Quote:
Originally Posted by tabs
So what are the "animal spirits" up to these days? It is simple really, we have entered into one of the largest speculative bubble of all time as people are frantically speculating so that they can get "rich" in an effort to outrun the the economic abyss that awaits them. They can feel the fear in their guts and are scared shyte less as they run for what they think is a life boat. But there is no life boat, reality has to be addressed sooner or later. After every frantic means is exhausted with no place to run the stark reality finally sets in. The Global Economy of Scale is dead.
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Agree. Although Tabs, you will probably disagree with my agreeing because you refuse to agree or have anyone agree with you. 100% of the time with my comments. Oh well.
Having said that, I think a key strategy would be to look at past problems (not necessarily in the United States) and see what areas and which asset classes performed well. As I mentioned in the previous post, real estate is good, but ultimately has it's limitations. In communist countries, all the real estate was taken away overnight. Without courts and laws to protect landowners, that system will break down.
Is gold a good asset class to hold? It's relatively rare, is a storehouse of value, and for the past 2,000+ years has indeed been a reliable asset to hold in times of trouble. It's historical track record is unparalleled.
Cash? Not likely a good asset to hold. The government is making more of it every day, inflation is already rampant (in asset classes, not imports kept cheap by foreign labor), and nominal interest rates are near zero. Holding cash right now seems to be the worst decision.
Stocks? Many stocks have moved far away from their historical price levels based upon the underlying fundamentals (namely the profit per share of the corporation). Tesla is the poster child for this of course. Over time, the markets will "revert to the mean" and either the profits will go WAY up, or the stock will go WAY down. Tesla shareholders right now are obviously thinking that future profits will be WAY up instead of the other way around. Statistically, this is not likely to happen, as the profits would have to increase beyond levels never seen before in the history of the stock market in order to justify these levels. Possible, but not likely.
Bonds? Jeepers, bonds are like Pokemon Go - no one ever talks about them any more. With rates at zero, and not likely to go negative, the outlook for bonds is terrible. Let me capitalize that - TERRIBLE. As rates go up, the face value of existing bonds go down (because one can just buy a higher performing "new" bond rather than a low performing "old" bond - simple math). Short term bonds are less risky than long-term ones, as you can just ride it out. But long term (beyond 3-5 years) are terrible right now. And on top of all of that interest rate risk, US bonds are denominated in US dollars, which is likely to decline in the future. Bottomline, I wouldn't buy any bonds.
Real Estate? Not perfect, but a stable asset class when bought right (as with any asset). Overvalued real estate will not perform well, but decent, good-quality assets that have a reasonable rate of return (7% CAP) should continue to perform well. I would avoid troubled assets like shopping malls and large office buildings should be avoided, unless they are super-cheap.
Classic cars / art, etc? Collectibles, if "blue chip" should hold some value, and one nice thing about them is that good assets are also 'international' assets. I.E. things that Europeans and Asian investors might also like. Classic Porsche cars or race cars (although Chinese buyers are non-existent on these). Good quality art (top level, Picasso, Monet, etc.). Other high-level collectibles with International interest (the stuff Sotheby's would auction). Not the new crappy stuff like new yachts or jets or new watches, or anything new (because they will just keep making more of those). Collectibles whose overall market is indeed limited. I think that is a good measure of safety.
There's more to write, but it's dinner time!
-Wayne