The Economy with Albert K Lu

Summary The Rate of Return (Natural rate of interest) Pure rate on time Purchasing power of money adjustment Entrepreneurial Terms of trade The Permanent Portfolio Realizes the most benefit from 4) terms of trade component of inflation. Is speculative for this reason. It must anticipate which asset classes will benefit first from inflation. Must be tailored to each central bank economy because central banks target interest rates and domestic asset prices denominated in the local currency. Doesn't just protect the investor from business cycles  but needs the business cycle to generate returns. Is not an investment panacea. Would have looked different if Harry lived 100 years earlier or 100 years later. Is a result Harry's personal experiences and experiences evolve over time. Where can I learn more about the Permanent Portfolio? Harry's book "Fail-safe Investing" Harry's book "How I Found Freedom in an Unfree World" Harry's investment radio show The Permanent Portfolio Mutual Fund Crawling Road: A blog dedicated to the Permanent Portfolio The Mad Money Machine: An investing podcast Who was Harry Browne? Harry Browne was an American free-market Libertarian writer and the Libertarian Party's 1996 & 2000 candidate for President of the United States. He was also a well-known investment advisor for over thirty years, originator of the Permanent Portfolio concept Learn more about Harry Browne Clips Introduction Interest: pure rate Interest: purchasing power of money Interest: entrepreneurial PP performance mystery Interest: terms of trade Regional variations Lifetime security? What would Harry say?

Background Permanent Portfolio Harry Browne's Permanent Portfolio: Part 1 - Introduction Harry’s book “Fail-safe Investing” Harry’s investment radio show The Austrian Business Cycle https://www.youtube.com/watch?v=GU-FXv2VlK0 http://youtu.be/5K4Os5eXPw4 Principles Investing is like the rest of your life The future is uncertain Applying the Principles to the Permanent Portfolio There is no reason to believe the Permanent Portfolio cannot be improved. Human knowledge is expanding. Techniques are refined and improved. Due to its empirical design, the Permanent Portfolio gives us no reason to believe it will continue to work in the future. The past is no indication of future performance. This applies equally to the Permanent Portfolio. There is nothing wrong with delegating financial management. We do this in other areas of our lives. No task is too trivial (auto maintenance) or too important (life-saving surgery) to delegate. Simplicity is generally desirable but often involves assumptions and limitations. The Permanent Portfolio simplifies investing by making simplifying assumptions and omitting explanations Definitions Investing - any attempt to capture the general market return. Speculating - any attempt to beat the general market return. General market return - the hypothetical uniform real return on a totally secure time deposit. Clues to Operation Risk is minimized within each asset class Historical performance seems too high for a low-risk strategy Rebalancing is essential to performance Regional versions The Four Economic Categories Harry's four economic categories are not all-encompassing as he claims. What is True Prosperity? Stable money (inflation free) Falling nominal prices Rising standard of living (consumer prices fall faster than wages) Stable markets (no global booms or busts) The classical gold standard (19th century America) is an example of true prosperity. The Golden Constant (pdf) True prosperity is not accounted for in Harry's economic model. Harry's four economic categories correspond to stages of the classic Austrian business cycle Prosperity => Mal-investment boom Inflation => Rising consumer prices Tight money => Central bank slowing of money expansion Deflation => Healthy liquidation of mal-invested capital Clips Introduction Making decisions Investing & Speculating Some clues Four economic categories

What is the Permanent Portfolio? The Permanent Portfolio is an investing system which coordinates the purchase and sale of diversified financial assets in a buy-and-hold manner. Who was Harry Browne? Harry Browne was an American free-market Libertarian writer and the Libertarian Party's 1996 & 2000 candidate for President of the United States. He was also a well-known investment advisor for over thirty years, originator of the Permanent Portfolio concept Learn more about Harry Browne Why use the Permanent Portfolio? Is do-it-yourself. Is low-cost. Is simple to implement. Has worked in the past. Harry’s Philosophy Keep it simple and safe The investing world is part of the same world you already know and deal with successfully Anything can happen; nothing has to happen Harry’s 17 Simple Rules for Financial Safety Build Your Wealth upon Your Career Don't Assume You Can Replace Your Wealth Speculate Only with Money You Can Afford to Lose Invest Only on a Cash Basis Understand the Difference between Investing & Speculating Beware of Fortune-Tellers Don't Expect Anyone to Make You Rich Don't Expect a Trading System to Work Reliably Make Your Own Decisions Do Only What You Understand Ask the Right Questions Whenever You're in Doubt, Err on the Side Of Safety Spread the Risk Build a Bullet-proof Portfolio for Protection Keep Some Assets outside Your Own Country Take Advantage of Tax-Reduction Plans Enjoy Yourself with a Budget for Pleasure The Permanent Portfolio 25% Stocks – S&P 500 25% Bonds – Long-dated US Treasuries 25% Cash – US Treasury Bills 25% Gold – Bullion How has the Permanent Portfolio performed over the years? In Harry’s book, he reports the portfolio gained  an average of 9.9% annually from Jan 1970 through Dec. 1998, a 29-year period. Others have reported similar results in recent years. Where can I learn more about the Permanent Portfolio? Harry's book "Fail-safe Investing" Harry's investment radio show The Permanent Portfolio Mutual Fund Crawling Road: A blog dedicated to the Permanent Portfolio The Mad Money Machine: An investing podcast Clips Introduction Harry's 17 rules The Bullet-proof portfolio

Topics Who will lead the Fed? Geithner's DMV experience; sad story or business as usual? Gender discrimination Bernanke deserves an A+ report card Video CNBC: Who will lead the Fed. Geithner frustrated at DMV CNBC: Bair suspects gender discrimination http://youtu.be/GEjXW9XoFf0 Links Slate.com: Is gravitas or gender the issue with Yellen

Topics Texas rollercoaster accident sparks calls for government oversight Detroit, blame government not freedom Peter Schiff, the "Stand-up Economist," takes his show on the road Video http://youtu.be/r8kWVs5kWcM http://youtu.be/OuESvJenj9s Links ABClocal.go.com: Woman dies in Texas commuter rail accident Chron.com: Houston MetroRail's sad safety record IAAPA.org: Amusement park safety statistics NYTimes.com: Detroit Bankruptcy Moves Forward Yelp.com: Detroit businesses still serving

 Topics Amusement park fatality Texas roads update Harry Browne on enjoying life Passport adventures Links Dallasnews.com: Accident at Texas amusement park Harry Browne: The Secret of Selling Anything Harry Browne: How I Found Freedom

Topics SeaTac, Bose, and Sinatra George Zimmerman trial Texas roads kill over 1000 so far in 2013 Links CBSlocal.com: Encouragement from TXDOT

Topics Bernanke's taper talk crushes markets Carnival CEO steps down Barnes & Noble gives up on color reader Google overtakes Apple   Links WSJ: A Hawkish Signal Bernanke Didn't Send WSJ: Carnival CEO to Step Down WSJ: Barnes & Noble Pulls Back After Losses In Tablet Wars

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Topics Tinkering with GDP. Why now? Why do some students lack passion? Does it matter? Video http://youtu.be/g5OfBxk00LI http://youtu.be/LwIyy1Fi-4Q Links NPR: Lady Gaga and GDP tinkering FT: GDP gets Hollywood makeover NPR: What if I have no passion?  

Topics Peter Schiff: The Fed can't exit Buffett wouldn't buy at $800 or would he? Bitcoin taking heat in Canada Jeffrey Tucker on bitcoin geekiness Charts   Video http://youtu.be/mRKp8A_gZ8c http://youtu.be/Go-BDai6HCU Links Bloomberg.com: Buffett wouldn't buy gold at $800 Helzberg Diamonds (aka Berkshire Hathaway) Gold Purchase Program Salon.com: Canada tightens grip on bitcoin

Topics Robert Murphy and Rothbard's Law Team Brittany interviews Robert Murphy Bitcoin: What is it? Video http://youtu.be/OX1EO3VVTSA http://youtu.be/vQMwpbSjC1A Links  5/5 ARM Home Loan in 20 Minutes or Less Robert Murphy Blog  

Topics Americas Restaurant Seminar on Money, Banking & Inflation Gold underpricing results in coin shortage The devolution of "private banking" Bangladesh factory disaster: Are you to blame? Video http://youtu.be/G60enh4PcMw Links Time: Bangladesh: Is there blood on your shirt Heritage Economic Freedom Index: Bangladesh 132

Topics Dr. Krugman visits Spain, receives "Austrian" welcome Reception in NJ was not much better The pain continues in Idaho Links Economist Pedro Schwartz vs. Paul Krugman CNBC: Guest Paul Krugman NYTimes.com: Krugman fires back CBS: Healthy conflict CNBC: Simpson on Krugman "I think he needs to rest"  

Topics Kinsella vs. Wenzel: IP showdown turns into circus Ron Johnson's downfall - the consumer and psychic profit John Mackey - the reluctant capitalist Conscious Capitalism: Pioneering Economic Treatise or Corporate PR Spin? Audio The Kinsella on Liberty Podcast: IP Debate - Kinsella vs. Wenzel The Robert Wenzel Show - John Mackey interview http://youtu.be/QARHPdnEP-U