Gyroscopic Investing

Hi folks,
I stumbled across this new article on the Permanent Portfolio:

http://seekingalpha.com/article/1088961 ... urce=yahoo

That's a nice overview, though I would have mentioned the new PP book in addition to the AAII article for people who were looking for ways of learning more about the strategy.

I wonder if the writer was aware of the book and chose not to mention it or simply doesn't know about it.

Send him an email - maybe he'll revise his post with a link to Amazon. Worth a shot.

"I think any long-term investor would be wise to expand each asset class to ensure diversity in each. For example, for stocks, S&P 500 Index + Small-Cap Value index + Emerging Markets. I am afraid at some point, the floor is going to fall out of the government bond market (it may have started). Some would say all that money will flow into stocks, which you will being holding. I am not sure what will happen. I would think long-term government bond + long-term corporate bond + international (or emerging market) bond would be a reasonable mix.

Finally, for gold, most investors will hold GLD or SGOL (or similar). Neither pay a dividend. TIPS may actually be a suitable holding for inflation protection."


CAN YOU PLEASE COMMENT this answer to the article.

Thank you

frugal wrote: "I think any long-term investor would be wise to expand each asset class to ensure diversity in each. For example, for stocks, S&P 500 Index + Small-Cap Value index + Emerging Markets. I am afraid at some point, the floor is going to fall out of the government bond market (it may have started). Some would say all that money will flow into stocks, which you will being holding. I am not sure what will happen. I would think long-term government bond + long-term corporate bond + international (or emerging market) bond would be a reasonable mix.

Finally, for gold, most investors will hold GLD or SGOL (or similar). Neither pay a dividend. TIPS may actually be a suitable holding for inflation protection."


CAN YOU PLEASE COMMENT this answer to the article.

Thank you

Some people run a variable portfolio where you can add in some assets to augment the core holding. So if you wanted to tilt your stocks to small cap value or hold more international that's all an option.  As for the floor going to fall out of bonds. Well sure it could happen. But I've been hearing that same exact story for a decade! So that's not really actionable information.

As for replacing gold with TIPS. No way. TIPS are not going to offer the same kind of currency protection that gold will if needed. There's more to returns than chasing after interest/dividends. Sometimes your best bang is going to be in capital appreciation which gold has in spades over something like TIPS.

In regards to bonds. The bond portion is to protect against deflation. Again, having a mix of bonds within the 25% holding will reduce the risk of being exposed to one 'type' of bond, namely, US government.

yes, I agree, bond yields have been falling for 20 some odd years. I do not believe the Federal Reserve has printed this much money in the past just to buy bonds.  The Fed's position has to be unwound at some point in time.  I have no idea what will happen.

http://www.thumbcharts.com/assets/php/d ... 7184320157

In regards to Gold, if I recall, Mr. Browne recommends buying physical gold and putting it in a bank. He even spends time discussing foreign banks, just in case. I am not sure if going forward, GLD or SGOL will be true hedging to inflation. I am afraid GLD is a trading vehicle now and therefore, Gold prices are determined by GLD trading volume.  Since GOLD is meant as a inflation portion of the portfolio, TIPS will supply some inflation protection, even though not ideal since they are controlled by the government.

Since GLD has only been around since 2004 and we have had mild inflation since that date, has anyone done a correlation study of GLD vs inflation?

http://www.thumbcharts.com/assets/php/d ... 7185023544

It has been some time since I have read post son this board, so I do apologize if I am re-hashing old commentary.

From the same comment: ".... I think a lot has changed since Harry’s original theory. The theory is still sound..."