If the EURO 💶 collapses 🤯

[frugal]

Hello

if I finally decided to create a Permanent Portfolio for the United States , my reasoning is that, if the euro collapses , having a significant portion of my assets in dollars would offer me more complete protection against the depreciation of the European currency .

In this scenario of serious problems in Europe that would lead to the end of the euro , how would European investors be protected ?

Would the new currency adopted by each country inevitably be devalued ? Or would our euro-denominated ETFs offer some kind of protection ?

This is one of my biggest concerns and I would like to better understand the potential risks and how to mitigate them .

Any guidance or resources you could offer me on this topic would be a great help .

Thanks in advance!

[boglerdude]

Gold is your international diversification and insurance for chaos and inflation

[Hal]

I suspect you will find this interview from a few years back helpful...



From my perspective, and it is just my opinion, I see Gold as capital and the other three PP holdings as investments. The key point being, there is always a risk the value of your investment can go to zero

[frugal]

Problem is:

Gold is only 25%



Shouldn’t be enough to offset losses …

Waiting your comments I remain.


Regards

[ochotona]

No one knows that a complete collapse of US Bonds and Cash and Stocks would look like, but long-term scenarios being suggested by various gold bugs out there like Jordan Roy-Bryne are 10,000 - 25,000 USD. It's 3400 now, so if it goes up by 4x to 13,600 then you're covered in nominal terms.

Even Luke Gromen has said gold could very easily 5x or 6x (he said this in May 2024 when gold was in the 2300s), and that 19x to 44,000 USD was not his base case, but it was possible.

[frugal]

Hi

An US citizen should have 20-30% in directly euros ?

And an EU citizen should have 20-30% in US Dollars ?

Or the 25% gold on PP should be enough to protect us from currencies collapses ?


Regards

[seajay]

You can become relatively richer by losing less than those around you.

We invest in a UK/London home (residency), USD in US stocks, gold. Supplemented with a state and occupational pensions that might be considered as a bond ladder that precisely expires the day you die. Home value + imputed rent might be considered as being 'equity' - similar to stocks.

In Iceland 2009 financial crisis when their Krona collapsed the price of gold remained much the same in Euro's, gold or Euro's held by a Icelander left them relatively richer than neighbors who solely held Krona.

Fundamentally - diversification of assets currencies and locations. Less wise for instance to have a UK home, UK pension and a UK stock broker that holds a US stock ETF in their name on my behalf - as say a bad case invasion could see the loss of the home, pensions and stocks. 25% remaining is not as bad as others who might lose all, but if the stock brokerage was offshore then you'd be more likely able to liquidate the holdings - perhaps in a single day (T+1 I believe wont apply to the EU until 2027 that still remains at T+3 (3 days to liquidate)) into something like bitcoin/whatever, have retained 50%. Compared to a neighbor who started with similar wealth but had lost 90% you'd be five times richer.

Some adhere strictly to the PP code, they might however be considered as a guideline



Gets you thinking outside of the box and where more ideally you hold assets/asset allocation that you are comfortable enough to not capitulate at the worst possible time.

[seajay]

From my perspective, and it is just my opinion, I see Gold as capital and the other three PP holdings as investments.

I see it as in-hand. A 400oz London Good Delivery bar of gold weighs less than its value held as $100 bills. Weighs similar to 12440 x $100 bills, but would cost around 13000 x $100 bills to buy (at recent $3316/oz).

Unlike hard cash in hand however the gold is more inclined to appreciate in purchase power, whereas dollar bills are more inclined to lose purchase power.

Silver might be a alternative for some, but at recent 100 gold/silver ratio levels that's 100 times more weight to lug around.

Millennia ago the Talmud when discussing financial safety advocated keeping a third in-hand (alongside a third in merchandise i.e. stocks, and a third buried in the ground - which might be taken as owning some land/home or hiding cash away somewhere safe/hidden - such as T-Bills). Comparing that to the PP since 1978 (limit of PotfolioVisualizer data for LTT) https://www.portfoliovisualizer.com/bac ... Ty4Dn4ePZ2 and in my book near-enough the same.

[ochotona]

Hi

An US citizen should have 20-30% in directly euros ?

I don't think Euro is the best choice for US persons. Many EU countries (I'm looking at you, France) have as bad a debt crisis as the US - NATO has been tasked with increasing deficit spending to fund defense, Germany is taking on more debt for infrastructure as well...

Here in the US, I've bought some FXF ETF, Invesco's Swiss Franc ETF. Also iGOV iShares International sovereign bond ETF which has a bit from all developed exUS governments.

[frugal]

OCHOTONA

Hi!

Invesco's Swiss Franc ETF
+
iGOV iShares International sovereign bond ETF

= both for 25% cash portion of PP?

Or it is a second PP outside US-HB-PP?

[ochotona]

OCHOTONA

Hi!

Invesco's Swiss Franc ETF
+
iGOV iShares International sovereign bond ETF

= both for 25% cash portion of PP?

Or it is a second PP outside US-HB-PP?

One consideration is that the IGOV has a duration of 7-8 years, similar to IEF. Some people implement a US Permanent Portfolio of 25% stocks, 25% gold, and 50% IEF. IEF has a duration similar to the average of Cash (0 years) and TLT (20 years). This is called "bullet", one ETF, instead of "barbell" of two ETFs.

Disclosure - I don't run a Permanent Portfolio, except I have a gold allocation similar to the Permanent Portfolio. I'm just here for the gold.

[frugal]

OCHOTONA

Hi!

Invesco's Swiss Franc ETF
+
iGOV iShares International sovereign bond ETF

= both for 25% cash portion of PP?

Or it is a second PP outside US-HB-PP?

One consideration is that the IGOV has a duration of 7-8 years, similar to IEF. Some people implement a US Permanent Portfolio of 25% stocks, 25% gold, and 50% IEF. IEF has a duration similar to the average of Cash (0 years) and TLT (20 years). This is called "bullet", one ETF, instead of "barbell" of two ETFs.

Disclosure - I don't run a Permanent Portfolio, except I have a gold allocation similar to the Permanent Portfolio. I'm just here for the gold.

Good

May I know your actual portfolio?

Regards

[ochotona]

I use this one:

Walked-forward maximize Sharpe Ratio, with low exposure to rising interest rates

https://allocatesmartly.com/big-new-fea ... -forwards/

Sorry, it's behind a paywall, but honestly, it's worth every penny. I pay this service 1/3 of what I pay to have my lawn mowed.

I translate the ETF allocation percentages in a spreadsheet into my many accounts (too many, His and Hers Roths, IRAs, workplace retirement, brokerage account) and then I just trade the last day of the month and forget about it.

Right now, it's about 20% equity, all of that is exUS. So when you combine that with my 20% gold on the side, and the rest cash and bonds (many International bonds), it's now eerily like a European's person Permanent Porfolio. Sounds about right given the circumstances.