Gyroscopic Investing

If the alternative is worthless currency and equity it is.

If the alternative is slowly, but not smoothly, losing nominal value, then smooth-ish 0% return is really good.

I am just questioning a quick and orderly return to positive yields and honest economics.

AnotherSwede wrote:If the alternative is worthless currency and equity it is.

If the alternative is slowly, but not smoothly, losing nominal value, then smooth-ish 0% return is really good.

Not if you can prevent that to begin with. Which you can.

I am just questioning a quick and orderly return to positive yields and honest economics.

That is literally impossible right now.
There is no way back, and the longer we stay at NIRP, the worse that gets

If the market would be allowed to set the rates, as it's supposed to be, the game ends, or do you think Italy will last long with double digit rates? Because that's what the real rates are supposed to be. Or Spain, or Portugal or.....etc etc.

And what do you think happens with ALL the bubbles when rates go up? Real estate, stocks, everything is bubbly due to nirp.

Not if you can prevent that to begin with. Which you can.

How?

AnotherSwede wrote:

Not if you can prevent that to begin with. Which you can.

How?

By not being 100% invested in euros.

Ok, my currency (krona) follows the euro, pounds are worse.

I am afraid euros (and bunds) are not worse off than other currencies, even if the euro breaks it must be replaced, 1 to something, by something.

AnotherSwede wrote:Ok, my currency (krona) follows the euro, pounds are worse.

I am afraid euros (and bunds) are not worse off than other currencies, even if the euro breaks it must be replaced, 1 to something, by something.

It remains to be seen if Germany or whatever country's bonds you hold, will convert foreign creditors bonds 1 on 1 to german marks..

Let me put it like this for all the people who still say it's all ok and will work out.

Lets just say:

- you have 25 - 30 yearsalaries in euros.
- you live in Europe
- most of it is in cash, part of it is in a euro PP
- you obviously cannot hold this in cash (especially euros!)

Who here will claim with a straight face that as of today, they'd drop 25-30 yearsalaries in a euro PP....?
Because I don't...

I have a mortgage and have not been able to rationalize paying much more interest than I get.

So I have 75% global equity, 25% gold and try paying off the mortgage.

AnotherSwede wrote:I have a mortgage and have not been able to rationalize paying much more interest than I get.

So I have 75% global equity, 25% gold and try paying off the mortgage.

75% stocks? Holy shit, to each his own but to be 75% in stocks right now?

[quote][Because I don't../quote]
Me neither

what an awful problem, having that much money in these times.

AnotherSwede wrote:

[Because I don't../quote]
Me neither

what an awful problem, having that much money in these times.

I realise it's a luxury problem, but it's still a problem.

I have a cash buffer i am comfortable with.

But mostly i am in mortgage.

dutchtraffic wrote:A global PP (using https://www.ishares.com/uk/individual/e ... -ucits-etf for the bonds), and using a total world ETF for stocks would have never broken down completely.

It does break the PP concept entirely though.

But that's only because of the USD-denominated assets, so just adopt a US PP. What exactly is the problem with doing that? You're playing with fire if you don't have substantial exposure to the world's reserve currency. Rome did not fall before all of the peripheral economies and their coins & sovereign debt first did. Instead of 75% losses in Iceland, I bet you would have made a profit with a US PP instead of a Iceland PP.

The only modern day example we have of a currency going kaput from its reserve status is the British Pound. And who caused that? We did, intentionally. Who will cause it to us in the future? Probably China. But in the meantime, nearly all of the developing/emerging world has their sovereign debt denominated in USD and pegged to US interest rates. You don't want to be anywhere near there when the SHTF. The pressure will be out-of-this-world to end the USD as the reserve currency. It won't be a question of political will, but economic necessity. But everyone else crashes and burns first. There's an advantage to being the sole survivor.

Probably China. But in the meantime

How are you gonna make the transition?
How will you know it is time to NOT rebalance from gold into soon to be worthless dollars and treasurys?

What about already now implementing a global PP? At least for nonamericans. Perhaps with local cash as cash.

MachineGhost wrote: But that's only because of the USD-denominated assets, so just adopt a US PP. What exactly is the problem with doing that?

Everybody assumes the US will be the last man standing, which probably makes that scenario less likely to happen.

I would effectively make a bet on the US, and not just the USD as a currency, but also politically.
Do I trust the US government enough to put all my money there, as a foreigner? Ofc not.

AnotherSwede wrote:

Probably China. But in the meantime

How are you gonna make the transition?
How will you know it is time to NOT rebalance from gold into soon to be worthless dollars and treasurys?

What about already now implementing a global PP? At least for nonamericans. Perhaps with local cash as cash.

I expect it will happen just as Bretton Woods happened. It will be in everyone's best interest to have an orderly transition to a new monetary regime. If not, that's what we hold gold for. Betting against America has been a bad bet for hundreds of years and a global currency crisis is not going to change that fact. After all, money is just a means to transfer value; it is not value per se. Only the USA has the widest, deepest and most liquidly transparent financial markets in the entire world with the taxation and productivity power to back it all up and that is not going to change anytime soon.

If you can predict exactly what countries will receive capital flows during a global currency crisis besides the USA and avoid those countries that will not, then I say go for it. But from my USA-centric perspective, the additional sovereign risk is not worth it vs holding gold, especially as all of the peripheral economies are dependent on commodities and/or finished good exports to the USA. Even Switzerland. You have to decide if investing in "Rome" is an effective hedge against the peripheral economy that you live in.

The easiest answer to your dilemma is hold gold out of your country and out of your economic zone. Giving that Germany is largely responsible for screwing up the EU, it's way too correlated to the fate of the EU to say that is a safe sovereign diversification.

On the topic of how countries could deal with foreign bondholders during a euro currency crisis.
It's obviously more likely that domestic bondholders will be treated "better".

Now i'm wondering how an Irish Ishares etf that holds bonds from my own country would be treated, hmz..

1 day before the election i had made my decision to drop my euro assets entirely and move over to a portfolio in USD.
Obviously there is still EURO exposure from stocks in the S&P500, and EFA.

I switched to a PP-like portfolio:

20% cash: MINT
20% stocks: SPY
20% stocks: EFA
20% gold: GLD
20% bonds: TLT

I sell weekly calls with a delta of 20 to 30 on every holding (except cash ofc) to get some cash flowing.