Gyroscopic Investing

Harry Browne and team created the original Permanent Portfolio in the 1970's and then modified it in the 1980's.  Since then, the model of 25% equity, 25% long-term bonds, 25% gold and 25% cash has performed quite well.

But if Harry Browne was alive today, would he have updated the Permanent Portfolio strategy?

Although the Permanent Portfolio has performed well over the long term, nothing lasts forever.  At the risk of ridicule, I am starting this topic to hear thoughts on what Harry Browne might have changed in the Permanent Portfolio is he were still with us.

Would Harry have tweaked the strategy by adding leverage?  Would he have added a variable to embrace momentum investing?

I'm interested in your speculation as to what Harry might have done, if anything.

Harry Browne passed away in 2006. He was not as far removed from the present as initially thought. It hasnt been 36 years since the PP was last analyzed, but rather only 8 years. HB wouldnt have changed anything in my opinion.

I agree with budd, I don't think he would have changed anything substantial. As budd said, Browne was keeping tabs on the PP until the mid-2000's which is not that long ago. There's an episode of the radio show where he talks about the TLT ETF being helpful since it's the only bond fund that's mostly consistent with PP strictures. If you listen to the show, it's apparent that he was aware of "modern advances" like ETFs, online brokers, REITs, etc. IIRC he spoke out specifically against leverage and momentum. The only thing I could see him tweaking are the specific fund recommendations.

Hi,

was HB a genius ?

The authors of the new book aren't experts like HB was ?

I would dearly love to hear his thoughts on gold ETFs, and whether he'd recommend pulling out of long bonds if interest rates were to dip low enough. 

I'm going to guess his answers would be "use cautiously if at all" and "never", respectively.  But I couldn't articulate the reasons as well as he could have.

The main thing I remember from the radio shows is Harry's voice quoting clients and callers who constantly complain, "It couldn't possibly go any lower/higher." I imagine if he were still alive and well, he'd be fielding a lot of calls from people anxious to exit long bonds, and he'd figuratively sit them on his lap and tell them everything's going to be alright.

EdwardjK wrote: I'm interested in your speculation as to what Harry might have done, if anything.

The only thing I think he would have changed would be to allow equity factor tilts as that science is more settled than it was a decade ago, nevermind a couple of decades.  And only if it can be done cheaply.  I mean, Prosperity allows for a wide field of investment choices; it doesn't have to be equity only.  And equity and the economy do not always correlate to each other historically.  This can be risky to the PP if there is another divergence.  At least one asset MUST be going up at all times to avoid an epic fail.

And he might have relaxed his restrictions on [deep] real assets, but only if it can be done cheaply.  There are other proven real assets that are helpful such as rare stamps, rare gold coins, colored diamonds, heck even Bitcoins.  Gold may not always shine if the marketplace unfortuantely decides another real asset is the du jour of the moment.  That can be risky to the PP.

But I've never listened to his radio shows, so he may be more stubborn than I am.  Dayum old people are like that. 

"Use cautiously" sounds like good advice to me.  The PP framework is about economic regimes NOT the assets selected.

Given the recent world political developments, I think he would tell Americans that they should try to get a second passport.

Libertarian666 wrote: Given the recent world political developments, I think he would tell Americans that they should try to get a second passport.

I think he would say quite the opposite. While the U.S. is not perfect that whole 70s/80s thing of Japan kicking our butts, the whole 90's thing of Europe kicking our butts and the 2000s thing of China kicking our butts all seems quite silly now. The fact is the U.S. is the only major world power that has all of the following things going for it

1. A stable government with actual rule of law...even the Chinese are figuring out why this matters now

2. A growing population

3. A highly educated workforce

4. A reasonably good ability to assimilate foreigners

While people get frustrated at how dysfunctional our government is, the Federal government constitutionally is doing exactly what was intended: When wide consensus does not exist, it does nothing really. Certainly, folks can nit pick the above and find numerous exceptions to the elements above and we don't rank #1 in all of them, but that doesn't change the core truth to any of them either. Finally, for good/bad/evil we are advantaged in world affairs because we more or less drive the basic global economic framework and have the world's most potent military. In poker terms, currently the deck is stacked in our favor. Hopefully, we will continue to play our cards right on the important hands.

Kbg wrote:

Libertarian666 wrote: Given the recent world political developments, I think he would tell Americans that they should try to get a second passport.

I think he would say quite the opposite. While the U.S. is not perfect that whole 70s/80s thing of Japan kicking our butts, the whole 90's thing of Europe kicking our butts and the 2000s thing of China kicking our butts all seems quite silly now. The fact is the U.S. is the only major world power that has all of the following things going for it

1. A stable government with actual rule of law...even the Chinese are figuring out why this matters now

2. A growing population

3. A highly educated workforce

4. A reasonably good ability to assimilate foreigners

While people get frustrated at how dysfunctional our government is, the Federal government constitutionally is doing exactly what was intended: When wide consensus does not exist, it does nothing really. Certainly, folks can nit pick the above and find numerous exceptions to the elements above and we don't rank #1 in all of them, but that doesn't change the core truth to any of them either. Finally, for good/bad/evil we are advantaged in world affairs because we more or less drive the basic global economic framework and have the world's most potent military. In poker terms, currently the deck is stacked in our favor. Hopefully, we will continue to play our cards right on the important hands.

I could hardly disagree more. For one thing, the federal government is doing far more than is authorized constitutionally. Also, the "highly educated workforce", assuming you are referring to US citizens, falls far short of a lot of other countries' workforces according to standardized testing.

Anyway, what is the "opposite" of "get another passport"? Geographical diversification isn't just for investments.

America -- love it or leave it.

Educated workforce?  Yes, one of the world's highest. And by raw numbers, not percentages, absolutely. Are we #1 in standardized testing. Nope, I think we are at like #14 or 15. Does not change the basic premise (fact) of the matter though. Somehow as dysfunctional as our secondary school system is, primary education and higher education remains competitive and by all accounts the US has the best universities on the face of the planet...though that is not the same as saying all the best universities.

I'm not a constitutional lawyer or scholar, but I think it is extremely difficult to make ANY case that the constitution isn't still pretty much operating as designed in terms of it's major parts and pieces. Constitutions are a framework for how the government's various parts are supposed to work and what their responsibilities and authorities are. Most of what the right wing crowd gets in a pantie twist about is mainly law that results from/implements various elements of the constitution. The founding fathers totally expected the details to evolve over time/history.

Still got a Congress - Check
Still got a Supreme Court - Check
Still got a President - Check
Still have a balance of power - Check
States rights...I think the Civil War decided that one pretty definitively personally and in the balance was probably one of the best things that ever happened to us. Europe, South America anyone? Buehler?

Presidential lopsidedness, probably; but only up to the point of where another branch pushes back seriously which has happened a number of times.

Kbg wrote: I'm not a constitutional lawyer or scholar, but I think it is extremely difficult to make ANY case that the constitution isn't still pretty much operating as designed in terms of it's major parts and pieces. Constitutions are a framework for how the government's various parts are supposed to work and what their responsibilities and authorities are. Most of what the right wing crowd gets in a pantie twist about is mainly law that results from/implements various elements of the constitution. The founding fathers totally expected the details to evolve over time/history.

It depends on what constitutional law scholar you ask because the biggest scholar of them all was Barack Obama.  Principles are inviolate, but details will always change.  If you violate principles, are you a hypocrite?  A traitor?  A cronyist?  An idiot?  A knave?

But in general, a huge chunk of constitutional principles were torpedoed by FDR, namely that of the judicial branch and to a lesser extent, the Supreme Court.  Even today, there is but scant awareness of the power of judicial engagement and jury nullification.  This inviolate principle was intended by our Founding Fathers to be the final and ultimate check on overzealous government expansion.  D'oh!

Another way to look at this is America's best days are ahead of it as we continue working to correct that oversight.