Canadian Couch Potato Interview

[Lone Wolf]

What does it mean to be a long term optimist who also recognizes that time takes everything from everyone?

I think that I live a great life.  I expect that it will be even greater in the future.  But even recognizing this, I understand that one day it'll be the end of the line for me.  Fortunately, that ain't today and I simply can't spend any time worrying about it.

I see humanity and\or post-humanity as being in the same position.  Yes, some day the sun will burn itself out, the stars will drift apart and the universe will grow cold.  In the meantime, I think that technology holds incredible promise for our species, much of which we can't even predict.

Your thesis on energy is highly compelling but I still see it playing out differently.  If and when the consequences of a true shortage in fossil fuels become apparent, dense sources of power with bad reputations (such as nuclear power) will be brought online much more readily and with much less hesitation.  And nuclear power makes the energy density of even fossil fuels (incredible sources of energy) look like a joke.

Without question this comes with its own set of problems but consider how flexible people's thinking becomes when they are faced with an existential crisis.  Throw in something futuristic like a space elevator that allowed us to "sling" containers of nuclear waste into the sun and I think that nuclear becomes a really, really easy tech to get behind.

[doug6zj9]

Okay, LoneWolf, Help me reconcile these two comments:

I'm very much the long-term optimist.  I hear all this stuff about long-term decline and the 80s baby in me just doesn't buy it.  

...

The opportunities of the present are precious because eventually time takes everything from everyone.  We live in an insanely good world, but only for a little while.  No time to waste.

FWIW - I took the first sentence to be an observation about society as a whole; the "we" refers to us collectively, ie, western civ will be alright.  I took the second sentence to be an observation about our lives individually; the "we" refers to each of us individually, ie, we all must die. 

[MediumTex]

What does it mean to be a long term optimist who also recognizes that time takes everything from everyone?

I think that I live a great life.  I expect that it will be even greater in the future.  But even recognizing this, I understand that one day it'll be the end of the line for me.  Fortunately, that ain't today and I simply can't spend any time worrying about it.

I see humanity and\or post-humanity as being in the same position.  Yes, some day the sun will burn itself out, the stars will drift apart and the universe will grow cold.  In the meantime, I think that technology holds incredible promise for our species, much of which we can't even predict.

Your thesis on energy is highly compelling but I still see it playing out differently.  If and when the consequences of a true shortage in fossil fuels become apparent, dense sources of power with bad reputations (such as nuclear power) will be brought online much more readily and with much less hesitation.  And nuclear power makes the energy density of even fossil fuels (incredible sources of energy) look like a joke.

Without question this comes with its own set of problems but consider how flexible people's thinking becomes when they are faced with an existential crisis.  Throw in something futuristic like a space elevator that allowed us to "sling" containers of nuclear waste into the sun and I think that nuclear becomes a really, really easy tech to get behind.

Part of the fun in living is that you don't know what surprises each day may hold.

I agree that we have an almost amusement park-like world in which to live our lives, and the blessing of being born at the right time and place in history should simply be accepted with humility and appreciation (assuming you think it's a good world, and I do for the most part).

Another thing I have learned is that thinking about the future will NEVER actually give you a peek into what it might actually feel like when it arrives; rather, thinking about the future is simply the way you are choosing to spend this moment, and the feeling that you are "pre-experiencing" some aspect of the future is actually just a different way of experiencing the present. 

The same is true of thinking about the past--you are not really re-living things that have already occurred, you are just experiencing them through the lens of your current mental state.  That's why the same past experience looks and feels different as you look back on it at different stages of life.

The mystery of this moment is endlessly interesting.

[6 Iron]

I was struck by how reasonable the comments were, even those that disagreed with the concept. Some individuals react to gold, and to a lesser extent, long term treasuries, as if they are threatened. Good people, those Canadians. Great interview, Craig.

[Lone Wolf]

Another thing I have learned is that thinking about the future will NEVER actually give you a peek into what it might actually feel like when it arrives; rather, thinking about the future is simply the way you are choosing to spend this moment, and the feeling that you are "pre-experiencing" some aspect of the future is actually just a different way of experiencing the present. 

The same is true of thinking about the past--you are not really re-living things that have already occurred, you are just experiencing them through the lens of your current mental state.  That's why the same past experience looks and feels different as you look back on it at different stages of life.

The mystery of this moment is endlessly interesting.

Most excellently said.  When you look at it this way, you can see that we give up so much when we spend time worrying about things that we can't control.

[rickb]

This forum should produce a book. MT and Craig could easily produce one of the best books on investing ever written. I'd certainly buy a dozen copies.

This line of thinking resulted in the bogleheads books.  If you really think this is worth pursuing you might ask Taylor Larimore about it.  In particular, note that their "guide to investing" covers a slew of topics that are not directly related to the strategy of buying index funds.  The real question is how a book on why and how to invest according to the PP principles would differ from Browne's "Why the Best-Laid Investment Plans Usually Go Wrong".  I sincerely admire the efforts of Craig and MT - however I really don't think they're saying anything Browne didn't already say in this book.

[MediumTex]

This forum should produce a book. MT and Craig could easily produce one of the best books on investing ever written. I'd certainly buy a dozen copies.

This line of thinking resulted in the bogleheads books.  If you really think this is worth pursuing you might ask Taylor Larimore about it.  In particular, note that their "guide to investing" covers a slew of topics that are not directly related to the strategy of buying index funds.  The real question is how a book on why and how to invest according to the PP principles would differ from Browne's "Why the Best-Laid Investment Plans Usually Go Wrong".  I sincerely admire the efforts of Craig and MT - however I really don't think they're saying anything Browne didn't already say in this book.

I think that any such effort would be more along the lines of highlighting nuances in Browne's thinking that don't necessarily jump off the pages of his work.

I think there is also a lot to be said about updating the strategy based upon ETFs and other investment options available today.

There is also the benefit of being able to anticipate virtually any objection to the PP and address it as part of the discussion.

The largest gap in Browne's writing, IMHO, was simply underestimating many people's resistance to the assumptions on which the PP is based.  In my own case, I had to spend a LOT of time with Browne's work before the PP began to really sink in.  For a long time, I simply didn't believe it.  Then, I didn't want to accept it.  Finally it clicked, and after that it's been fun.

[rickb]

This forum should produce a book. MT and Craig could easily produce one of the best books on investing ever written. I'd certainly buy a dozen copies.

This line of thinking resulted in the bogleheads books.  If you really think this is worth pursuing you might ask Taylor Larimore about it.  In particular, note that their "guide to investing" covers a slew of topics that are not directly related to the strategy of buying index funds.  The real question is how a book on why and how to invest according to the PP principles would differ from Browne's "Why the Best-Laid Investment Plans Usually Go Wrong".  I sincerely admire the efforts of Craig and MT - however I really don't think they're saying anything Browne didn't already say in this book.

I think that any such effort would be more along the lines of highlighting nuances in Browne's thinking that don't necessarily jump off the pages of his work.

I think there is also a lot to be said about updating the strategy based upon ETFs and other investment options available today.

There is also the benefit of being able to anticipate virtually any objection to the PP and address it as part of the discussion.

The largest gap in Browne's writing, IMHO, was simply underestimating many people's resistance to the assumptions on which the PP is based.  In my own case, I had to spend a LOT of time with Browne's work before the PP began to really sink in.  For a long time, I simply didn't believe it.  Then, I didn't want to accept it.  Finally it clicked, and after that it's been fun.

I'm not sure if I'm reading too much into this, but it strikes me as a somewhat defensive response.  I'm really REALLY not attacking you. It seems like we could produce any of the following

• PP for dummies - but this is essentially the same as Browne's "Fail-Safe Investing"
• PP for financially savvy folks - but this is essentially the same as Browne's "Why the Best-Laid Investment Plans Usually Go Wrong"
• something else - ?

The issue is what would be the something else? 

Perhaps "Browne vs. Bogle" (i.e. a book length version of the bogleheads thread)

Or "Brick House Investing - How and Why Browne's PP Stands up Against Any Big Bad Economic Calamity"

Or even "Harry Browne vs. the Mob - The Internet Tries (and Fails) to Find Fault with Browne's PP"

There is a huge amount of source material.  If it's to be turned into a book the question is what is the hook that will get a publisher interested and how would it be different from what Browne already published?

[Jan Van]

The largest gap in Browne's writing, IMHO, was simply underestimating many people's resistance to the assumptions on which the PP is based.

Do you think he underestimated, or simply didn't bother about it? His attitude seems more "take it or leave it". If you don't like it, have it your way, no skin off my back...

[MediumTex]

I'm not sure if I'm reading too much into this, but it strikes me as a somewhat defensive response.  I'm really REALLY not attacking you. It seems like we could produce any of the following

• PP for dummies - but this is essentially the same as Browne's "Fail-Safe Investing"
• PP for financially savvy folks - but this is essentially the same as Browne's "Why the Best-Laid Investment Plans Usually Go Wrong"
• something else - ?

The issue is what would be the something else? 

Perhaps "Browne vs. Bogle" (i.e. a book length version of the bogleheads thread)

Or "Brick House Investing - How and Why Browne's PP Stands up Against Any Big Bad Economic Calamity"

Or even "Harry Browne vs. the Mob - The Internet Tries (and Fails) to Find Fault with Browne's PP"

There is a huge amount of source material.  If it's to be turned into a book the question is what is the hook that will get a publisher interested and how would it be different from what Browne already published?

Your ideas are sort of what I was thinking.

I look at the BH thread and this forum and the fact that for whatever reason the PP investing concept just feels like looking into a very deep well and it seems like it could be a great topic for another book at some point.

I am actually surprised that there haven't been a whole slew of new PP books given the current bull market for gold and the explosion in interest in PRPFX.

[l82start]

i think taxes, and a clear concise discussion of how to make a pp its most tax efficient would be a helpful/needed chapter.

 also i found the Bogle-head book/wiki combination a great reference as a beginner, by covering the investing basics, "a beginners guide to investing" from a PP perspective, you would fill a need, and help take new investors from zero to PP enthusiast without having to learn the hard way all the mistakes HB warns against in his books, mistakes that other introduction to investing books may actually suggest as being good ideas...

[steve]

I have been working on what I call the Perfect Portfolio
The Perfect Portfolio is the fail safe investing strategy of Harry Browne’s Permanent portfolio using modern day Low cost Exchange Traded Funds (ETF) and a low cost Vanguard brokerage account.
Topics that need work in my opinion are Tax loss harvesting in more detail for example I want to include tax loss harvesting bands that are similar to rebalance bands., Closed end funds like GTU and PHYS that have tax advantages for taxable investor etc. How to fill out IRS forms etc.
There are other things but most have been covered by Fail Safe Investing and the BogleHeads guide to investing. What I can add can probably be covered in a few sentences. You could buy both those books and we as a group could add a one or two page addendum.

[Indices]

With a book there is the issue of money. Would all proceeds go to charity? That probably is best and would prevent authors from fighting each over it.

The other issue is with rights. If this forum created a book, would we have the rights to call it the Permanent Portfolio? We might run into trouble from the mutual fund or Harry Browne's estate.

[quenali]

I'm puzzled why none of the investment companies have come up with a PP mutual fund utilizing some ETF's.  The ETF's would cost, what maybe 30 bps, you charge 1 percent and no manager costs.....and the strategy has already been proven to work.

[Indices]

I'm puzzled why none of the investment companies have come up with a PP mutual fund utilizing some ETF's.  The ETF's would cost, what maybe 30 bps, you charge 1 percent and no manager costs.....and the strategy has already been proven to work.

This is my long term goal. It would make life so much easier if a fund set up the PP with low fees.

[longeyes]

I'm puzzled why none of the investment companies have come up with a PP mutual fund utilizing some ETF's.  The ETF's would cost, what maybe 30 bps, you charge 1 percent and no manager costs.....and the strategy has already been proven to work.

Or why PRPFX has not offered an ETF version of its fund?

[cowboyhat]

My quibble with Browne's presentation of the PP is that he does not really present an exploration of the limits of his idea. Nothing lasts forever. I would like to read a thoughtful presentation of reasonable empirical and theoretical criteria for abandoning the PP?

Medium Tex mentioned losses over a rolling three year period or identification of a 5th economic state.

I would add a shift in the world economy to a non-dollar-based currency status. This might not be grounds for dumping the underlying concepts, but some serious revisions in holdings might be in order.

[Indices]

Clive that's quite interesting. What would a 100 per cent Toronto Index stock fund have done over the same period? I think that is an apt comparison. A Canadian is not likely to be able to hold, or wish to hold, an American centric PP portfolio, but would very likely have held 100 per cent in stocks or a 60/40 split.

[cowboyhat]

My interpretation of Harry Browne's writings is that he was mostly thinking about US-based investors. A problem with a Canadian PP is that Canadian currency is strongly influenced by commodities prices. Also an all Canadian stock market holding would be dominated by commodities prices. Probably the same would be true of an Australian or a Norwegian PP. This influence would seem to undermine the balance HB was seeking.

Leaving Canada out of it for a moment, I don't think setting up a non-US PP is at all straightforward, especially if your home country has a relatively small economy, or if your home currency/central bank is shaky.

[smurff]

If currencies became 100% backed by gold, I can see that the PP would need serious rethinking.

[moda0306]

Looking at all the currencies backed by gold before the great depression that lost that status after, I wonder how safe a gold standard promise by a government would be.

That said, if they're going to confiscate it at the old price before devaluation like they did then, it would lose some appeal.

[stone]

Clive, that Canadian PP backtest is sobering. Is it a general rule that tighter rebalancing bands reduce max drawdowns?

[Indices]

Clive where do you get your data from? I'd like to run some "experiments" for my own purposes.

Thank you for your contributions to the forum. I don't always agree with what you say, but your data is always thought provoking.

[dualstow]

On the Crawling Road site, Craig wrote:

The Canadian Couch Potato (aka. Dan Bortolotti) did an interview series with me about the Permanent Portfolio concepts. He has been nice enough to post his interview on his site and there will be an article about it in Money Sense Magazine in Canada shortly.

The MoneySense article on the interview is out. http://www.moneysense.ca/2011/09/12/the ... portfolio/
One "Harry Browne" just posted about it on facebook.  ;)