Gyroscopic Investing

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This is interesting from the perspective of an individual coming from a small country. How much of the PP concept depends on the fact that USD is a world reserve currency and US treasuries being ranked and perceived as one of the safest investments? Can we really assume that short term British bonds will protect you when long term US bonds are getting hurt and vice versa? How much of PP depends on the idea that US short treasuries will do well when US long term treasuries do bad, or the fact that gold is second most popular currency?

Maybe it should be:

25% cash in world's reserve currency
25% long term bonds with the world's safest debtor
25% stocks
25% gold

I think the PP works as long as you hold bonds in a developed economy. The problem with government bonds is that sometimes governments default. But developed countries hardly ever default (Greece is an exception but I believe they are still paying bondholders). If you live in a developing country than it would be best to hold the PP in a stronger currency and buy bonds in that currency. I don't think someone living in the UK has to worry about the UK collapsing like Argentina or even Greece. Obviously the US is a safer bet, but I think anyone who lives in a strong developed economy will do fine.

Hi, I´m struggle at this time to implement a PP that fit with my situation and I really dont know if I do this rigt. I´m from Argentina living in Uruguay. I dont want to purchase LT bonds here because the default risk that we lived 10 years ago in Argentina. Our currency is closely tight and influence with the dollar. But lately I think that I prefer was to cover for dollar devaluation (in this moment is actually happening). I withdrawal 3% a year for living expense.
My PP allocation now is:

Gold
20% GTU
5% IAU (for rebalance)
more easy to implement that buy bullions and storage here

Stocks
12.5% VTI
12.5 ILF

LT
20% 30yrs Treasury individually
5% EDV (for rebalance)

CASH
20% SHY
5% Money Market (for rebalance)

I think maybe the LT and GOLD are right but I have doubts with others parts. My idea is to have and steady portfolio and easy to manage (because I count with the withdrawal), with some exposure to my latinoamerican situation if is posible. I think maybe go with 100% ILF in the Stocks, and some ETF with dollar fall coverage in the Cash part.

Would appreciate any suggestions or modifications.

escafandro wrote: I think maybe the LT and GOLD are right but I have doubts with others parts. My idea is to have and steady portfolio and easy to manage (because I count with the withdrawal), with some exposure to my latinoamerican situation if is posible. I think maybe go with 100% ILF in the Stocks, and some ETF with dollar fall coverage in the Cash part.

Would appreciate any suggestions or modifications.

Given your overall situation, that looks pretty good to me.

I wouldn't change anything.

Ok, you think that my concern for the dollar devaluation is not justified for the moment?
I ask then because I losse some purchase power in the last year with the apreciation of our money respect to the dollar and we have rising inflation. So this is my biggest concern to the future.
regards   

So, I glad that in general terms my PP looks fine.
Maybe in the future I´ll can get a latinamerica PP when I have more options and less risk in the bond part.

Other thing:

Fully holding a foreign PP is better than mixing and matching. Holding US LT, domestic ST, UK stocks for example is not the way to go as generally the assets all work in synchronisation with each other and in some countries you might have stocks up, gold down for example whereas in another country you might have stocks down, gold up.

Having in my Permanent Portfolio US LT and US ST, and I think the Gold performance is moving with the US situation too (I correct?).
Is ok to hold 50% of the stocks in ILF?

regards

escafandro wrote: I dont want to purchase LT bonds here because the default risk that we lived 10 years ago in Argentina.

Your situation is unique (at least on this forum).

I don't know much about LT bonds in Uruguay, but am wondering if it would really be such a mistake to stick to a PP based there, where you live. 

Wouldn't gold skyrocket if there was a soverign debt default? 

Is it just too dysfunctional a system for any investing strategy to really work?

Did I read correctly that the Uruguay currency is pegged to the U.S. dollar?

I would think that buying U.S. Treasuries in that situation would be fine.

Sorry if I don`t explain me very well.

I don't know much about LT bonds in Uruguay, but am wondering if it would
really be such a mistake to stick to a PP based there, where you live.  

There are some Mutual Funds here but with very high expense ratios, no index that mesure the market in Uruguay (I read that Global X launch a new ETF for Argentina but with only 20 companies), no really LT Bonds (the long is about 10 years).

Wouldn't gold skyrocket if there was a soverign debt default?

Luckily I dont have Argentina Bonds when the default happens in 2001. I have some now that I had to purchased as an exchange of the money that was trapped in the bank. In 2001 not only we went into default but also the banks could not repay the deposits of the savings accounts in dollars.  

Did I read correctly that the Uruguay currency is pegged to the U.S. dollar?

My mistake I mean that culturally we are bound to dollar, many products are sold directly in USD not in Pesos Uruguayos. And the ups and downs of the dollar is capital concern of the government. The central bank is often buying dollars to prevent further depreciate and maintain his value (for the exports).
In Argentina for example we have the parity of 1 USD = 4 Pesos for about three or four years now.

regards