Harry Browne Gives Up -- A Little
By Boris Kupershmidt
[email protected]
Special to The Libertarian Enterprise
The September 8, 1997 issue of Forbes Magazine carries an
article "Requiem for a Market Letter".
Written by Mark Hulbert, who for many years has kept tabs on the
investment letters industry, it bemoans the recent death of so many of
them, and goes on to analyze one letter in particular that has been
discontinued, Harry Browne's Special Reports, continuosly published
since 1974.
Perhaps it is understandable why Hulbert is troubled, for if more of
these letters were to experience the same catastrophic drop in their
subscriber base and close up shop, there would be little left for him
to report on and he would have to find something else to do. But I
found it curious that while he concedes that, yes, Browne's portfolio
produced 3% real return against stocks' 9% over the last decade, he
goes on to blabber about "comparative volatility" and makes no mention
of the real issue here. Browne's subscribers, following his advice,
will not only have suffered huge losses -- compared to the simplest
option of leaving their money in an index fund and enjoying 23 years
of worry-free life -- but have actually been cheated by having
bought a worthless product at the considerable expense of around $300
per year.
This is obviously only my opinion; here is what it is based upon.
All of Browne's books are very fat, and each one of them is a
swindle. The contents of each could be described simply and
succinctly in a few pages. But this conclusion can only be reached
upon plowing through each whole volume, be it his disquisition on how
to find "freedom in an unfree world" or how to take advantage of Swiss
banks.
Browne's single investment idea consists of the so-called
"Permanent Portfolio", divided into four equal parts between stocks,
bonds, gold, and cash, the basic idea being that no matter what kind
of trouble is prevalent at the moment, at least one of the four
components will benefit, even if others are going to the dogs. The
wisdom of this idea could be debated, but the point is that he has
published it in at least one of his books, and there is no further
reason to continue extracting considerable subscription fees for
repeating endless variations on the theme.
I could make a more substantial criticism of Browne's investment
philosophy -- if that is the proper word -- by remarking that it takes
a very special kind of moron to continue following a wholly defensive
financial strategy while in the world outside unimaginable productive
capacities are continuously coming on line, due not only to over 50
years without a major wars (and a concomitant destruction of human
beings and property), but more specifically to the cumulative power of
ever-increasing and accelerating human ingenuity, unleashed by the
growing number of people all over the world able to contribute the
inventive powers of their brains to the creation of new products
instead of simply being killed off or forced to live from hand to
mouth.
It's not unlikely that Browne's subscribers are a very healthy
lot, otherwise it would have taken them much less than 23 years to
wise up to the trash they were getting from their guru. Indeed, even
if one lives in an underground bunker and has no other relations with
the outside world, an occasional visit to a doctor's office would show
no equipment older than a few years, and that is a fairly good
reflection on the speed of change and innovation in the world,
including the worlds of economics and finance.
Boris Kupershmidt, a former citizen of the former Soviet Union, is a
full time mathematical wizard. His latest book is being published (if
all goes smoothly) by the American Mathematical Society.