Harry Browne’s Rules of Financial Safety (1999) • Hacker News Board

Re: Harry Browne’s Rules of Financial Safety (1999)

#221

Post by dave333 » Mon, Sep 04, 2023, 4:33 AM UTC

ww520 wrote: post #152

roenxi wrote: post #14

Rule 11 deserves a rethink. There is an official policy that cash will lose some % of its value each year! Holding 25% of your wealth in cash is planning to throwing away years of life. For this sort of dead-basic investment advice, there is no point being ready for situations where a cash position is advantageous. People are much more likely to panic, do something stupid or get ground down by inflation. It is better…

"Cash is trash." That's a saying on Wall Street urging people to put cash in equities. When viewing cash in isolation, it's tempting to conclude that holding cash is bad due to inflation. However, cash needs to be seen in contrasting with other investment vehicles. It's true that cash is losing 7% annually due to inflation. But at a time when stocks are losing 50% and bonds are losing 20% due to raising rate, losing…

Cash is convertible trash, except during deflation when it is King.

Re: Harry Browne’s Rules of Financial Safety (1999)

#222

Post by lottin » Mon, Sep 04, 2023, 4:34 AM UTC

OrvalWintermute wrote: post #213

throw0101a wrote: post #133

Earlier quoted context omitted.

Gold is an unproductive asset, that does not do anything useful against inflation, and when used to back currency (e.g., Gold Standard) does not help with stability (and may actually cause instability): * https://www.theatlantic.com/business/archive/2012/08/why-the... * https://archive.ph/FWKcL

Gold is great as a hedge for many things, and that is exactly how I use it. However, I am not suggesting all people have to have a physical supply. There are 3 ways at least that it is regularly used as an investment Physical Gold Gold via a fund e.g. SPDR (GLD) https://www.spdrgoldshares.com/ Gold mining stocks e.g. SPDR (GLDM) https://www.spdrgoldshares.com/ Gold does work as a hedge against sustained inflation, bu…

A hedge is a financial instrument that is negatively correlated with an exposure. A hedge position is not supposed to have a positive return, it's supposed to offset another position, so that the combined return of both positions is zero, or close to zero. You're using financial jargon in an attempt to sound clever, but you only sound like somebody who doesn't know what they're talking about.

Re: Harry Browne’s Rules of Financial Safety (1999)

#223

Post by chii » Mon, Sep 04, 2023, 5:57 AM UTC

r3trohack3r wrote: post #203

prepend wrote: post #76

What’s the minimum wealth level where these are applicable? > Rule 13: Keep some assets outside the country in which you live. This is very impractical unless you have even money where 5% of your wealth international makes up for the cost to maintain. It could easily cost$5-10k in travel expenses to travel somewhere and establish accounts, plus the costs to account for and audit and maintain.

IMO it’s also ineffective. You can use it to derisk those assets, but in the U.S. there have been cases of a court demanding people hand over non-domestic assets and holding them in contempt until they do. If the U.S. government decides your assets are theirs, I don’t think the location of the account is sufficient protection. You better hope you aren’t on U.S. soil, or any soil that extradites, when they ask you for…

> If the U.S. government decides your assets are theirs

which happens if you evade taxes, or commit fraud. In general, the US doesn't do unjustified seizures

Re: Harry Browne’s Rules of Financial Safety (1999)

#224

Post by pallas_athena » Mon, Sep 04, 2023, 7:34 AM UTC

Related (as in: investment advice for those who don't want to think too much about it)

https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_...

https://www.bogleheads.org/wiki/Lazy_portfolios

https://www.bogleheads.org/wiki/Simple_non-US_portfolios

https://www.reddit.com/r/Bogleheads/

Re: Harry Browne’s Rules of Financial Safety (1999)

#225

Post by capableweb » Mon, Sep 04, 2023, 8:44 AM UTC

prepend wrote: post #174

capableweb wrote: post #82

Earlier quoted context omitted.

> It could easily cost$5-10k in travel expenses to travel somewhere and establish accounts, plus the costs to account for and audit and maintain. Maybe don't travel to Dubai (or similarly most-expensive-countries-in-the-world) then and establish accounts in a country that doesn't wildly out-rich you. Also, you don't have to stay longer than just a few days most likely. Besides, many places to allow internationals to…

> Besides, many places to allow internationals to signup for accounts also allow you to do a video call with account manager rather than going there in person. I’m not so sure about that. No reputable banks where you’d want to have your other country account. And I don’t think the author considers “first cyber bank of Barbados” to fit this rule. And it’s certainly a horrible idea. > Maybe don’t travel to Dubai Please…

Sure, Seattle>Tokyo 1st October to 5th, $1000 flight ticket, hotel for 50-100/night, and you have like 3500 before you reach 5k.

Re: Harry Browne’s Rules of Financial Safety (1999)

#226

Post by roenxi » Mon, Sep 04, 2023, 8:47 AM UTC

jamesaurichs wrote: post #182

roenxi wrote: post #39

Earlier quoted context omitted.

They could hold gold. Similar risk profile, much more likely to hold value long term and be better to hand on to the kids if there is some left over. I'm not saying cash is so terrible that a nervous, confused and delicate grandma can't just eat the losses for security. I mean, sure. If you think you're probably going to lose money anyway then 10%! But a 25% allocation by default is just giving money to wealthy men w…

Note that this OP probably has some agenda against dollar, being that in another comment before https://news.ycombinator.com/item?id=37046128#37047171 they said "Yeah, for example China's position of overwhelming strength vs. weak little USoA meant that China's wages have risen by an order of magnitude and their technology catapulted into the present century, building them in to the world's largest economy." Just a s…

1. That post had nothing to do with the US dollar, and you're quoting it without context which is a mistake. It is a heavily sarcastic reply to someone saying that "Every trading relationship will favour the stronger side" - which is obviously a silly thing to focus on. The US-China relationship has been a series of massive wins for China. It is a better view to say "well executed free trade with a stronger partner has huge, society reshaping upsides for the weaker one. Trade should be encouraged".

In fact, I live in Australia. So when that poster said "Australia in particular has been subject to unprecedented economic coercion and manipulation by China. It's not pretty." they were completely wrong. Australia suffers far more from our own policies than from anything China could do to us short of military action.

2. I just made a top-level comment saying "don't buy the dollar". You don't need to analyse my comment history to figure out where I stand on the dollar. Or you could just ask - I think it is a a dog of an asset and managed by incompetent bureaucrats who do a lot of harm to their own society.

Re: Harry Browne’s Rules of Financial Safety (1999)

#227

Post by hammock » Mon, Sep 04, 2023, 1:33 PM UTC

TacticalCoder wrote: post #198

hammock wrote: post #158

Earlier quoted context omitted.

Why get hung up on the percentages? Isn’t that bike shedding? The principle is what matters. Take the wealth you can’t afford to lose, and put it in a balanced portfolio that seeks to match the performance of the market so that you don’t fall behind your peers. So look at your peers (your socioeconomic class) and match the average portfolio. For a tech wagie, a 60/40 for the older folks or 80/20 for the younger folks…

> So look at your peers (your socioeconomic class) and match the average portfolio. > The point is simply to keep up with your peers’ returns on their wealth that they also can’t afford to lose Wait... Why the heck would I give care about what my "peers" (whatever that is) are making as returns? I don't care about keeping up with the Jones. Does copying my peer's average portfolio somehow protect mine? As in: is that…

Because at the end of the day, for humans (and any lifeform competing, in the biology sense, with others of their sexually-reproductive species), relative advantage trumps absolute advantage

Re: Harry Browne’s Rules of Financial Safety (1999)

#228

Post by OrvalWintermute » Mon, Sep 04, 2023, 3:22 PM UTC

lottin wrote: post #222

OrvalWintermute wrote: post #213

Earlier quoted context omitted.

Gold is great as a hedge for many things, and that is exactly how I use it. However, I am not suggesting all people have to have a physical supply. There are 3 ways at least that it is regularly used as an investment Physical Gold Gold via a fund e.g. SPDR (GLD) https://www.spdrgoldshares.com/ Gold mining stocks e.g. SPDR (GLDM) https://www.spdrgoldshares.com/ Gold does work as a hedge against sustained inflation, bu…

A hedge is a financial instrument that is negatively correlated with an exposure. A hedge position is not supposed to have a positive return, it's supposed to offset another position, so that the combined return of both positions is zero, or close to zero. You're using financial jargon in an attempt to sound clever, but you only sound like somebody who doesn't know what they're talking about.

> You're using financial jargon in an attempt to sound clever, but you only sound like somebody who doesn't know what they're talking about.

Stop with the snark, you're violating the rules.

> Hedge defined "To hedge, in finance, is to take an offsetting position in an asset or investment that reduces the price risk of an existing position. A hedge is therefore a trade that is made with the purpose of reducing the risk of adverse price movements in another asset. Normally, a hedge consists of taking the opposite position in a related security or in a derivative security based on the asset to be hedged."

https://www.investopedia.com/terms/h/hedge.asp

> "What Are the Advantages of Buying Gold Over Treasuries? Gold is popular among investors because it can be used as a hedge against currency devaluation, inflation, or deflation. It’s also liked for its ability to provide a safe haven during times of economic uncertainty. When it comes to gold and taxes, depending on your income level, Treasury investments are typically more favorable tax-wise."

https://www.investopedia.com/articles/investing/092514/bette...

I have hedged my heavy US bond & US Treasury & US stock positions & US dollar positions with another asset class.

My hedge is producing outsized returns is the anecdotal observation.

Re: Harry Browne’s Rules of Financial Safety (1999)

#229

Post by anonporridge » Mon, Sep 04, 2023, 4:04 PM UTC

jandrewrogers wrote: post #214

anonporridge wrote: post #204

Earlier quoted context omitted.

This is why the first order move when "rebalancing" is to just adjust your allocations of new investment money from your post tax income. e.g. if your stocks and bonds are doing very well and have inflated beyond their allocation, stop buying them and divert all of your savings to cash and gold/bitcoin.

Yes, and also you can sometimes select tax lots that minimize or completely eliminate the net tax exposure. This does have practical limits though e.g. if the portfolio greatly exceeds income or all of your tax lots of consequence are deep into positive territory.

Both very good problems to have.

Re: Harry Browne’s Rules of Financial Safety (1999)

#230

Post by jonhohle » Mon, Sep 04, 2023, 4:14 PM UTC

throw0101a wrote: post #134

jonhohle wrote: post #75

Earlier quoted context omitted.

Isn’t that the point, though? It’s a hedge against inflation, a low risk, static asset to keep in place of cash. In 1970 a Carolla would have cost about 40oz of gold and today it would cost about 20oz. A barrel of crude was ⅒oz, today 1/20th oz.

> It’s a hedge against inflation, a low risk, static asset to keep in place of cash. It is not a good hedge against inflation: * https://www.nber.org/papers/w18706 * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789 From Roy Jastram's The Golden Constant: The English and American Experience 1560 to 1976 : > Andre Sharon, head of the international research department at Drexel Burnham, Inc., notes, “the valu…

I listed two easily found examples of gold’s buying power increasing from 1970. It will and has always maintained value better than fiat. It’s never been about cyclical inflation, but about long term devaluing of floating currencies. I wouldn’t expect gold to be a hedge against currency that was pinned to the value gold.

Weimar Deutschmarks, Venezuelan Bolivar, Mexican Pesos, Hungary, Zimbabwe, Yugoslavia, etc. etc. are a few examples in the last hundred years where it would have been better to hold gold than cash.

Are productive investments going to be more profitable than gold? Absolutely. Gold is not a productive asset and will not produce anything. That’s not what it’s for. It’s specifically for not investing over long periods where a fiat cash position would lose about ⅓ of its buying power per decade (in terms of current US Federal Reserve Notes).

Look at a chart of gold from 1970 to today and add a trend line from just the lows[0]. Even if you would have bought at the peak in 1980, the buying power of your gold would have been effectively unchanged (the dollar value would have tripled). At any other time, gold has handily beat cash.

Any financial consultant is absolutely going to steer you away from gold because it can’t make them recurring revenue. It’s always going to do worse than the stock market over the long term. That’s not what gold is for. It’s an alternative to a long term cash position.

I’m not saying put all money into gold, but having 1-10% of assets in physical gold is not any worse than most people’s much higher allocation in bonds.

0 - https://www.macrotrends.net/1333/historical-gold-prices-100-...