Real Assets vs. Financial Assets
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Real Assets vs. Financial Assets
In a Macro Voices podcast just recorded, Jesse Felder pointed out that real assets are at all-time low prices relative to financial assets. I found the original figure published online, it's Exhibit 2:
https://www.cohenandsteers.com/assets/c ... Assets.pdf
The podcast will show up on YouTube shortly for general release to the public.
This kind of figure motivates me to keep buying gold, and not obsess too much about $1250, $1275, $1300, or whatever price it is next week.
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notes from below Exhibit 2 and on the back of the flyer
a) Diversified real assets: equal-weighted blend of global real estate securities (FTSE/EPRA Developed Real Estate Index), commodities (S&P GSCI through July 1998 and Bloomberg Commodity Index thereafter), global natural resource equities (S&P Global Natural Resources Index) and global listed infrastructure (Dow Jones Brookfield Global Infrastructure Index). Stocks: S&P 500 Index. (b) Real assets: U.S. and U.K. housing and timberland, commodities (Thomson Reuters/CoreCommodity-CRB Index) and collectibles (art, cars, diamonds, wine). Financial assets: large-cap stocks (S&P 500
Index) and long-term U.S. Treasury bonds. See back page for index definitions and additional disclosures.
The Bloomberg Commodity Index Total Return is a broadly diversified index that tracks the commodity markets through commodity futures contracts. The Dow Jones Brookfield Global Infrastructure Index is a float-adjusted market-capitalization-weighted index that measures performance of globally domiciled companies that derive more than 70% of their cash flows from infrastructure lines of business. The FTSE EPRA/NAREIT Developed Real Estate Index (net) is an unmanaged market-weighted total-return index which consists of publicly traded equity REITs and listed property companies from developed markets and is net of dividend withholding taxes. The S&P 500 Index is an unmanaged index of 500 large-capitalization stocks that is frequently used as a general measure of U.S. stock market performance. The S&P GSCI is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The S&P Global Natural Resources Index includes the largest publicly traded companies in natural resources and commodities businesses that meet specific investability requirements. The Thomson Reuters/CoreCommodity-CRB Index represents a basket of 19 commodities, including energy, agriculture precious metals and industrial metals.
https://www.cohenandsteers.com/assets/c ... Assets.pdf
The podcast will show up on YouTube shortly for general release to the public.
This kind of figure motivates me to keep buying gold, and not obsess too much about $1250, $1275, $1300, or whatever price it is next week.
--------------------------------------
notes from below Exhibit 2 and on the back of the flyer
a) Diversified real assets: equal-weighted blend of global real estate securities (FTSE/EPRA Developed Real Estate Index), commodities (S&P GSCI through July 1998 and Bloomberg Commodity Index thereafter), global natural resource equities (S&P Global Natural Resources Index) and global listed infrastructure (Dow Jones Brookfield Global Infrastructure Index). Stocks: S&P 500 Index. (b) Real assets: U.S. and U.K. housing and timberland, commodities (Thomson Reuters/CoreCommodity-CRB Index) and collectibles (art, cars, diamonds, wine). Financial assets: large-cap stocks (S&P 500
Index) and long-term U.S. Treasury bonds. See back page for index definitions and additional disclosures.
The Bloomberg Commodity Index Total Return is a broadly diversified index that tracks the commodity markets through commodity futures contracts. The Dow Jones Brookfield Global Infrastructure Index is a float-adjusted market-capitalization-weighted index that measures performance of globally domiciled companies that derive more than 70% of their cash flows from infrastructure lines of business. The FTSE EPRA/NAREIT Developed Real Estate Index (net) is an unmanaged market-weighted total-return index which consists of publicly traded equity REITs and listed property companies from developed markets and is net of dividend withholding taxes. The S&P 500 Index is an unmanaged index of 500 large-capitalization stocks that is frequently used as a general measure of U.S. stock market performance. The S&P GSCI is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The S&P Global Natural Resources Index includes the largest publicly traded companies in natural resources and commodities businesses that meet specific investability requirements. The Thomson Reuters/CoreCommodity-CRB Index represents a basket of 19 commodities, including energy, agriculture precious metals and industrial metals.
Re: Real Assets vs. Financial Assets
This is news?
I don't know about you, but I'm buying gold as dictated by the asset allocations I've chosen. This has the natural effect of buying more when the prices are low, which will put me in a really good position when/if the asset takes off. I assume someday it will given that it's already been up around the 2000 mark, which means yes, prices are low right now. But there's nothing preventing gold from dropping further given the right conditions.
The problem is, and always has been, that the time to buy any asset is exactly when everyone hates it the most, which is the underlying cause of low prices (i.e. most people aren't buying). What people tend to do is buy high priced assets instead (like stocks, now) because everyone loves them. This of course is the exact opposite of what you actually want to do. An asset allocation provides you with the discipline needed to do this right, as it's genuinely difficult to take your hard-earned money and buy something that everyone else is saying you should avoid.
I don't know about you, but I'm buying gold as dictated by the asset allocations I've chosen. This has the natural effect of buying more when the prices are low, which will put me in a really good position when/if the asset takes off. I assume someday it will given that it's already been up around the 2000 mark, which means yes, prices are low right now. But there's nothing preventing gold from dropping further given the right conditions.
The problem is, and always has been, that the time to buy any asset is exactly when everyone hates it the most, which is the underlying cause of low prices (i.e. most people aren't buying). What people tend to do is buy high priced assets instead (like stocks, now) because everyone loves them. This of course is the exact opposite of what you actually want to do. An asset allocation provides you with the discipline needed to do this right, as it's genuinely difficult to take your hard-earned money and buy something that everyone else is saying you should avoid.
Re: Real Assets vs. Financial Assets
That chart in the link was very interesting.
I think the one aberration would be real estate. I know for my market, along with other large coastal cities, prices are inflated beyond pre-great recession levels and the market is still somewhat frenzied for single family homes, where most of the homes affordable to the median household should really just be torn down instead of occupied.
Commodities have been the real loser for quite awhile, especially if you don't consider gold a commodity (which I don't). I'm not sure if this is something that will ever turn around. The thought of it is somewhat scary. Cheap food and gas for the average consumer has been a godsend.
My hybrid is no longer made and is being replaced by a turbocharged gasoline model. People I hear talking about vehicles talk about how many horsepower and how big the vehicle is. Economy is not a discussion I hear at all. Perhaps I'm surrounded by fools, or perhaps oil is just so cheap now that fuel efficiency is not a topic worth discussing to most people. Just an anecdote that leads me to believe oil is way undervalued at the moment.
The market timer in me would like to buy commodities, but he wanted to buy them back when they were 20% higher than current levels, so what does he know?
I think the one aberration would be real estate. I know for my market, along with other large coastal cities, prices are inflated beyond pre-great recession levels and the market is still somewhat frenzied for single family homes, where most of the homes affordable to the median household should really just be torn down instead of occupied.
Commodities have been the real loser for quite awhile, especially if you don't consider gold a commodity (which I don't). I'm not sure if this is something that will ever turn around. The thought of it is somewhat scary. Cheap food and gas for the average consumer has been a godsend.
My hybrid is no longer made and is being replaced by a turbocharged gasoline model. People I hear talking about vehicles talk about how many horsepower and how big the vehicle is. Economy is not a discussion I hear at all. Perhaps I'm surrounded by fools, or perhaps oil is just so cheap now that fuel efficiency is not a topic worth discussing to most people. Just an anecdote that leads me to believe oil is way undervalued at the moment.
The market timer in me would like to buy commodities, but he wanted to buy them back when they were 20% higher than current levels, so what does he know?
Don't agree with me too strongly or I'm going to change my mind
Re: Real Assets vs. Financial Assets
Take real estate out, and the low real asset price anomaly becomes even more pronounced.eufo wrote:I think the one aberration would be real estate. I know for my market, along with other large coastal cities, prices are inflated beyond pre-great recession levels and the market is still somewhat frenzied for single family homes, where most of the homes affordable to the median household should really just be torn down instead of occupied.
I have no concept of when this all changes. I think it will, but is it 5 years or 15 or 50?
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Re: Real Assets vs. Financial Assets
Here, here!sophie wrote:
I don't know about you, but I'm buying gold as dictated by the asset allocations I've chosen.
Yup. Look at all the Boglehead threads asking if 100% stocks is ok. That's definitely a seasonal fruit.The problem is, and always has been, that the time to buy any asset is exactly when everyone hates it the most, which is the underlying cause of low prices (i.e. most people aren't buying). What people tend to do is buy high priced assets instead (like stocks, now) because everyone loves them.
9pm EST Explosions in Iran (Isfahan) and Syria and Iraq. Not yet confirmed.
Re: Real Assets vs. Financial Assets
If only I could go back in time to March of 2009, and ask each and every person who has switched from the PP to the Golden Butterfly what they think of increasing their stock allocations. I'm pretty sure most of the responses will be along the lines of "are you insane???"dualstow wrote:Here, here!sophie wrote:
I don't know about you, but I'm buying gold as dictated by the asset allocations I've chosen.
Yup. Look at all the Boglehead threads asking if 100% stocks is ok. That's definitely a seasonal fruit.The problem is, and always has been, that the time to buy any asset is exactly when everyone hates it the most, which is the underlying cause of low prices (i.e. most people aren't buying). What people tend to do is buy high priced assets instead (like stocks, now) because everyone loves them.
Not to say that the Golden Butterfly isn't a sound portfolio - it's great and a marvelous contribution by Tyler, and I might well switch to it myself when/if I get full control of my main retirement accounts. It's just that I think a lot of its recent popularity is due to what dualstow has just-now famously dubbed a "seasonal fruit".
Re: Real Assets vs. Financial Assets
Lol. Yeah, it would be fun to make a trading strategy based on the 200-day trailing count of "why aren't we all 100% stocks?" Bogleheads threads. Once it passes a certain threshold, you buy a boatload of gold. If I can package that with cheap boating insurance for board members here, we're set!dualstow wrote: Yup. Look at all the Boglehead threads asking if 100% stocks is ok. That's definitely a seasonal fruit.
I honestly couldn't tell you how the GB has performed relative to the PP lately and I completely agree that nobody should be switching to anything simply based on recent performance. It's important to always look at the big picture, and fortunately there are ways to do that.sophie wrote:
If only I could go back in time to March of 2009, and ask each and every person who has switched from the PP to the Golden Butterfly what they think of increasing their stock allocations. I'm pretty sure most of the responses will be along the lines of "are you insane???"... It's just that I think a lot of its recent popularity is due to what dualstow has just-now famously dubbed a "seasonal fruit".
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Re: Real Assets vs. Financial Assets
We could call it the Shoeshine Boy/Chatter" strategy.Tyler wrote: ...
it would be fun to make a trading strategy based on the 200-day trailing count of "why aren't we all 100% stocks?" Bogleheads threads. Once it passes a certain threshold, you buy a boatload of gold. If I can package that with cheap boating insurance for board members here, we're set!
9pm EST Explosions in Iran (Isfahan) and Syria and Iraq. Not yet confirmed.
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Re: Real Assets vs. Financial Assets
Just 100%? That is for wimps!dualstow wrote:Here, here!sophie wrote:
I don't know about you, but I'm buying gold as dictated by the asset allocations I've chosen.
Yup. Look at all the Boglehead threads asking if 100% stocks is ok. That's definitely a seasonal fruit.The problem is, and always has been, that the time to buy any asset is exactly when everyone hates it the most, which is the underlying cause of low prices (i.e. most people aren't buying). What people tend to do is buy high priced assets instead (like stocks, now) because everyone loves them.
If you haven't read the classic BH thread on buying stocks on thin margin, you should. It's hilarious.
Re: Real Assets vs. Financial Assets
True. I agree with the observation that the most of the questions come from the younger crowd and not the more seasoned guys who more clearly represent the Bogleheads zeitgeist. I'm always impressed that for every young poster asking about 100% VTSAX there are several experienced Bogleheads who explain the feeling of going through a market drop and argue for at least a bit of diversification. And that's even from the guys who were lucky enough to reap the full rewards of the 80's and 90's stock boom.
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Re: Real Assets vs. Financial Assets
Aw man, I have to add Rick to the list of people who thinks infers means implies. (I know, he's retired, rich, and does not care).
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Re: Real Assets vs. Financial Assets
9pm EST Explosions in Iran (Isfahan) and Syria and Iraq. Not yet confirmed.
Re: Real Assets vs. Financial Assets
Ha -- I went 'GBish' from within a Boglehead account that was 60% stocks, reducing stocks to ~42%.sophie wrote:If only I could go back in time to March of 2009, and ask each and every person who has switched from the PP to the Golden Butterfly what they think of increasing their stock allocations. I'm pretty sure most of the responses will be along the lines of "are you insane???"
Not to say that the Golden Butterfly isn't a sound portfolio - it's great and a marvelous contribution by Tyler, and I might well switch to it myself when/if I get full control of my main retirement accounts. It's just that I think a lot of its recent popularity is due to what dualstow has just-now famously dubbed a "seasonal fruit".
In late 2012 after my stocks had made back their 2008/2009 losses (I didn't get out while down!)
Although instead of that 18% in stock going up ~33% in 2013, it went down 28% as Gold. 2014 and 2015 weren't great either.
What *%(&^& crappy timing.
(I do generally worry less about my investments, so I've got that going for me. My gold allocation is higher now than then.)