The PP is having a really nice day today

[mandynshane]

do you think the swiss frank will be more devalued then the dollar currently is?  I might be wrong but I feel like the dollar is being destroyed

[AdamA]

I use fxf etf swiss franks for my cash portion since I think the frank is more attractive then the dollar and so far its been a really good performer - what do you guys think about that switch

Terrible idea.  Just use dollars. 

[melveyr]

My thoughts on using Swiss Franc instead of dollars...

Think of a bread recipe. You are saying "Hey, I don't like flour. I am going to skip it and replace it with something nummier."

Yes, in isolation US dollars might not look attractive, but holding cash in a Treasury money market is part of the PP recipe. A treasury MM performs a very specific role that cannot be replaced.

If you mess with the recipe, you might not be happy with the result. And it definitely won't be a PP.

With regards to PLW...

50% PLW
25% Gold
25% Stocks

is almost identical to a PP. It just has less options for rebalancing and tax planning (splitting assets between taxable and tax deferred).

[MediumTex]

do you think the swiss frank will be more devalued then the dollar currently is?  I might be wrong but I feel like the dollar is being destroyed

All world fiat currencies are being devalued as fast as the politicians and central bankers can run the printing presses.

The problem is that we are also in a period of global deleveraging where people are trying to pay off all the debt they ran up during better times.  This deleveraging process tends to make currencies more valuable because every time a debt is paid off a little bit of money leaves the system.

I would say that your sense that the dollar is being destroyed is like a mental virus that has been implanted in your brain by various TV and radio programs, along with stuff you have seen on the internet. 

I would just try to tune all of that stuff out.

People were certain that the dollar was on its last legs in early 2008 as well, and it promptly rallied 25%.

If you investigate the permanent portfolio and determine that it is right for you, just follow the recipe.  If you have to own Swiss francs, consider buying PRPFX.  Think of PRPFX as one of those pre-mixed salads you see at the grocery store.  It costs a little more, but it's very easy.

[mandynshane]

Thank you for your constructive input I really appreciate it,  The reason I originally went to the frank was because with the economy I'm a bit concerned with  treasury bonds not totally but a bit, and was looking for something that would be cash but act like a treasury bond in case of a market collapse  it seemed when I did research that when stocks crash people put money in Swiss franks 2008 fxf was up 7.64% when most assets got destroyed I realize the 30 year treasury did better but couldnt find a dollar equivalent that has done as well as the frank..  Have you guys seen a website called http://www.etfreplay.com you should check it out its very helpful you can enter any etf and  backtest  10 years or up to the date the etf was created it has been very informative to me seeing just how well the pp has done its amazing

[MediumTex]

Your timing with the franc has been very good.  If I were you I would take my profits from my timely franc trade and set up a traditional permanent portfolio.

The thing you have to remember when talking about currency trades, as opposed to gold, is that there is no domestic constituency pressuring a local government to keep the value of gold low.  With any currency, however, there is some domestic manufacturing base in the home country that is crying its eyes out every night when the currency appreciates in value because it makes what they are exporting that much more expensive to their foreign trading partners.

Right now, the Swiss franc is benefiting from fear about the euro AND fear about the dollar, but the current conditions will not go on forever. 

To give you a sense of how these things have unfolded historically, in the 1970s, IIRC, the Swiss franc tripled in value compared to the dollar, while gold went up by a factor of 20.  Which would you have rather owned back then?

Remember, too, that the grocery store down the street presumably doesn't accept Swiss francs.  There are many different reasons for the cash allocation in the permanent portfolio.

Good luck with whatever you decide.

[pershing83]

One could buy say, FXA and FXF (Aussie and Swiss) plus US$ for their cash allocation. I would point out again H Browne wrote the last book in 1999, and I do not think he was seriously considering the sea changes of global market development. Also, his reference to the 'broad market' for stocks was domestics. I can't help but think he would go abroad today, 12 years later.

PRPFX has outperformed the pp a bit ove the last 10 years and I must think this the reason, ie, francs and  a broader array of stocks. BHP was the Coggino's largest holding for awhile at least. Even some REITs.

I'm not suggesting the pp try to mimic PRPFX, I just wonder if some changes might be made? I have a son and 2 friends who now own PRPFX and all 3 said pretty much what I said above.

[Gumby]

One could buy say, FXA and FXF (Aussie and Swiss) plus US$ for their cash allocation.

I think PRPFX only targets 10% of its portfolio in Swiss Francs, to hedge against the dollar.

Also, his reference to the 'broad market' for stocks was domestics. I can't help but think he would go abroad today, 12 years later.]

Foreign sales make up nearly half of the earnings for American companies these days. Some might say that American companies already have too much international exposure:

USNEWS: Why US Companies Arent So American Anymore

[mandynshane]

Harry Browne was Inspirational to me, and Ive read his books and listened to all of his radio shows I love this site and honestly anything to do with his knowledge I really wish he was still alive to see how things are changing. I know I have broken his cardinal rule and made some very large changes to his pp but the premise of my portfolio I learned from him..  I could be wrong but I believe Harry new there could be slightly better performance with a slightly more complex portfolio but he wanted it to be simple for people first.  Obviously prpfx and pp aren't the same in construction but I never heard Harry Browne say anything but praise for prpfx and I heard him say that they were the same in principle, Yet prpfx owns international stocks francs etc.  I would never say my changes are better then Harry Brownes genius, but my changes came about through research and backtesting in very difficult times of the economy and so far my portfolio has done very good and has been very stable obviously this could change and I could be proven wrong at any time.
this is my actual allocation be prepared this is not authentic pp..  20% cef - 10% fxf - 10% mint - 20% plw - 20% vti  20% tei  I know this combination may seem well like a terrible idea in comparison to authentic pp but people who are not familiar with the original pp always tell me that it is a terrible idea before they even look at its performance and history or understand the complex theory behind his simplistic approach.  To me my changes just reflect the times we are in and area's of opportunity .  increase in silver holdings, addition of Swiss Francs, and emerging market debt. I believe most will say this increases my risk tremendously...  but I believe it has helped my growth more then added risk, as my Volatility has been very low.     

[MediumTex]

mandynshane,

I'm glad you found us.

It sounds like this is your kind of place.

[AdamA]

One could buy say, FXA and FXF (Aussie and Swiss) plus US$ for their cash allocation.

How does this improve the PP?

[MediumTex]

One could buy say, FXA and FXF (Aussie and Swiss) plus US$ for their cash allocation.

How does this improve the PP?

Does painting flames on the side of a car make it go faster?

[AdamA]

Does painting flames on the side of a car make it go faster?

If you have to ask, then you'll never know.

[KevinW]

It surprises me that running something through an investment house would have been reccommended by HB rather than owning some ultra-short bonds outright.

Getting back to this, Inflation-Proofing Your Investments outlines how a Treasury MMF offers unique protection against a cascading bank run crisis.  Briefly, under our fractional reserve system, banks loan out nearly all of their demand deposit balance to other banks.  So if bank A suffers a run and its paper becomes illiquid, any bank B that holds A's paper now has a liquidity problem, which makes B susceptible to a run, etc.  Hypothetically this could cascade through the entire banking system making nearly all "cash" accounts inaccessible at the same time.  This was apparently a big concern when ...Proofing... was written.

T-bills are backed by the "full faith and credit," not more commercial paper, so they don't have this problem.  So Treasury MMFs are distinguished as the one "cash" vehicle that sidesteps the risks inherent in the fractional reserve system.  In that light, the yield premium on a Treasury MMF vs. a prime MMF seems like a small price to pay.

Harry Browne's writing was straight and to the point.  It just seemed too simple.

Me too.

[stone]

MandyShane, I'm struck by you choosing emerging market debt as part of a quasi-PP. I had also thought that emerging market local curency debt really ought to be part of a balanced portfolio because it correlates so little with anything else and often is one of the best performing asset classes. I don't own any myself but it really took an act of will for me not to. When Medium Tex says that gold has no exporters clamoring for it to devalue, he has a point BUT comodities do tend to revert to the extraction cost. Gold price is now double the extraction cost. To support the gold price there needs to be extra money constantly allocated to gold. To be honest I can imagine that happening for some time to come. As far as I can see, what the gold part of the PP is doing is acting as a life buoy whilst developed economy curencies sink against emerging economy curencies. Emerging market local curency debt is an alternative and divergent way to deal with exactly that phenomenon.
About holding Australian dollar- I'd be very scared. Don't they have a housing market bubble with the least affordable house prices on the planet? Isn't that a doomsday scenario waiting to happen that could outweigh  the mining strength especially if China pauses for breath in its iron etc consumption?

[pershing83]

Maybe I'm missing something but HB said hold 25% cash, specifically US cash, ST treasuries; holding some FXA would have reurned 20% +/- last 12 mos. I'd still hold dollars, too.

[mandynshane]

I've never had fxa,  only fxf Swiss Francs and that is because Swiss Francs are a place of safety in market decline, combined with mint etf gives me my short term dollar exposure. There is no doubt that the 30 year treasury saved a portfolio in 2008 tlt etf was up almost 34 % so it is a proven champion for safety, that being said I'm not sure if the future will be as strong, all things investing are not consistent. But it hasn't been proven wrong yet.  2009 was unfortunately not as stellar for tlt as it gave back almost 22% so what if you could make 2008 and 2009 perform stronger... this is my thought on adding emerging market debt people flocked to it after the market beating tei etf was up almost 74% in 2009 that really helped a lot in portfolio performance in 2009 my thoughts may be wrong but in theory they have worked well so far

[Gumby]

Sounds like that approach works well when things are bad domestically. Not sure how well that approach would fare during a period of prosperity. Is a future of prosperity off the table at this point?

Makes me wonder what investing during the Depression must have been like.

[mandynshane]

It works very well in good times and bad times, I came up with this allocation backtesting for as far back as I could. It has done very very well with low volatility-  to me how it reacts to the market feels similar to pp -
I do understand that past performance doesn't prove it works. It just proves it hasn't been proven wrong yet.

[WildAboutHarry]

Makes me wonder what investing during the Depression must have been like.

Try reading "The Great Depression: A Diary" by Benjamin Roth.  Interesting contemporary account with a lot of focus on banks and investing.

[mandynshane]

I believe there is plenty of prosperity, but we live in a global era.. and some areas will do better. I continue to hold vti because I believe I get enough global exposure with it in equities -  but emerging markets will continue to grow rapidly in the years to come in my opinion and I find exposure to there debt and currency attractive for years to come .Emerging markets will continue to like and buy  gold and silver. USA will always be strong but will grow at a slower pace and our treasuries I believe will become a bit less desirable- But not enough to remove them from the portfolio because they are still needed for the package deal- combining treasury's with emerging debt has worked well so far for me.

[MediumTex]

mandynshane,

There are lots of predictions embedded in your portfolio.

It sounds pretty speculative to me. 

If it works well for you, though, then I would say stick with it.

BTW, how would you be protected during an extended period of deflation?  I don't know if emerging market debt is where I would want to be in that environment.  You can say "that probably won't happen", but that's what people always say before something unexpected happens.

[mandynshane]

Great Day..

fxf -Swiss francs +2.98 a share
cef -Gold and silver  +.85 a share
plw-Treasury- +.41
tei- Emeging market debt- +.24
mint-short term bond  -.01
vti- total stock market -1.76

todays change in my portfolio +.73%
                    s&p 500        -2.56

[escafandro]

Fine, but a more regular PP like:
VTI -1.76
GTU + 1.51
IAU + .38
TLT + 3.29
EDV + 4.35
SHY + .11

Change: + 1.04%

[mandynshane]

maybe the real test will be tomorrow lets re-visit because I am studying volatility and honestly curious how my allocation holds up.