Let's Take A Guess

[portart]

Of course, PP being what it is, you don't mess around with the formula. So, the nature of this question must be taken out of context of PP, and I am asking you to hazard a guess... Ready? Here is the question...

Let's say you are not in PP mode and sitting mainly in cash, ready to make a move but your not sure which way. Gold has sold hard off the last two years while equities have risen strongly. One would have expected in a fair world (whatever that is), that this year, gold would recover some and equities would have sold off.  What we got was gold selling off even more and equities hitting all time highs.  So, take a guess, if equities go south and decides to sell off and gold starts to recover, which will have more juice?  Equities going down or gold rising. 

[DragonJoey3]

My guess would be that Equities will sink harder than gold rise.  But that's when equities sink.  The correction is coming but I wouldn't expect it until late this year or sometime in 2015.  But that's the thing, no one knows, and thus I hold the PP

[Ad Orientem]

Absent a spike in inflation I don't see gold counter-balancing any sharp drop in stocks. That is normally what bonds do. Speaking of which, has anyone been paying attention to what LTTs have been doing of late? TLT is up near 15% ytd...

[buddtholomew]

Who would have imagined that QE would result in a stronger dollar and weaker gold? It really is impossible to predict the outcome of one market, let alone three...and their inter-relationships.

[I Shrugged]

My guess is stocks are due for a bigger fall than gold is due to go up.

[mortalpawn]

I'm of the opinion that if the bond/stock bubble actually pops, we could see deflation in all assets (including gold) in the short term as the big investors move to cover their bets.  This would only happen if the correction was large enough to force a cascade of margin calls and covering of "derivatives".  Cash would then be your friend, at least until the dust settles.  After that bonds and gold would do well as most investors would be skittish of stocks for a year or two.

However when the "big" correction will happen - no one knows.  We could have continued sprinkling of fairy dust,  a modest 10-20% correction, and you could see stocks/bonds or stocks/gold move in opposite directions. 

Also if the correction is "big enough" we could see the investment banks go bust again, in which case the Fed would need to bail them out again or it would lead to some major defaults and possibly a very bad (think Argentina or Zimbabwe) situation.  Gold would be a great asset to hold in this case, along with ammunition and canned goods.  Hopefully we'll never reach that point.

If you want to enter the PP from cash, but are worried about where things might head in the near term - consider dollar cost averaging into it - buy a bit of each asset every month until you are all in.

[sophie]

This question comes up a lot.  It's very hard to hold your nose and buy all four assets.  One thing you can be sure of is that pretty much everyone on this board bought into the PP thinking they were sure which asset would fall and which would go up.  And almost all of us were proven completely wrong.

Thus, once you decide how much money to invest in the PP, hold your nose and buy all four assets equally.  Don't try to guess or market-time individual assets.  You might then end up holding an unbalanced PP which could be a disaster, since each asset (save cash) was specifically selected for its volatility.

If you aren't comfortable putting everything in all at once, then by all means do it a piece at a time, on whatever schedule works best for your peace of mind.

[Pointedstick]

This question comes up a lot.  It's very hard to hold your nose and buy all four assets.  One thing you can be sure of is that pretty much everyone on this board bought into the PP thinking they were sure which asset would fall and which would go up.  And almost all of us were proven completely wrong.

Oh yes, oh yes, oh yes. So true!

[Libertarian666]

This question comes up a lot.  It's very hard to hold your nose and buy all four assets.  One thing you can be sure of is that pretty much everyone on this board bought into the PP thinking they were sure which asset would fall and which would go up.  And almost all of us were proven completely wrong.

Oh yes, oh yes, oh yes. So true!

Yes, I find it hard to buy anything while holding my nose. Maybe that's because I'm a touch typist?