In principle the PP is just an asset allocation plan, but it's hard to imagine anything better than this.
Yes. Every other allocation I've seen reflects a preconceived notion about how the future will unfold. The most common preconceived notion is that the stock market gains of 20th century USA can be extrapolated out indefinitely. I believe this to be an instance of recency bias. Sustained prosperity like that is extremely rare in human history.
The only thing I haven't understood yet: Where are the commodities and where is the real estate. Why aren't they in there?
Essentially, gold does what they do, but better for PP purposes. Gold's role is to protect against (hyper)inflation, and under inflation you want hard assets with a tangible value that isn't directly linked to the stock or bond markets.
Part of a commodity's value comes from its tangible hard asset nature, and part of it comes from its industrial utility as an input to production. An ideal commodity for the PP derives all its value from hard asset-ness and none from industrial utility, because industrial use means that a) the commodity's price is correlated to relevant stock prices, and b) producers are poised to ramp up production when prices rise, and consumers will make substitutions when prices fall, which dampens price movements.
Gold has practically no industrial use (all I can think of is jewelry, dental fillings, and wiring for satellites). Other commodities have substantial industrial uses. As akratic said Browne didn't consider real estate an "investment," it's either a consumption item or a capital expenditure in a business. Also real estate prices are tied to interest rates.
Browne's book "Inflation-Proofing Your Investments" ( http://www.amazon.com/Inflation-Proofing-Your-Investments-Permanent-Depression/dp/044690970X/ref=sr_1_1?ie=UTF8&qid=1312485354&sr=8-1 ) goes into this issue in some depth, including an analysis of why gold is superior to specific alternatives including silver and real estate.
It seems to me that those could be relevant in the notorious 5th case. The PP was construed in a world of US dominance and rising industrialism. I don't think we can count on either for the next 100 years.
Browne is careful about defining his terminology precisely. The PP is defined as an investment portfolio for growing monetary wealth conservatively. It takes a broader historical view than any other investing approach I know of, so there's a natural tendency to feature creep ( http://en.wikipedia.org/wiki/Feature_creep ) into the realm of doomsday preparedness. But the PP is only about investing money now to have more money later.
To the extent that a decline manifests itself as inflation, deflation, and recession, the PP should work. If money becomes useless the PP won't help you, but neither will index funds, the Dogs of the Dow, or any other security-based investment.
the reserve currency status of the USD is key to the cash position... Or maybe that only 1 economy is used.
There is some confusion on this point. Based on the references above, I believe that the important property is that all the securities (stocks, bonds, and cash) be bought from the same economy. The whole premise of the PP is that "the economy" is in one of four states. For it to function properly, the securities need to move relative to "the economy," for an identical definition of "the economy."
Most of Browne's writing was targeted at US investors, so "the economy" is implicitly defined as USA. However his advice for foreign investors was to define "the economy" as their home country, and buy domestic stocks/bonds/cash denominated in their native currency. IIRC this was asked and answered on the radio show. E.g. a German investor would use a German stock index, German bonds, and a cash account denominated in DM.
I've looked into defining "the economy" as the world and using global stocks/bonds/cash. My conclusion was that a global PP worked essentially the same as a domestic one, but with higher expenses and more complex tax accounting.
