Lots of good information and background. With a concluding paragraph recommending gold:
"I think these are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold. Additionally, for reasons I will explain in the near future, most investors are underweighted in such assets, meaning that if they just wanted to have a better balanced portfolio to reduce risk, they would have more of this sort of asset. For this reason, I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio. I will soon send out an explanation of why I believe that gold is an effective portfolio diversifier."
Curious about this groups opinion about the article, gold or otherwise.
It's great article. The logic is sound, and the evidence is compelling. Dalio also has a great record of reading the macro economy successfully (2008 as just one example).
The article has been shared on the Bogleheads forum. It's honestly hilarious watching the intellectual contortion those fellows are going through to try and convince themselves to not hold gold.
That gold makes for a good diversifier is something that Harry Browne was arguing for back before it was even legal to own the stuff. So I doubt there would be any argument from most of the denizens of this board. Dalio's market predictions definitely fall under the heading of speculation. But as speculations go, I don't think the thesis is unreasonable. When looking at various asset classes... stocks and real estate have been looking a bit frothy and I view them as being on the high end of fair market valuation. The bond market has been the object of aggressive manipulation by central banks for a very long time and IMO is seriously inflated well above fair market valuations. Unless you are prepared to go way out on the yield curve or way down in credit quality, chances are your inflation adjusted yield is around zero... or less. And I have never been a fan of paying people to lend them money.
If someone offered me $50,000 in 30 year US Treasuries (currently yielding 2.56%) or $50,000 in gold, with the only condition being that I had to hold whichever I chose for 30 years... I'd take the gold without hesitation. I do own some bonds in the PP because the future is not predictable and I have enough other stuff so that if/when bonds take it on the chin, I will be OK. But my gut says the bond market is a bug waiting for its windshield.
(Ad O) ⇢ If someone offered me $50,000 in 30 year US Treasuries (currently yielding 2.56%) or $50,000 in gold, with the only condition being that I had to hold whichever I chose for 30 years... I'd take the gold without hesitation.
But wouldn’t you get your principal back, exactly $30,000, plus the interest payments, even if bonds “take it on the chin?” Or you mean you expect that to be ruined by inflation, its purchasing power eroded?
As long as I *have* to hold for the duration, I think I’d take the bonds.
(Ad O) ⇢ If someone offered me $50,000 in 30 year US Treasuries (currently yielding 2.56%) or $50,000 in gold, with the only condition being that I had to hold whichever I chose for 30 years... I'd take the gold without hesitation.
But wouldn’t you get your principal back, exactly $30,000, plus the interest payments, even if bonds “take it on the chin?” Or you mean you expect that to be ruined by inflation, its purchasing power eroded?
As long as I *have* to hold for the duration, I think I’d take the bonds.
Bond yields are close to zero when adjusted for inflation. Your principal is all but certain to be eroded by inflation. While volatile in the near term, gold has historically held its own against inflation. With even a very slight uptick in inflation your looking at a severe erosion of your investment in bonds.
ochotona wrote: ↑Thu Jul 18, 2019 5:20 pm
You have to worry about default. Gold won't default.
As long as Treasury debt is denominated in fiat dollars there is no real danger of overt default. But inflation is a longstanding form of soft default. Paul Krugman has practically bragged about how the United States inflated away much of its World War II debt.
For those inclined to buy into this but who still wanted to hedge a bit, this could revive interest in PRPFX. The early incarnation of Harry's permanent portfolio, but it is weighted in favor of the inflationary scenario.
Smith1776 wrote: ↑Thu Jul 18, 2019 2:31 pm
The article has been shared on the Bogleheads forum. It's honestly hilarious watching the intellectual contortion those fellows are going through to try and convince themselves to not hold gold.
Yeah, I'm honestly not sure why gold in particular gets some people so worked up. There's nothing at all wrong with preferring different investments and people can talk all day about the pluses and minuses of international or value stocks, but even casually bring up the measurable benefits of gold and it's like you crossed a red line and must be struck down. Granted, I do think some of the loudest gold voices over the years have hurt the general perception of the asset, such as the skeezy bullion commercials on the radio that sound no better than a manipulative stock broker pitching a hot stock tip. So I'm always happy to see prominent respected voices like Dalio speaking up to help spread the word and break the conditioning.
Kevin K. wrote: ↑Thu Jul 18, 2019 7:16 pm
The Dalio article is indeed superb.
Also found this piece comparing the simplified version of Dalio’s All Weather portfolio with the Golden Butterfly to be worthwhile.
Smith1776 wrote: ↑Thu Jul 18, 2019 2:31 pm
The article has been shared on the Bogleheads forum. It's honestly hilarious watching the intellectual contortion those fellows are going through to try and convince themselves to not hold gold.
Yeah, I'm honestly not sure why gold in particular gets some people so worked up. There's nothing at all wrong with preferring different investments and people can talk all day about the pluses and minuses of international or value stocks, but even casually bring up the measurable benefits of gold and it's like you crossed a red line and must be struck down. Granted, I do think some of the loudest gold voices over the years have hurt the general perception of the asset, such as the skeezy bullion commercials on the radio that sound no better than a manipulative stock broker pitching a hot stock tip. So I'm always happy to see prominent respected voices like Dalio speaking up to help spread the word and break the conditioning.
Hero worship also has a large part to play. Because Buffett or Bogle said something it not only must be taken as blind truth, but is something that they must fight to the death to defend. Too many people fail to do their own research. They find one or two heroes, adopt all their opinions blindly, and then argue those second hand opinions as if they are fact. There is good and bad to heroes. The good is they put people at least on a reasonable path. The bad of them is evident in the misinterpretation of opinion as fact, and the dogmatic closing of the mind to alternative opinions.
pmward wrote: ↑Fri Jul 19, 2019 11:16 am
Hero worship also has a large part to play. Because Buffett or Bogle said something it not only must be taken as blind truth, but is something that they must fight to the death to defend. Too many people fail to do their own research. They find one or two heroes, adopt all their opinions blindly, and then argue those second hand opinions as if they are fact. There is good and bad to heroes. The good is they put people at least on a reasonable path. The bad of them is evident in the misinterpretation of opinion as fact, and the dogmatic closing of the mind to alternative opinions.
True. And the funny thing about hero worship is that sometimes the popular vision of the hero contradicts the hero's actual views. Even Jack Bogle recommended gold in a portfolio, and the fascinating thing is that some people have so convinced themselves that gold is against his investing philosophy that they refuse to believe it even when presented with video evidence.
pmward wrote: ↑Fri Jul 19, 2019 11:16 am
Hero worship also has a large part to play. Because Buffett or Bogle said something it not only must be taken as blind truth, but is something that they must fight to the death to defend. Too many people fail to do their own research. They find one or two heroes, adopt all their opinions blindly, and then argue those second hand opinions as if they are fact. There is good and bad to heroes. The good is they put people at least on a reasonable path. The bad of them is evident in the misinterpretation of opinion as fact, and the dogmatic closing of the mind to alternative opinions.
True. And the funny thing about hero worship is that sometimes the popular vision of the hero contradicts the hero's actual views. Even Jack Bogle recommended gold in a portfolio, and the fascinating thing is that some people have so convinced themselves that gold is against his investing philosophy that they refuse to believe it even when presented with video evidence.
Yeah, for the simple mind that blindly wants to follow heroes, it becomes hard to differentiate the "truth" when you have two heroes that have an opposing opinion on something like Bogle and Buffet on gold. Another example would be the International debate. When Bogle rejects international, but the Vanguard organization says that people should be at global market cap weight, some people lose it and cannot make heads or tails of what way is "right" and what way is "wrong" (quotation added because the real answer is subjective and not black or white). So this leads to an interesting situation where people that worship the same heroes, and should be best friends, instead spend their time arguing and fighting to the death in 20 page flamefest threads over how to interpret between this discrepancy. Bogleheads can be an entertaining read at times, for sure.
Tyler wrote: ↑Fri Jul 19, 2019 11:43 am
True. And the funny thing about hero worship is that sometimes the popular vision of the hero contradicts the hero's actual views. Even Jack Bogle recommended gold in a portfolio, and the fascinating thing is that some people have so convinced themselves that gold is against his investing philosophy that they refuse to believe it even when presented with video evidence.
Dare I say it — we have a dedicated thread for religion — the same thing happened to Jesus. It’s like a whole chapter in Brothers Karamazov.
Tyler wrote: ↑Fri Jul 19, 2019 11:43 am
True. And the funny thing about hero worship is that sometimes the popular vision of the hero contradicts the hero's actual views. Even Jack Bogle recommended gold in a portfolio, and the fascinating thing is that some people have so convinced themselves that gold is against his investing philosophy that they refuse to believe it even when presented with video evidence.
Dare I say it — we have a dedicated thread for religion — the same thing happened to Jesus. It’s like a whole chapter in Brothers Karamazov.
There is a thread over there called Hedgefundies Excellent Adventure that is WAY long, but has some very good research and simulations in it. In summary, they've been analyzing a 40% UPRO/60% TMF portfolio extensively and someone mentioned gold was an excellent diversifier...I had to smile. They are actually getting pretty close to what I've been posting on in the VP section for quite a while.
www.allterraininvesting.com 
