Xan wrote: ↑
Fri Jul 29, 2022 8:37 am
Do you have a mechanism for telling which asset is the "rat poison" ahead of time?
For British investors, a third each UK home, US$ bills (hard currency), gold, for a century+ history sustained a 2.6% SWR, excluding imputed rent benefit. Historic imputed rent averaged 4.2% so 1.4% proportioned to a third such that combined with 2.6% SWR = 4% total. Much the same as the more general 4% SWR guideline figure.
Trade that, i.e. swap between gold and silver according to variations in the gold/silver ratio. Look to deploy the hard currency into other currencies and/or assets as 'value' seemingly presents, and you'll either improve or worsen that outcome.
There's no reliably consistent method of selecting which asset(s) may be good/bad, but you can make reasoned judgements. 1980's Dow/Gold ratio of near 1.0 relative to past levels was indicative that either stocks were cheap, gold expensive. Dow/Gold ratio of around 40 in the late 1990's relative to past levels was suggestive that stocks were expensive/gold cheap, further clarified by stock PE's being at historic highs. Recent Treasuries yielding 0%/negative real yields is indicative of relatively high prices ...etc.
Gold/Silver in 1980 and a relatively low historic 25 ounces of silver bought a ounce of gold. 1990 and a historically high level of a ounce of gold bought 100 ounces of silver. Relative levels of historic/current stock PE and/or dividend yields, bond real yields ...etc. are all possible guideline relative valuation measures that might be referenced when making choices/decisions.
It's not viable/appropriate to regularly trade your home value, however over 10+ year rebalance periods its not totally out of bounds either. Perhaps using a gold/house price measure as to whether prices may be relatively inexpensive/expensive. Supplement house value with some REIT holdings and the REIT capital values might be traded to make regular trading more viable.
Paradoxically Warren Buffett advocates near 100% stock to be appropriate but also suggests averaging into that, not lumping large amounts all-in at a single point in time, yet buy and hold is no different to the cost-less daily buying/selling (lumping all-in daily). Relative valuations can indicate when it might at times be appropriate to avoid lumping all-in. If my daily diet is baked beans on toast and my daily shop tends to see a average case of a can of beans costing much the same as a loaf of bread, but some days a can of beans costs multiple times more than a loaf of bread, other days costs a fractional part of a loaf of bread, then I might revise my spending to on some days buy multiple cans, and other days avoid buying any, as guided by historic relative valuations.