Gyroscopic Investing

Stocks take advantage of prosperity. They tend to do poorly during periods of inflation, deflation, and tight money, but over time those periods don’t undo the gains that stocks achieve during periods of prosperity.

Bonds also take advantage of prosperity. In addition, they profit when interest rates collapse during a deflation. You should expect bonds to do poorly during times of inflation and tight money.

Gold not only does well during times of intense inflation, it does very well. In the 1970s, gold rose twenty times over as the inflation rate soared to its peak of 15% in 1980. Gold generally does poorly during times of prosperity, tight money, and deflation.

Cash is most profitable during a period of tight money. Not only is it a liquid asset that can give you purchasing power when your income and investments might be ailing, but the rise in interest rates increases the return on your dollars. Cash also becomes more valuable during a deflation as prices fall. Cash is essentially neutral during a time of prosperity, and it is a loser during times of inflation.

whatchamacallit wrote: ↑Mon May 02, 2022 9:38 pm I think so too.

I found this quote from review of book:

https://taylorpearson.me/bookreview/fai ... investing/

Stocks take advantage of prosperity. They tend to do poorly during periods of inflation, deflation, and tight money, but over time those periods don’t undo the gains that stocks achieve during periods of prosperity.

Bonds also take advantage of prosperity. In addition, they profit when interest rates collapse during a deflation. You should expect bonds to do poorly during times of inflation and tight money.

Gold not only does well during times of intense inflation, it does very well. In the 1970s, gold rose twenty times over as the inflation rate soared to its peak of 15% in 1980. Gold generally does poorly during times of prosperity, tight money, and deflation.

Cash is most profitable during a period of tight money. Not only is it a liquid asset that can give you purchasing power when your income and investments might be ailing, but the rise in interest rates increases the return on your dollars. Cash also becomes more valuable during a deflation as prices fall. Cash is essentially neutral during a time of prosperity, and it is a loser during times of inflation.

dockinGA wrote: ↑Tue May 03, 2022 5:30 am

whatchamacallit wrote: ↑Mon May 02, 2022 9:38 pm I think so too.

I found this quote from review of book:

https://taylorpearson.me/bookreview/fai ... investing/

Stocks take advantage of prosperity. They tend to do poorly during periods of inflation, deflation, and tight money, but over time those periods don’t undo the gains that stocks achieve during periods of prosperity.

Bonds also take advantage of prosperity. In addition, they profit when interest rates collapse during a deflation. You should expect bonds to do poorly during times of inflation and tight money.

Gold not only does well during times of intense inflation, it does very well. In the 1970s, gold rose twenty times over as the inflation rate soared to its peak of 15% in 1980. Gold generally does poorly during times of prosperity, tight money, and deflation.

Cash is most profitable during a period of tight money. Not only is it a liquid asset that can give you purchasing power when your income and investments might be ailing, but the rise in interest rates increases the return on your dollars. Cash also becomes more valuable during a deflation as prices fall. Cash is essentially neutral during a time of prosperity, and it is a loser during times of inflation.

I think you're both on the right track, but my only concern is that Cash is losing out to inflation right now. With rates rising and hopefully peaking inflation, maybe that's about to change. Of course, maintaining nominal value is better than losing nominal value like all other assets are doing right now, even if maintaining nominal value means that it's losing real value.

This certainly appears to be the bursting of the Everything Bubble, and I'm kinda anxious to see how things shake out.

stpeter wrote: ↑Tue May 03, 2022 10:42 am

dockinGA wrote: ↑Tue May 03, 2022 5:30 am

whatchamacallit wrote: ↑Mon May 02, 2022 9:38 pm I think so too.

I found this quote from review of book:

https://taylorpearson.me/bookreview/fai ... investing/

Stocks take advantage of prosperity. They tend to do poorly during periods of inflation, deflation, and tight money, but over time those periods don’t undo the gains that stocks achieve during periods of prosperity.

Bonds also take advantage of prosperity. In addition, they profit when interest rates collapse during a deflation. You should expect bonds to do poorly during times of inflation and tight money.

Gold not only does well during times of intense inflation, it does very well. In the 1970s, gold rose twenty times over as the inflation rate soared to its peak of 15% in 1980. Gold generally does poorly during times of prosperity, tight money, and deflation.

Cash is most profitable during a period of tight money. Not only is it a liquid asset that can give you purchasing power when your income and investments might be ailing, but the rise in interest rates increases the return on your dollars. Cash also becomes more valuable during a deflation as prices fall. Cash is essentially neutral during a time of prosperity, and it is a loser during times of inflation.

I think you're both on the right track, but my only concern is that Cash is losing out to inflation right now. With rates rising and hopefully peaking inflation, maybe that's about to change. Of course, maintaining nominal value is better than losing nominal value like all other assets are doing right now, even if maintaining nominal value means that it's losing real value.

This certainly appears to be the bursting of the Everything Bubble, and I'm kinda anxious to see how things shake out.

I take solace in the fact that markets don't always react immediately (IIRC, in March of 2020 it seemed like everything was crashing, but then bonds and gold started to come back before stocks did and it was a great time to rebalance). Patience, grasshopper! :-)

Ugly_Bird wrote: ↑Tue May 03, 2022 1:50 pm

stpeter wrote: ↑Tue May 03, 2022 10:42 am I take solace in the fact that markets don't always react immediately (IIRC, in March of 2020 it seemed like everything was crashing, but then bonds and gold started to come back before stocks did and it was a great time to rebalance). Patience, grasshopper! :-)

Maybe it was good time to rebalance but I didn't reach the bands. :-(

stpeter wrote: ↑Tue May 03, 2022 1:59 pm

Ugly_Bird wrote: ↑Tue May 03, 2022 1:50 pm

stpeter wrote: ↑Tue May 03, 2022 10:42 am I take solace in the fact that markets don't always react immediately (IIRC, in March of 2020 it seemed like everything was crashing, but then bonds and gold started to come back before stocks did and it was a great time to rebalance). Patience, grasshopper! :-)

Maybe it was good time to rebalance but I didn't reach the bands. :-(

Based on a scholarly article that I've mentioned here before ("Opportunistic Rebalancing: A New Paradigm for Wealth Managers" by Gobind Daryanani), I rebalance if any of the four assets goes below 20% or above 30%, in contrast to Harry Browne's 15/35 bands.

Ugly_Bird wrote: ↑Tue May 03, 2022 6:47 pm

stpeter wrote: ↑Tue May 03, 2022 1:59 pm

Ugly_Bird wrote: ↑Tue May 03, 2022 1:50 pm

stpeter wrote: ↑Tue May 03, 2022 10:42 am I take solace in the fact that markets don't always react immediately (IIRC, in March of 2020 it seemed like everything was crashing, but then bonds and gold started to come back before stocks did and it was a great time to rebalance). Patience, grasshopper! :-)

Maybe it was good time to rebalance but I didn't reach the bands. :-(

Based on a scholarly article that I've mentioned here before ("Opportunistic Rebalancing: A New Paradigm for Wealth Managers" by Gobind Daryanani), I rebalance if any of the four assets goes below 20% or above 30%, in contrast to Harry Browne's 15/35 bands.

Someone here on the forum did a thorough analysis and back-testing all possible rebalance bands. Turned out that over long period of time it makes almost no difference.
Edit: found it! Here it is
viewtopic.php?f=1&t=1601&p=19097&hilit=rebalance#top