Given the overwhelming correlation from last Fall through March of this year, I have to believe there's more than the one (TLT)
Hi AIMster.
I didn't find TLT per se rather Harry Browne identified that LONG DATED Gov Bonds, gold, stocks and cash collectively worked in a manner such that when one was down significantly one or more of the others would tend to counter-balance it.
In Iceland over the financial crisis Long dated bonds were the counterbalance to stock declines for a relatively short period of time - that was until it was recognised that Iceland was going broke and Gov Bonds were not the place to be. Thereafter gold took over, and sky rocketed in local currency terms (but remained level in international terms), rising 250% as the currency crashed and had to be IMF bailed-out.
On a global basis the regularity of Sovereign defaults and debt restructuring over time is horrendous reading http://mitpress.mit.edu/books/chapters/0262195534chapm1.pdf there are numerous other examples - cases of governments nationalising at extreme levels, the US has seized gold in the past, the UK has been bankrupted etc. etc.
A set of three 80/20 stock/cash AIM's against stocks, bonds and gold, with some held in foreign currency (perhaps gold in USD, bonds in Euro, Stocks in domestic, cash into a surplus countries deposit) seems to be pretty protective. I think the US is not immune to events that have occurred in other countries and when those events do occur serious levels of personal wealth can be wiped out almost overnight.
For an Icelander who held perhaps gold and cash in a foreign (to them) currency, despite 90% stock price declines 50% or more of their wealth would have been protected. I'm not so sure however that the recommended Permanent Portfolio action of rebalancing back to 25% equal allocations, resulting in a large sell against gold and large buy of domestic stocks, might be the wisest action at the present time, but at least a PP investor would have the funds with which to make that decision.
Sh*t happens. Usually when you're least prepared. If as an example hyperinflation kicked off as it has done in the past in many countries, gold and foreign currency would be about the only saviours.
A three set AIM is both simple whilst providing modest rewards and significant protection. I for one don't want to get to 60 only to have some domestic crisis wipe out a lifetimes worth of saving/investing.
From what I have seen, correlations wax and wane. I suspect Harry Browne proposed the choice and blend of the four he did for good reason.
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