As gold makes an all time closing high today, Two fairly unassaible points about gold valuation:
First, a thought from the brilliant Cem Karsan:
There are currently 500 trillion dollars of correlated assets in the traditional 60/40 portfolio: stocks, bonds, real estate, private equity.
There are currently 15 trillion dollars in non correlated assets: precious metals, art, energy, collectibles etc,
Given that the correlated assets are now trading far above all valuation metrics at all time highs, we can expect a decade or two of near zero real (inflation adjusted) returns, just as were exprienced many times historically (1900-1920/ 1930-1949/ 1962-1983) after similar runs ups,
What happens when some of that 500 trillion dollars goes looking for returns and discovers the non-correlated areas?
In the last three years this flow has caused the non-correlated assets to increase from a total pool of 5 trillion to 15 trillion, so some of this flow has begun.
But how far will it go as it becomes obvious that the correlated assets are no longer providing a real return? And the non-correlated assets are already providing a healthy return.
Rick Rule puts this another way, but similar, when he points out that historically the US investor has 2-5 percent of their portfolio in gold. Now that figure stands at half of 1 perecent. What happens when that returns to the mean?
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