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34


THE LIBERTARIAN ENTERPRISE
Number 34, December 25, 1997

Harry Browne Gives Up -- A Little

By Boris Kupershmidt
bkupersh@utsi.edu

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.


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