Gyroscopic Investing

Mebane Faber posted this chart from GMO on his blog:



This kinda feels like they're trying to predict the weather over the next seven years, but their predictions match my gut feelings on how things are likely to unfold.

If this proves accurate then the 60/40 portfolio could be in for a rough time.  It's stuff like this that makes me appreciate the 25% in gold.  I have also included some international stocks in the stock portion of the PP, which just feels right to me (and from a Canadian PP prospective has backtested well).

Gosso wrote: This kinda feels like they're trying to predict the weather over the next seven years, but their predictions match my gut feelings on how things are likely to unfold.

If this proves accurate then the 60/40 portfolio could be in for a rough time.  It's stuff like this that makes me appreciate the 25% in gold.  I have also included some international stocks in the stock portion of the PP, which just feels right to me (and from a Canadian PP prospective has backtested well).

I concur on all points.

Ad Orientem wrote: I concur on all points.

Sweet. 

I'm disappointed they didn't include gold, although I suppose it is difficult to value using standard measures.

Gosso wrote:

Ad Orientem wrote: I concur on all points.

Sweet. 

I'm disappointed they didn't include gold, although I suppose it is difficult to value using standard measures.

Gold has little in the form of utilitarian value. Its value lies in its status as a store of value and money for the last 6000 years give or take. But gold is definitely where you want to be in a world where nations are tripping over each other in a mad rush to debase their currencies. It may be a while before that translates into higher CPI. But at some point it will.