Comments on: Asset class choices – Getting the big picture correct http://www.1stMillionAt33.com/2009/06/asset-class-choices-getting-the-big-picture-correct/ A site to share my tips, tools, and humble thoughts on the journey to wealth Tue, 27 Jul 2010 22:24:37 -0700 http://wordpress.org/?v=2.8.5 hourly 1 By: occdude http://www.1stMillionAt33.com/2009/06/asset-class-choices-getting-the-big-picture-correct/comment-page-1/#comment-5322 occdude Mon, 06 Jul 2009 05:38:55 +0000 http://www.1stMillionAt33.com/2009/06/asset-class-choices-getting-the-big-picture-correct/#comment-5322 Provocative post, good work. I would like to add several insights. I agree gold is money, but in deflation the demand for dollars is greater than gold, due to peoples rush to safety of cash and the need to liquidate investments. Since the dollar is the most indebted currency on the planet, it stands to reason that in a period of deleveraging the demand for dollars will rise as long as the supply isn't higher than the demand. Now, the fed will get the hang of this inflation thing (printing money but in typical government fashion, wont do it as quick as the market can efficiently liquidat. They are currently going to be hamstrung by the bond market vigilantes who if they even smell inflation, will jack up interest rates to the moon and beyond. So unless you have a period of EXTREME financial stress like what was developing in Mar. where the dollar and gold were going up in tandem, safe dollar deposits are the way to go in the short to intermediate term. An interesting point is that if you want to hedge against a potential currency crisis AND deflation to an extent, Yuan currency ETFs are a good way to go. The Yuan is undervalued against the dollar, maintains a rough dollar peg and the ETF from wisdom tree pays a 1.9 percent dividend. When you examine the Yuan currency ETFs what is surprising is the lack of volatility, it seems to be rock steady with everything either going up or going down while the currency acts like a baseline, this by the way is the way a currency should act(as a stable store of value). As far as asset allocation goes. In normal times where there isn't going to be a period of extreme liquidation, I believe your asset allocation should reflect your actual use of monies, and your goals should be to preserve purchasing power. How this could be accomplished is by investing a portion of your savings that actually reflects your spending on real estate for example. If you spend 20 percent of your income on shelter, it stands to reason you would want to invest in REITS and reinvest the dividends. The result should be that at some time when you want to increase your standard of living shelter wise, you would be appropriately hedged and with reinvested dividends should be able to get BETTER shelter. The same could be said about other asset classes like food, transportation, energy, healthcare invest in things you actually need yourself. The old adage "I buy so much of this (whatever) I should buy stock in the company" should be a good guidline to both asset allocation and investment sectors. This period however, you should pay down debt, invest in personal skills to increase your ability to earn revenue and keep your job, store cash safely and if you're specualtive, to get short. Provocative post, good work. I would like to add several insights. I agree gold is money, but in deflation the demand for dollars is greater than gold, due to peoples rush to safety of cash and the need to liquidate investments. Since the dollar is the most indebted currency on the planet, it stands to reason that in a period of deleveraging the demand for dollars will rise as long as the supply isn’t higher than the demand. Now, the fed will get the hang of this inflation thing (printing money but in typical government fashion, wont do it as quick as the market can efficiently liquidat. They are currently going to be hamstrung by the bond market vigilantes who if they even smell inflation, will jack up interest rates to the moon and beyond. So unless you have a period of EXTREME financial stress like what was developing in Mar. where the dollar and gold were going up in tandem, safe dollar deposits are the way to go in the short to intermediate term. An interesting point is that if you want to hedge against a potential currency crisis AND deflation to an extent, Yuan currency ETFs are a good way to go. The Yuan is undervalued against the dollar, maintains a rough dollar peg and the ETF from wisdom tree pays a 1.9 percent dividend. When you examine the Yuan currency ETFs what is surprising is the lack of volatility, it seems to be rock steady with everything either going up or going down while the currency acts like a baseline, this by the way is the way a currency should act(as a stable store of value).

As far as asset allocation goes. In normal times where there isn’t going to be a period of extreme liquidation, I believe your asset allocation should reflect your actual use of monies, and your goals should be to preserve purchasing power. How this could be accomplished is by investing a portion of your savings that actually reflects your spending on real estate for example. If you spend 20 percent of your income on shelter, it stands to reason you would want to invest in REITS and reinvest the dividends. The result should be that at some time when you want to increase your standard of living shelter wise, you would be appropriately hedged and with reinvested dividends should be able to get BETTER shelter. The same could be said about other asset classes like food, transportation, energy, healthcare invest in things you actually need yourself. The old adage “I buy so much of this (whatever) I should buy stock in the company” should be a good guidline to both asset allocation and investment sectors.

This period however, you should pay down debt, invest in personal skills to increase your ability to earn revenue and keep your job, store cash safely and if you’re specualtive, to get short.

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