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On the Bookshelf

“The Permanent Portfolio: Harry Browne’s Long-Term Investment Strategy” (John Wiley & Sons, 2012) is an updated guide to implementing one of the better known alternative diversification strategies. The strategy simply calls for holding equal 25% allocations in U.S. large-cap stocks, gold, long-term bonds and cash. It also serves as the basis for the Permanent Portfolio (PRPFX) mutual fund.

Much of the material presented in this book is based on Browne’s “Why the Best-Laid Investment Plans Usually Go Wrong” (William Morrow and Company, 1987). The value authors Craig Rowland and J.M. Lawson provide is updated information on how to implement Browne’s strategy. Rowland and Lawson not only list specific mutual funds and exchange-traded funds, but they also give options for buying physical gold.

“The Permanent Portfolio” is a great book for those unfamiliar with Browne’s writings or who want to learn how to implement his strategy. For those who have previously read Browne’s text, this book gives a refresher, but does not cover much new ground.

A combination of accounting analysis and strategies for operating a long/short portfolio is the premise behind “What’s Behind the Numbers?” (McGraw-Hill, 2012). Co-authors John Del Vecchio and Tom Jacobs combine fundamental analysis with technical analysis and suggestions for market timing in a single text.

It is a lot to cover, though the first half of the book does a good job of focusing on certain strategies for identifying potential accounting problems. This book is nowhere near as comprehensive as Howard Schilit’s “Financial Shenanigans” (McGraw-Hill, 2010), but actionable steps are provided. The authors place a particular focus on revenue manipulation, giving formulas and examples to follow.

The second half of the book makes the argument for going both long and short. We don’t think such strategies are suitable for the average investor. Furthermore, we think readers would have been better served if the authors maintained their focus on fundamentals, showing how the analysis could be used to find quality companies. This book has its strengths, but we simply do not endorse its entire message.


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