Gyroscopic Investing

This is a major problem with internationalizing the PP concept.

Let's say the government is seizing everything in sight.  All your paper assets are down the toilet.  Stocks are stolen, government bonds are defaulted. So three out of the four assets have gone to zero.

If this happens in the United States, that means gold will be skyrocketing.  Actually, to back up, first of all, if you stored it safely as recommended, it will still be safe.  So you've only had a 75% hit to your portfolio instead of a 100% hit.  You still have something to show for your life savings.  That's even if gold doesn't go up.

But gold will go up.  A lot.  Because the dollar is the number 1 money and gold is number 2, if this kind of chaos ensues then the world will flee out of the dollar, which has now been destroyed, and into gold.  Gold will have a great rise, which will either soften the blow of the total loss of all the other assets, or may in fact outweigh the loss and give you an overall gain.

This reasoning doesn't work anywhere else.  The Greek Kroner or whatever is not the world's number 1 money.  If the rulers of Greece or Argentina or Zimbabwe destroy their currency and wreak havoc on their nation, that does not guarantee that gold price will go up.  The gold market is a worldwide market.  Greece is a inconsequential part of the world economy.  The United States isn't.

So the PP takes care of political risk for US investors.  Even in the most crazy, horrible scenario, the PP carries the investor through.  That is not true for an international investor.  This is a sticky problem.  I don't know for sure what the solution is.

LC475 wrote:But gold will go up.  A lot.  Because the dollar is the number 1 money and gold is number 2, if this kind of chaos ensues then the world will flee out of the dollar, which has now been destroyed, and into gold.  Gold will have a great rise, which will either soften the blow of the total loss of all the other assets, or may in fact outweigh the loss and give you an overall gain.

This reasoning doesn't work anywhere else.  The Greek Kroner or whatever is not the world's number 1 money.  If the rulers of Greece or Argentina or Zimbabwe destroy their currency and wreak havoc on their nation, that does not guarantee that gold price will go up.  The gold market is a worldwide market.  Greece is a inconsequential part of the world economy.  The United States isn't.

Well, technically the gold would be worth a lot when denominated in that beaten down non-dollar currency

But, in all seriousness, I don't think Harry Browne intended the Permanent Portfolio to be entirely "Bullet Proof" for non-Americans. In Appendix G of Why The Best Laid Investments Usually Go Wrong is a short two page recommendation on Foreign PPs titled, "Permanent Portfolio Alterations for Non-Americans," Harry Browne says:

Permanent Portfolio Alterations for Non-Americans

The suggestions in this book are made with American readers in mind. If you live outside the United States, some of the suggestions I've made for the Permanent Portfolio can be changed. Whether you should use U.S. investments or use investments of the country in which you live depends on how stable and useful you consider the investment markets in the country where you live.

If you are an American living abroad and you expect to return to the US to live within the next few years, it isn't necessary to make any changes from the suggestions I've made. If you don't know when or whether you will return to the US, consider making the changes.

The purpose of Treasury bills in the portfolio is to provide stable purchasing power through a default-proof investment in the currency you rely on. So, for US Treasury bills, you can substitute the equivalent investment in the country in which you live. That can be bills, notes, or bonds issued by the government and maturing in one year.

The long-term bonds can be bonds of the government of the country in which you live, so that you will have protection if there's a deflation in your country. Use the longest maturity available.

Stock-market investments are meant to provide profit when your country is prosperous and inflation is low. So, in general, you should buy stocks of the companies in your country.

However, you might prefer to use American stock-market investments instead. Usually, the stock markets of the world move upward or downward together. And the US securities markets offer a greater number of alternatives — including such things as warrants and specialized mutual funds.

The decision may depend upon how adequately you believe you can cover yourself with stock investments of your own country. One possibility is to split the stock-market budget between investments of your country and the United States.

There is no reason to alter the suggestions I've made for gold, no matter where you live.

It's pretty clear that he thought the US was special/different from other countries.