Gyroscopic Investing

Greetings (and good luck to caigr!)

Just curious.  I don't invest in it.
Are the holdings (esp the gold) audited?
I seem to recall Browne was skeptical of seperating ones' self from that aspect for varied reasons.
Did he hold auditing of bullion suspect?
If not the actual holding, how about the valuation of the bullion?  How is the investor in PRPFX assured that the value of the bullion is accurate?
Only curious.
Not currently an investor.
I am sure the answer to my questions is available but would hazard a guess that any readers actually putting money into this fund have already researched this ad nauseum.

I don't know if the individual holdings are audited, but mutual funds in the US are very tightly regulated with respect to how they are operated and how the assets are used.

Browne was concerned about manager risk with any type of money management, not just the fund. This is the idea that the person running the fund or managing your money may do something ill-advised. This is a risk any time you have active management of investments. Heck, it's even bitten Vanguard's Total Bond Market fund in the past when the managers got away from the index and were burned during the Enron/Worldcom bankruptcies.

Thanks craigr.
You are indeed brave to take this board on.  Expect more than a few trolls.

I understand Browne's concerns.   On the other hand I would think PRPFX is a "close enough" substitute and I can imagine individual's rebalancing large (relative) amounts of gold especially in extreme times could gather unwanted attention.  In addition there are no doubt dozens of disreputable coin dealers and counterfeits for every example of Vanguard bond fund waywardness.  So I think there is a lot to be said for individuals avoiding all this by using PRPFX.

But that only works if:
-PRPFX actually owns the bullion they claim to, and value it correctly and
-The bullion is in metal (not paper) form.  

Its not paranoia in a world in which derivatives are written on all sorts of things without requiring much backing them besides promises, to ask the PRPFX folks how they assure investors of the accuracy of these things.  Maybe it is.  

I agree mutual funds are tightly regulated but this was probably little consolation to investors in Oppenheimer Core Bond Fund, who probably thought their fund owned a more safe version of "core" than it really did.  So even US mutual funds can really surprise when the times are tight.

In any case just curious and by no means do I mean to imply any disrespect or distrust of the folks at PRPFX.  I would think it is an easy way to follow a HB approach and I just wonder if owners have already done this due diligence.  If I ever buy PRPFX it would make my dilligence easier...

Yes it's always a good idea to read the prospectus to see what a fund holds. A quick look at the PRPFX fund disclosure shows that they are claiming they hold Gold Eagles, Maple Leafs and physical bullion among others:

http://finance.yahoo.com/q/hl?s=PRPFX

If I recall correctly, Browne was one of the founders of PRPFX in 1982 and invested some of his money in the fund.

foglifter wrote: If I recall correctly, Browne was one of the founders of PRPFX in 1982 and invested some of his money in the fund.

Not exactly.  Terry Coxon, Browne's collaborator and protege started the fund.  I don't know if Browne ever personally invested in the fund.

Browne preferred the 4x25% approach, but considered PRPFX to be the next best thing for those who for whatever reason couldn't (or wouldn't) use his prescribed approach.

MediumTex wrote:

foglifter wrote: If I recall correctly, Browne was one of the founders of PRPFX in 1982 and invested some of his money in the fund.

Not exactly.  Terry Coxon, Browne's collaborator and protege started the fund.  I don't know if Browne ever personally invested in the fund.

Browne preferred the 4x25% approach, but considered PRPFX to be the next best thing for those who for whatever reason couldn't (or wouldn't) use his prescribed approach.

I honestly don't think that Harry liked PRPFX in the end and only plugged them because of the sponsorship and consulting fees he got from them.  Using PRPFX is contrary to anything he ever said about gold and the fund was only ever mentioned as an alternative.  That is, until he was off the air for 3 months and came back with John Chandler as a cohost.  After that PRPFX was mentioned constantly (Not surprising considering Chandlers involvment with the fund).  Am I wrong to assume that this had something to do with Harry not serving his main sponsor's interests well enough?

brylig wrote:Am I wrong to assume that this had something to do with Harry not serving his main sponsor's interests well enough?

I don't know the answer about Browne and the fund. But in the latter shows Browne was being affected by his illness and I am guessing that's why he had a gap in the shows or maybe had John helping. This is just a guess though.

John Chandler was Browne's long-time publisher and business partner. He was also the co-founder of the Permanent Portfolio Fund with Coxon. I've spoken with him many times and he has a very pragmatic outlook on investing just like Browne had.

The Permanent Portfolio fund was founded on ideas from the 1981 book "Inflation Proofing Your Investments" (which actually had little to do with inflation proofing and more about building a balanced portfolio). It seems to me that over the years Browne just found ways to simplify the approach (most people could not hold Swiss bonds easily back then for instance). In the end the 4x25% approach came out in his 1987 book "Why the Best Laid Investment Plans Usually Go Wrong" (an excellent book in many respects). The only real change he made to the investment strategy was to drop the actively managed funds and recommend index stock funds by the early 2000s.

In response to the OP, note that Cuggino initially came into contact with PRPFX in his role as one of the fund's auditors at Ernst & Young. 

So yes, the fund is audited and is currently being run by one of its former auditors.

Any chance of an ETF version of PRPFX?  Anything out there that's close?

longeyes wrote: Any chance of an ETF version of PRPFX?  Anything out there that's close?

No, there is no ETF, but putting together an ETF-based PP is a very easy thing to do.

I'll bet that even one of those GEICO cavemen could do it.