http://www.morningstar.com/Cover/videoCenter.aspx?id=321386

Then there is the opposite. You may own foreign stocks but they could be doing a tremendous amount of business in the US so if the US economy is in shambles it will flow over onto them. Think of corporations like Nestle, Bayer, Honda, Toyota, Sony, etc. A bad economy in the US will affect them.

The US still is a massive producer. If you travel outside the US you will see this. Coca-cola is enjoyed all over the world. Microsoft runs their software all over likewise. In Europe and Latin America I’ve seen an abundance of US car companies such as Ford represented and this doesn’t even include the foreign brands they own (such as Volvo, and for years before they sold down their shares – Mazda and Jaguar). Then there are books, movies, electronics, food and raw materials exports. You can’t go anywhere without seeing Caterpillar construction equipment and John Deere in agriculture. Then there is the oil market which has US company representation all over the planet. The list is endless and the US still makes up a huge amount of the global economy production capacity.

When US investors divest too far out of the US they are taking on additional currency risk that could not work out to their favor. The last decade much money was made in foreign stocks simply because the US dollar had lost about 1/3rd of its value compared to other currencies. If the dollar regains strength against these other currencies though the opposite could happen and those invested in non-dollar assets could be punished.

The Permanent Portfolio strategy relies on investors being tied more to their local economy. You don’t want to lose money because the UK Pound is doing poorly or a new Government is elected in Brazil which nationalizes all major industry. The US economy will move differently than that of the UK and Brazil and it’s to US investor’s advantage to have a portfolio that can roll with the economy as they are living it, not as someone in London is doing.

I’m not opposed to some international diversification, but investors thinking the grass is greener somewhere else could find themselves mistaken.

Rebalancing between tax-sheltered and non-tax sheltered is always a concern. In these cases Browne and others have recommended trying to hold some assets outside of your tax-shelter to make rebalancing easier. Also, it is often the case that you can juggle assets around inside the tax shelter to not be forced to move money outside of it. If this means you buy your gold to hold in the shelter for rebalancing, then you just have to do it. It may mean that you do hold some non-tax sheltered assets, but also have the stocks, bonds, cash and gold inside a tax shelter as well. Look at your taxable and sheltered assets as one big portfolio in this case. Don’t look at them as separate entities.

It seems to me that, if some of the PP is in IRAs or other tax-sheltered instruments (which is WISE!), when it comes time to rebalance, don’t you take an early withdrawal penalty, say to sell off stocks that are now at 35%, and buy gold which is now at, say, 15%? Wouldn’t that defeat the tax shelter aspect? Or am I missing something?

Please use small words in your reply, as I am quite new to “doing it myself”, but I just inherited some 401(k) and estate sale finances from my dad, and I want to drop it in the Permanent Portfolio before inflation eats all of it.

If you’re a DIY kind of guy the ETFs are fine (except I’d prefer not to see the gold in ETF form, but rather more physical control). If you don’t like messing with things then PRPFX is also fine if you are OK with the slight differences in the allocation. Over the long haul they both have done about the same. If you don’t know which you’d prefer, you could always do a little of both. The PRPFX fund is going to cost more in expense ratio over DIY (and there is also manager risk), but that’s the price you pay for the convenience. I personally use the 4 x 25% split myself.

In your opinion is holding the PP in the form of:
TLT 25%
GLD 25%
VFISX 25% or Cash
VTWSX 25% or VTSMX
preferable to simply holding:
100% PRPFX?