Gyroscopic Investing

Mod CraigR: Moved from book thread.

I wouldn't go this far...  the U.S. PP performance before Bretton Woods was not impressive.  And are you seriously kidding me that the PP performed as advertised in Iceland?  It was a total failure, except for the gold.  But you don't need a PP to own gold.

MG

KevinW wrote: - the PP doesn't depend on any special properties of USA or USD, e.g. reserve status
- the Iceland and Japan cases show the PP works as advertised in severe hyperinflation, and deflation, resp.\

Pre and post Bretton Woods there was a gold standard. The portfolio would probably have been better 33/33/33 Stocks/Bonds/Cash. It was also illegal for Americans to hold gold.

As for Iceland, the portfolio if it was being rebalanced almost certainly did better than an average Icelander concentrated in their markets. They would have had somewhere around 90% decline in their stocks and probably as bad on their cash and bonds had the IMF not stepped in to stop the carnage. I know people in the US in 2008 that took losses in excess of 30%. Many panicked and still have not recovered. They would have been better in a Permanent Portfolio as well.

Nobody claims the Permanent Portfolio is a magic elixir (certainly I don't). But it's a lot better than alternatives I commonly see advocated. Better by a long shot.

MachineGhost wrote: It was a total failure, except for the gold.

LOL

Please reconcile your phrase before the comma with the phrase after it.

An Icelandic PP is probably more of a parlor game than anything else. 

A nation of 350,000 people living on a frozen volcano with a stock market that is little more than a group of overleveraged banks is not a good representation of the diversification that the PP is seeking.

An Icelandic PP investor probably should have owned debt of the U.S., U.K. and Germany, and perhaps a world stock index.

I could put together a "Texas PP" that owned only the debt of state and local governments in Texas and stock of companies headquartered in Texas and it would be vastly safer than an Iceland PP.

Medium Tex, the nice illustration value of Iceland though is that the crazy over-leveraged boom leading up to 2008 did create a gushing source to rebalance out of and build up gold reserves that survived the bursting bubble.

Being 75% poorer is still 75% poorer, gold or not.  I'm not satisfied with just losing less than everyone else!

But I stand corrected.

MG

stone wrote: Medium Tex, the nice illustration value of Iceland though is that the crazy over-leveraged boom leading up to 2008 did create a gushing source to rebalance out of and build up gold reserves that survived the bursting bubble.

MachineGhost wrote: And are you seriously kidding me that the PP performed as advertised in Iceland?  It was a total failure, except for the gold.  But you don't need a PP to own gold.

Not sure what you mean with "performed as advertised" or "It was a total failure, except for gold" but Marc de Mesel did some interesting research on the Icelandic PP, back in 2009. His conclusion was that although you were far better off, having your money outside Iceland, you are still far better of than traditional stock/bond portfolio's and saving accounts. And yes, gold was the major driver but cash and bonds had positive performance as well. Even in 2008, when stockmarket collapsed at -89,7% according to Marc, the PP portfolio performance was a whopping 28,7% with 18,1% inflation.

The only drawback of course is that all your money would be in Kronar  ::)

Marc de Mesel wrote:Icelanders with a traditional 'defensive' portfolio, consisting of only stocks and bonds, destroyed their capital in 2008. Icelanders that had everything on a savings account can buy 3 times less. The Icelander with a permanent portfolio however was relatively well protected and can now buy 40% more real estate.

Read the full article here http://europeanpermanentportfolio.blogs ... eland.html