Summary: 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
