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Jul 3, 2012
You can't take one year of data as proof of anything. I'm not saying Scott Adams' portfolio is good. And Harry Browne's portfolio was introduced 15 years ago as a safe portfolio that does good in a financial crisis - it does good enough now, but it will completely miss out on great opportunities when the market picks up.
Jun 30, 2012
Hiring Dogbert as your financial advisor would definitely be suicide, but I wouldn't recommend Scott Adams' "World's Simplest Portfolio" either:


I've been following Harry Browne's Permanent Portfolio (which has 40 years of solid 10% return history behind it), and I'm pretty happy with it. The late Mr. Browne was my advisor, and it cost me nothing.
Jun 28, 2012
It's pointless to argue about the best place to invest it (given that we all know Dogbert will invest it in himself).....

@R3sistance - like a Ponzi scheme, that only works while he keeps investing more, and if the growth exceeds Dogbert's margin. As soon as the inflow of money stops, the whole lot will disappear faster than a bowl of M&M's at a fat camp.
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Jun 28, 2012

I disagree that gold is in a bubble. After all, the percentage of savings that is in gold is still fairly small. A bubble usually implies that the market is quickly reaching a point of saturation.
Jun 28, 2012

@wofly4661: Absolutely true, but it isn't really a function of intelligence. You don't need a lot of intelligence to know that the growth trends of the internet bubble were unsustainable. They were virtually exponential. Actually thinking that they were going to continue for any length of time would be idiocy.

Yet it isn't the belief that they would continue in the long term that brought in the investors.

It was the belief that they would continue until tomorrow that brought in the investors, and - especially in the case of professional investors - the belief that they would be able to tell when this was no longer the case.

Many of these people aren't unintelligent. The trouble is that they *know* they're smart, and this leads to hubris, and the belief that they're going to be able to outsmart the market. Couple hubris with greed - which bubbles invariably create - and suddenly you have a very powerful combination to overpower intelligence and common sense. Even when you know the bubble is going to burst, it's like a one-armed-bandit: Just...one...more...play. If you bought 1000 shares at a dollar each, and they go up to $5 each in short order, the *smart* thing to do is to sell and say "Yay, I made a cool four grand." However, the proud and greedy know that, if they sell at $5, and it rises to $15 before crashing to ten cents, they'll be thinking more about the ten grand that they *lost* by selling too early rather than the four grand they made by playing it safe.

When a bubble reaches a certain point that future growth is inferred on the basis only of past growth, it immediately starts to become overvalued. People bought gold because it was a good *safe* place to keep your money during times of economic instability. That's fine. Smart, even. But a lot of people started doing that, which brought up the value of gold. That's still fine...until you start getting people buying *because* of the rising value, which inflates the value, bringing in more people who want in on the party. They're buying not because it's safe, but because they expect the value to grow. When this proves to no longer be true - and at some point, its growth rate must decline - the bottom will completely fall out of the value.
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