New Profits from the Monetary Crisis, by Harry Browne, New York: William Morrow, 1978, 480 pp., $12.95.
You've got to admire a guy with the effrontery to recycle titles the way Harry Browne does. If I were a betting man I'd wager that the title of his next book will be How to Profit from the Devaluation by Making New Profits during the Monetary Crisis. More power to him that he manages to get away with it.
This little jibe out of the way, this latest offering from Harry Browne is a gutsy change of pace for him. Without actually admitting it, he has broken stride and shifted gears with a flair worthy of another famous Brown, Governor Jerry of California. Rightly or wrongly, the reading public has come to know Harry Browne as the godfather of the Doomsday School of Investing: buy gold, silver, and Swiss francs; get thee a shotgun, and hive off to a cave somewhere. He has given birth to a veritable army of imitators who have spouted more or less the same message, but far more stridently and less entertainingly than Harry ever did. While Harry Browne was always a pacesetter, somewhat unpredictable, and interesting to read, the same cannot be said for the legions who followed in his footsteps. They have allowed ideology to cloud their investment sense, and that, as Dennis Turner pointed out a couple of years ago (REASON, June 1977), is a mistake that is fraught with disastrous consequences.
Now that the doomsday approach to investing has assumed the proportions of a religion, along comes Harry Browne with a new book that will surely jolt his followers with the impact of a bombshell. It is time, says Harry, to soften our position a little bit. Sure, I still believe in Doomsday, but let's not get carried away with it. The effect is somewhat the same as though Ayn Rand were to mount the steps of the New York Stock Exchange and announce to the world: Of course, I still believe in egoism, but…hey listen…maybe a smidgen of altruism isn't so bad after all." While the citizens of Planet Earth would smile and nudge one another in the ribs, her disciples would be outraged. True believers never forgive a leader who breaks ranks with his or her followers.
The difference between Harry Browne and the rest of the gold-bug/hard-money/shotgun school of investing is a sense of proportion. Browne has it and the ideologues don't. He knows when it's time to call in his bets and look for another game in town. What he is saying in this book is essentially: yes, the monetary and fiscal policies of the United States government are ruinous; yes, they have led to a monetary crisis and could bring on a total collapse; but maybe, just maybe, it won't happen, and you'd better be prepared for that possibility. Harry Browne has tempered his familiar doomsday scenario with a generous dash of guarded optimism.
In his new book Browne talks about the importance of hedging, just in case you happen to guess wrong about the future. He recommends setting up two portfolios. One he calls the permanent portfolio, which consists of his usual mix of metal and hard currency. The other is a flexible or variable portfolio of metal, currencies, and warrants or securities designed to take advantage of the countervailing cycles in the gold and securities markets. To the best of my knowledge, this is a first for Harry Browne: the acknowledgment that the American stock market has a place in our investment plans for the future. While I disagree with Browne's advice in several key areas—primarily, the need for a permanent portfolio in the first place, and his emphasis on warrants as a hedge—his overall message is a welcome one. In this book he takes a far more balanced view of the world we live in than he has in any of his previous investment books.
It is doubtful that Harry Browne's followers are going to be reconverted to his new soft-line prognosis for our financial ailments, and those already attuned to the vagaries of the securities markets can find more sophisticated stock market advice elsewhere. But Harry Browne's new book is well worth reading on several counts. For one thing, he is one of the more readable financial writers publishing anywhere. His reasoning process contains enough little surprises to make him an interesting and entertaining tour guide through the complicated jungle of the financial world.
On a different level altogether, it is always exciting to watch an old pro at work. Harry Browne has been writing investment books for nearly a decade. This makes him something of a veteran on the scene. Like all true professionals in any field, he is not afraid to take chances. He has been unequivocal in the past in formulating his projections, and now that the crystal ball has begun to cloud over a bit, he is not afraid to break his stride and stake out new territory for himself. This business of making predictions about the future is treacherous, at best. When other people's money is involved it becomes all the more complicated. Harry Browne the veteran has demonstrated that he is still nimble on his feet. He can get up on his toes and dance and jab, then move in close and slug it out when he has to.
Finally, on a personal level, it is good to see a former doomsday crier adopt a more optimistic attitude—even if it is a guarded optimism at that. If Harry Browne has something good to say about the future, perhaps the world will not end tomorrow morning after all.
Jerome Tuccille's latest book is The Optimist's Guide to Making Money in the 1980's (Morrow).