Gyroscopic Investing

what do you advise? Thank you.


I have in mind of VIG, DBC, etc.



SHY
TLT
GLD
VTI
VIG, DBC, etc.

Odysseusa wrote:I have in mind of VIG, DBC, etc.

So... which economic environment is represented by VIG or DBC? Have you discovered a 5th economic environment that you are trying to account for? I'm only aware of inflation, deflation, prosperity and recession as possibilities.

Emerging market local currency soverign debt is an asset class that does its own thing and doesn't seem correlated to the PP components. REITs (or timber forrests as Clive suggested) would be another option.

TIPS are another, silver would be a scary addition if that's your bag.

Gumby, the fifth economic condition might be say stagflation combined with successful downward manipulation of the gold price by all central banks acting in a co-ordinated way.
Personally I am OK with the PP but I don't think it is madness to have some VP diversification.

My apologies. I didn't realize that this was on th "VP" board. Sorry about that.

I think REITS should only be an option 1) in a tax-deferred account (they pay their gains out in dividends... VERY tax inefficient), and 2) for someone who is not over-exposed already to housing... so basically only if you rent.

I know REITS and housing aren't lock-step, but for a lot of people out there, they are either over-leveraged into housing, or still have about 150k-300k of wealth tied up in a home at the very least.

I think investing in REITS with that kind of asset in your "portfolio" (yes, I know its not an "investment," but its still a big, big part of your balance sheet) is definitely not a smart idea.

Further, REITS, to me, are nothing more than a high-dividend sector equity speculation.  Real estate management is a business just like any other.  The rules may be a bit different for REITS, but it doesn't change that you're speculating into a sector of a business market, not unlike tech, pharma, or energy.

MOO is an agribusiness ETF that invests its assets in global agribussiness.  Essentially you're buying a mix of commodities, stocks and farm land from around the globe.

Personally I would stay away from REITs. REITs are how Wall Street suckers retail investors into losing money in the real estate market. Meanwhile, the smart money is keeping an eye on the coming tidal wave forming on the horizon...

At the moment more than half of all mortgages in the US are under water:

CNBC: Half of US Mortgages Are Effectively Underwater

...and because of this, many hedge funds are heavily shorting PrimeX (the index that tracks the price of bonds backed by pools of adjustable-rate prime mortgages).

WSJ: Prime Mortgage-Bond Index Drops, Stirring Worries

These aren't the crappy sub-prime mortgages that brought us down in 2008. These are the highest quality mortgages that are being shorted.

As more and more managers short PrimeX, and more Prime mortgages go underwater, the risk of a prime mortgage crisis rises significantly, until it becomes self-fulfilling.

Perhaps shorting BAC would be an easy way to play this next crisis. But, the easiest way to avoid this mess is to just stay away from REITs.

I think the problem comes where you are investing in anything that can be bought through the stock market. As soon as that is the case, the danger is that, whatever it is, it is liable to be sold off in a liquidation panic. Fortunately LTT so far seem to not suffer that fate but essentially everything else does. In 1929 probably forestry had to be bought by private treaty- going into the backwoods and haggling with a woodsman. That meant that it did not correlate with stocks so badly. The WOOD etf was dispatched along with pretty much everything else in 2008. UK farmland did very well through the 2008 crisis. To buy UK farmland you have to go to an auction etc. The great inconvenience is what saves it. If you could buy a UK farmland ETF, my guess is that its protective value in a crash might no longer hold up.

About REITs- in the UK I think they hold office buildings and perhaps some shopping centres. I don't think they hold residential property?? I have never thought about owning them so I'm grossly ignorant. From what you guys are saying it sound slike the US REITs hold homes. Is that the case?