Gyroscopic Investing

The February 9th edition of the Wall Street Journal carries an article from Jason Zweig, the "Intelligent Investor".

Therein, Mr. Zweig states, "Thinking about diversification in a different way - what we might call "differisifcation" - might change your views entirely.  Instead of spreading your bests to protect against a plunge in the U.S. stock market, you should regard your portfolio as a set of bets on basic economic conditions and create one bucket for each: expansion, recession, inflation and deflation." 

Mr. Zweig goes on to explain how assets classes do not increase at the same rate when the markets are doing well, but do tend to move in lock-step during a financial crisis.  Research performed by Peter Joers, of Greenline Partners, suggests investors build the following buckets filled with assets appropriate for each of four economic conditions:

Expansion - stocks and real estate
Recession - bonds
Inflation - Treasury inflation-protected bonds
Deflation - stocks and conventional bonds like U.S. Treasury's.

Unfortunately, Mr. Zweig does not mention Harry Browne or the Permanent Portfolio.  But the article clearly describes Mr. Browne's concepts to a tee.

But the article clearly describes Mr. Browne's concepts to a tee.

Except for recommending TIPS instead of gold.

AdamA wrote:

But the article clearly describes Mr. Browne's concepts to a tee.

Except for recommending TIPS instead of gold.

And stocks for deflation, and bonds for recession...

Bridgewater has made the whole risk parity thing very popular with institutions. It is shame that Mr. Browne rarely gets the credit.

It's becoming obvious that many "experts" are taking Harry Browne's work, making a couple of minor changes (TIP's instead of cash or gold seems to be the flavor of the month), and possibly slapping a fancy name on this strategy and acting as if they've just invented the wheel.

Stocks for deflation?  Could someone explain how that works?

jediclampet wrote: Stocks for deflation?  Could someone explain how that works?

Here's how that works......

You start with a lot of money in stocks and then after deflation you only have a little.

EdwardjK wrote: Unfortunately, Mr. Zweig does not mention Harry Browne or the Permanent Portfolio.  But the article clearly describes Mr. Browne's concepts to a tee.

If this trend keeps up of stealing from Browne, a Hall of Shame is gonna go very public.