I would like to get the general consensus about people take Harry Browne's Permanent Portfolio proposition. Few geniuses have muttered , '...and let this issue end here and with me', and so I wonder if Harry would encourage people to seek out alternatives to his PP or insist upon a timeless and unalterable solution.
I read an old post that contrast the HBPP to the Vanguard Wellington + some Gold. While there are clear differences it seems that the two approaches aren't entirely dissimilar in nature. I wonder: which most likely represents what Harry had in mind? Do we interpret Harry Browne's PP or imitate him entirely?
Since Harry was with us until 2006, I think we have the answer - he preferred his own portfolio to any other. Of course he was selling books, but we also have the historical evidence of a moderate rate of return with low volatility. The portfolio also fits with my own views about market efficiency, and is based on sound economic reasoning, so I was an easy sell.
I am all in favor of investigating other approaches, but I would be careful about modifying the original PP design since it is a carefully constructed package. The more I learn about it, and the more I see it work with my own money on the line, the less I want to tinker with it. My recommendation to anyone considering it would be to follow the PP as prescribed for a part of your total porfolio, but use other approaches if you are unsure if the PP is right for you.
"Machines are gonna fail...and the system's gonna fail"
Investigating other approaches is not a problem. Browne even commented as such because it's your money on the line and you must deal with the decisions and the gains or losses they bring.
Browne is very careful not to discount the unlikely as the impossible. Which to me is a key element of his investing ideas. Meaning that even seemingly impossible events were not just simply discarded because, well, they're "impossible." I think we've all seen many impossible events come true. So I also appreciated the thought put into the Permanent Portfolio for times when things don't go according to plan.
The problem I saw in other approaches I've investigated is they don't plan for these things or think that the future is just going to continue on like the past. Browne was very careful to never imply this and to protect against an unknown future with diversification based on economic cycles, and not just simply looking at some correlation data tables. This is a very unqiue feature to his approach that others lack.
SmallPotatoes wrote:
Is there any future the PP is not prepared for?
Won't know until it happens.
At some point, investors just have to accept that they've done the best they could to diversify and just carry on. If something truly unexpected happens it will have to be dealt with then. It is simply not possible to take into account every possible threat. To do so would be an impossible task and likely counter productive because, as the saying goes: "The enemy of a good plan is the search for the perfect plan." Or simplified: "Perfect is the enemy of the good."
Investors can get so paralyzed with fear that they make no decision to invest at all. That itself can be a big mistake because there are plenty of risks to sitting in cash for instance. Or, even worse, they get so worried about some far out possible risk that they become easy pickings for charlatans selling exotic investment products to supposedly protect them from said risk. Off-shore trusts come to mind in this regard.
Last edited by craigr on Sat Jun 19, 2010 7:01 pm, edited 1 time in total.
