preserve your wealth....

Rule #1: Your career provides your wealth

You most likely will make far more money from your business or profession than from your investments. Only very rarely does someone make a large fortune from investments.

Your investments can make your future more secure and your retirement more prosperous. But they can't take you from rags to riches. So don't take risks with complicated schemes in the hope of multiplying your capital quickly. Your investment plan should be aimed, first and foremost, at preserving what you have—preserving it from investment loss, government intervention, or mismanagement.

Source: Harry Browne: The 16 Golden Rules of Financial Safety

How you could read that and believe that the Permanent Portfolio is advertised as some amazing creator of wealth is unfathomable. Nor have MT or Craig ever advertised the Permanent Portfolio as a high growth portfolio. In fact, a significant Chapter in their book is devoted to Browne's 16 Golden Rules of Investing where Browne makes it abundantly clear that his investment strategy is mainly about wealth preservation.

And to accuse the Permanent Portfolio as being too limiting — and somehow prevented you from speculating — is even more ridiculous. Harry Browne's 12th rule is to feel free to speculate with money you can afford to lose...

Rule #12: Speculate only with money you can afford to lose

If you want to try to beat the market, set up a second — separate — portfolio with which you can speculate to your heart's content. But make sure this portfolio contains no more of your wealth than you can afford to lose.

I call this second pool of money a "Variable Portfolio" because its investments will vary as your outlook for the future changes. It might be all or part in stocks or gold or something else — whatever looks good at any time — or just in cash. You can take chances with the Variable Portfolio because you know that, whatever happens, no loss can be devastating. You can lose only the money you've already decided isn't precious to you.

Source: Harry Browne: The 16 Golden Rules of Financial Safety

And this is exactly what you've done with Bitcoin — you haven't improved the Permanent Portfolio, all you've done is create a Variable Portfolio!

Honestly, this is why your critiques of the Permanent Portfolio are just straw man arguments. Harry Browne (as well as MT and Craig) never claimed that the Permanent Portfolio provided significant growth — the Permanent Portfolio was always intended to protect your wealth and provide a small return.

And Harry Browne never discouraged people from speculating when they had money that they could afford to lose. He (and the rest of us) fully approve of your Variable Portfolio. What we don't approve of us claiming the Permanent Portfolio failed you when it's clear that you haven't carefully read the books and writings that explain its philosophy.

Marc... I think you're a good guy, but I think you've mischaracterized the Permanent Portfolio's philosophy.