HARD ASSETS AND THE MYTH OF ASSET ALLOCATION

 

Financial Advisors will all sell you on the myth of Asset Allocation.  The idea is that you spread your investing with 60 percent in stocks and 40 percent in bonds, and within that across various subgroups: for bonds: munis, corporate, high yeild, governments.  In stocks, tech, high dividend stocks, consumer staples, consumer discretionary etc.  The idea is that over time this provides the most growth and the most safety.

It's all predicated on the idea that the Fed's true mandate is to support the risk markets.  And that has been true for the last 50 years.

It may still be true, but 50 years of supporting the risk markets by keeping real rates negative has fostered an inflationary storm that can only be controlled by Raising Rates.  

How can the Fed support the risk markets (lower rates and ease) and fight inflation (riase rates and tighten)?  They can't.  Obviously.

So now in order to keep some semblance of order in the global markets the central banks have all become engaged in Yeild Curve Control and Currency Intervention.

The more they intervene the more unstable and volatile the markets become.

How does Asset Allocation work under these conditions?  It doesn't because all financial assets - all electronic assets - are CORELLATED.

Investing in Financial Assetts is just dumping your money in a pool and hoping the water rises.

If the water sinks so do your assets.

Hard Asset Investing is truly UNCORELLATED.  

Risky?  The risk is in proportion to yourt personal expertise within the realm of a particulsar Hard Asset.  

The more the central banks intervene in the markets in the current circumstances the less stability there will be.  There will be wild swings in the risk markets as a particular intervention has a particular short term effect.  As Mohammed El Arian says: It's all band aids.  The problem is trying to conduct supposed "Free Market Capitalism" with every aspect of Money controlled by an unelected panel of State Endorsed Experts at State Endorsed Central Banks.   

It worked for a while.  It's not working anymore.  The global system is way to complex even for a smart guy like Jerome Powell.  Especially when his interests conflict with those of a smart Woman like Crhistine Lagarde and a really smart guy like Zhou Xiaochuan and they're all at logger heads fighting currency wars.

So do yourself a favor and take control of you finances.  Put your money in something you understand.  And something that will continue to exist when the electrical chord becomes unplugged.