I am more of a global Macro strategist, I am not a stock picker I wouldn't say buy this sector or that sector .My permanent portfolio would have it would be allocation of your investable assets I should define that term first of all. Investable assets is the amount of money or savings you have to invest not including your home equity and your business equity I don't think people should treat their homes as portfolio investment I know a lot of people do its a big expenditure its not something you would want to gamble with or take chances with or over leverage same thing with your business equity your a dry cleaner,car dealer,doctor,lawyer,dentist you run a pizza parlor restaurant whatever that's your livelihood so you don't really want to speculate with that.So take your home equity and your business equity put it off to one side and whatever is left over that's your investable assets.I would recommend 20% in physical gold or silver I think silver also performs the same function not 50% or 100% you shouldn't go all in any asset category but I think 20% is the right amount. I expect gold to go up by 5 to 10 in a matter of I am not talking about 10 or 20 yrs.If nothing bad happens lets just hope for that you wont get hurt with a 10% allocation but while these other asset classes collapse gold and silver is your insurance.
I would also recommend a larger portion of allocation to cash maybe 30%. The answer is I might not have it for ever or for very long but in the short run it is kind of underrated asset it does not have a very high yield I understand that it has a lot of embedded optionality if things starts to fall apart the person with cash is able to come in pivot with better information something that's doing well pick up bargain of some other sectors falling out of bed.I would also recommend private equity, fine art real estate.These are assets in various ways that will hold up to inflation or deflation and that's an important point because we could have either one the stage is set for either one there are certainly forces in place pushing in both directions. If you definitely knew inflation is coming that would be easy you can buy gold,silver land you can leverage it up that's easy.If you definitely knew deflation is coming you would have cash, 10 yr treasury notes and some other assets that are robust to deflation.
But what if I say we are on the knife edge we can tip on either way which is the best way we could describe the system so you would want some of both I call this the barbell approach where you have inflation hedges like gold,silver and land and deflation hedges like 10 yr treasury notes and connecting the 2 ends of the barbell you have cash which gives you a lot of embedded optionality.
I have got gold going to my intermediate target price is $10000 an ounce that's not a number I made up or I pull out of a hat or mention just to get publicity or attract attention its actually its a result of a careful study of the implied non deflationary price of gold in a financial panic if you have a financial crisis worse than 2008 which is what I expect I think you can see that coming based on the scale of system,the concentration of banking assets, the interconnected of the system.
If the next financial crisis is worse than 2008 and if something like that comes along you are going to need a solution your going to need a way to both restore confidence and reliquify the world.We are at the point where the central banks are tapped out.Ill use the federal reserve as an example they took the balance sheet from 800 billion to 4.5 trillion to deal with the last crisis but they have not normalized it they haven't gone back down to 800 billion or even a trillion
One risk is that if you have another crisis tomorrow what are you going to do your going to double again to 8 trillion to 12 trillion wheres the confidence boundary legally you could and a lot of modern monetary theorist or MMT people think that's what you would do print the money and take the balance sheet to 8 trillion to 12 trillion I don't think that will work you cant specify the exact number but you have a confidence boundary where people will just say I am out of here this system is crazy I don't believe in keep printing I want to dump my dollars and then into some of these other hard assets that's a way in which the price would be in spike.
