New interview with Craig Rowland

[boglerdude]

> an emergency might force me to spend it all

yeah, experimental cancer treatment or something.

And if you can borrow more than you need, when the Fed starts buying mortgages again, thats more inflation protection.

[dualstow]

Ok, for the backdated email discussion, you can just go here
https://www.gyroscopicinvesting.com/for ... =9&t=13176

[Smith1776]

What I found really interesting about the interview was Craig's insight on cryptographic systems being compromised and hacked.

It's true. Bitcoin has proven resilient... so far. But it does rely on a relatively static security framework and a bunch of infrastructure to function. Gold is totally inert and doesn't have that problem. Plus, unlike Bitcoin, gold makes for some dang nice looking jewellery on my fiance.

[Smith1776]

I am still perpetually grateful to Craig and Tex for introducing me to the PP. I wish Tex would also do another interview.

[Vil]

Yup, just listened to it this morning. As I did not have enough of sleep during the night to cover my needs, most part I slept, but details should not bother any real PP proponent (like me). Whether Gold is real inflation protector or not, whether it covers 80-90 or merely 50% of the inflation, really does not bother me. Craig is a wise guy with the kind of a wisdom that only a self-made man can have. My personal wisdom is "work(do business) to make money, put (some of) those money aside in PP and go live your life". Hope nobody expects to get rich with PP, even keeping up with inflation seems to be hard enough task
Anyway, hope you are all doing fine ! Always nice to see VP-mostly-guys keeping the GI forum alive and kicking (no bad feelings, at all, you are all nice folks)

[dualstow]

Always great to see you check in, Vil!

[craigr]

Howdy all!

Thanks for posting the interview. I'll answer some points:

1) Yes my core portfolio is still based on the PP. Like most people, I have other assets, but the core of life savings I still do the PP. I have never shifted to all stocks, etc.

2) Yes, LT bonds have stunk recently. I rely on Stocks/Gold/Cash to buffer the losses.

3) Duration matching only works in hindsight. How do you predict these things consistently going forward without a lot of portfolio churn/taxes/expenses in the process?

4) Cryptocurrency is pure speculation. I'd only do it for the VP and would never rely on it to remain intact based on my 30+ years in information security. Virtually EVERY cryptographic system has experienced being broken or serious degradation to long-term security in significant ways. This includes most all cryptographic primitives (core hashing and encryption algorithms). These attacks always get better over time. You've been warned!

5) I like the idea of cryptocurrencies and wish them the best. I just feel that governments are going to work to introduce their own versions and will ban all these other ones in some way to make them worthless for all practical purposes to the average person.

6) I'll worry about gold being worthless when someone invents reliable and cheap cold fusion. Until then, I'd still hold it in a portfolio. If you really hate the stuff I get it. Buy some other hard assets like real estate instead. But make sure your portfolio has some kind of hard asset protection.

7) If you want to goose returns, just buy more stock index funds and overweight that asset. This gives growth long term and inflation protection vs. other assets if you can wait out market downturns.

8 ) Your timeframe is not the market. While it is nice to think you have 50 year investment horizon to wait out market issues the reality is you can get an emergency that you need to access those funds much earlier. The Permanent Portfolio gives a really stable core that has a lower chance of leaving you hanging in a big decline if you suddenly find you need those funds.

Glad to see everyone. I am neck deep in my company (www.sandflysecurity.com) and don't have much time to post. I pretty much leave my portfolio alone which I think is good advice no matter what portfolio you want to follow (PP or no):

Keep costs low, diversify, don't churn, rarely peak at returns.

Hope you are all doing well!

[Smith1776]

The Legend is back!

[Kevin K.]

It's such a pleasure and privilege to hear from you Craig. I know that I speak for many here when I say how grateful I am to you for all of your writing on the PP, going all the way back to those epic early threads you and Mr. Lawson did on the Bogleheads forums and of course including your essential book on the PP and these forums.

All the best to you!

[425]

4) Cryptocurrency is pure speculation. I'd only do it for the VP and would never rely on it to remain intact based on my 30+ years in information security. Virtually EVERY cryptographic system has experienced being broken or serious degradation to long-term security in significant ways. This includes most all cryptographic primitives (core hashing and encryption algorithms). These attacks always get better over time. You've been warned!

It's important to make a distinction between crypto and bitcoin. Bitcoin has matured to the point where I don't think it is fair to say that it is pure speculation. All assets have part of its price driven by speculation about its future market price discounted to present value. The problem with bitcoin is that the fear of missing out only comes when the current price is dominated by speculative premium.

I listened to the interview and I think listeners should be aware that current encryption standards are already vulnerable to quantum computing today and bitcoin wallets typically already handle best practices so that addresses are not re-used for this reason. One day computing power will be fast enough to attack transactions but bitcoin encryption standards can be upgraded to meet modern requirements unless encryption as a field fails to keep up with decryption in which case we also have bigger problems.

5) I like the idea of cryptocurrencies and wish them the best. I just feel that governments are going to work to introduce their own versions and will ban all these other ones in some way to make them worthless for all practical purposes to the average person.

Governments will have CBDCs for their own reasons, they will most likely not make them deflationary. They could definitely make it so that bitcoin is worthless but this is what you're speculating on. Bitcoin does not need hyper bitcoinization in order to gain 10x in price. In some ways investing the bulk of one's portfolio in the PP allows them to have an educated guess on how much money they can afford to lose so that they can invest in something riskier and it also frees up their time so that they can spend it on doing something riskier like running a business rather than working a job.

[dualstow]

5) I like the idea of cryptocurrencies and wish them the best. I just feel that governments are going to work to introduce their own versions and will ban all these other ones in some way to make them worthless for all practical purposes to the average person.

This got me wondering how I feel about it. While I wish investors the best, I don’t think I wish crypto the best. In fact, I think it would be interesting and not a little amusing if every institution voluntarily declared that they wouldn’t accept it. Highly unlikely, I know.
This isn’t out of some deep-seated misanthropy. I wish general investors the best and I hold some bitcoin. I just like the idea of crypto as a payment system, an easy medium of exchange, not a system that rewards young MIT students for hoarding it early. But is it hypocritical that I don’t feel the same way about someone who hoarded shares of, say, Pepsico early? Maybe …

I want productive companies to win, not cryptocurrencies. Nor even just currencies.

[Smith1776]

It's a good point. If productive companies are winning then that generally means society and people are probably doing well. If cryptocurrencies win in a big way it's probably because there's been some major monetary system upheaval.

[ppnewbie]

Happy to see Craig pop in. One important point is that both Craig and Harry Browne generated wealth from their businesses and then (IMHO) used the PP to preserve it, grow it at a reasonable amount above inflation, limit drawdowns while keeping things simple.

Personally, I do not see the PP generating wealth.

Also on the crypto thing. I just can’t get my head around it. There is a thing (Bitcoin) thats generated digitally that can be bought by another thing (Tether) that is also generated digitally that I can trade between me and myself on an exchange. A small amount of transactions can move the entire market of this fairy dust. My parents look confused when I mention the word crypto.

If I pull out a gold coin, literally every person around me looks and many reach out there hands. Young and old.

[vnatale]

Happy to see Craig pop in. One important point is that both Craig and Harry Browne generated wealth from their businesses and then (IMHO) used the PP to preserve it, grow it at a reasonable amount above inflation, limit drawdowns while keeping things simple.

Personally, I do not see the PP generating wealth.

Also on the crypto thing. I just can’t get my head around it. There is a thing (Bitcoin) thats generated digitally that can be bought by another thing (Tether) that is also generated digitally that I can trade between me and myself on an exchange. A small amount of transactions can move the entire market of this fairy dust. My parents look confused when I mention the word crypto.

If I pull out a gold coin, literally every person around me looks and many reach out there hands. Young and old.

Has any investing system generated wealth?

Capture.JPG (48.03 KiB) Viewed 287 times

[ppnewbie]

VTI with dividends reinvested is an easy one. But it is volatile with big potential drawdowns.

[dualstow]

I still can’t get over the idea that one can generate wealth- ok, can generate income, from interest and dividends. Of course I understand the concept. You’re renting out your money, like a landlord rents out living space. But…I didn’t sweat for it. And I didn’t invent anything. I’m not complaining— I’m grateful for it. But I still can’t get over it.

[Smith1776]

Compensation for risk and compensation for deferral of current consumption equals increased future consumption.

[vnatale]

Compensation for risk and compensation for deferral of current consumption equals increased future consumption.

I will amend it to "increased potential future consumption".

[Smith1776]

Compensation for risk and compensation for deferral of current consumption equals increased future consumption.

I will amend it to "increased potential future consumption".

[boglerdude]

Those days might be over as of 2008. The easy money is population growth ie lending new households your money for house, car, and education. If you want passive returns with shrinking family-formation you need to take risks on startups etc, and theres a lot of competition. Savings glut.

[ArthurPooh]

I still can’t get over the idea that one can generate wealth- ok, can generate income, from interest and dividends. Of course I understand the concept. You’re renting out your money, like a landlord rents out living space. But…I didn’t sweat for it. And I didn’t invent anything. I’m not complaining— I’m grateful for it. But I still can’t get over it.

It has always been so; wealth always came from owning, controlling, acquiring assets. Working poor people have always paid rent to idle landlords who have increased their wealth and power over generations. According to some study I read, Norman surnames are still overrepresented among American millionaires. Only difference is that now it's much easier for much more people to "switch sides" than ever before (and most still won't do it!).

[dualstow]

I’ll have to look for that! I’m very interested in surnames. The Normans gave us a lot of high culture words (and wiped out a lot of English in the process).
By ‘switch sides’ you mean graduate from a serf to a nobleman?

[Jack Jones]

I still can’t get over the idea that one can generate wealth- ok, can generate income, from interest and dividends. Of course I understand the concept. You’re renting out your money, like a landlord rents out living space. But…I didn’t sweat for it. And I didn’t invent anything. I’m not complaining— I’m grateful for it. But I still can’t get over it.

Somebody (probably you) had to sweat to build the capital.

[dualstow]

Absolutely, yes.
To put things in context, I also can’t get over the fact that seeds fall into the soil, get rained on, and stuff just grows out of the ground. Magic.

[Smith1776]

I can't get over the fact that my fiancé is into me.

Like... how?

Anyway, I wonder if Craig will change his position on Bitcoin in, say, a decade's time.