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Defining a Set of Core Asset Classes

This all sounds very good. Modern portfolio theory, diversification, splitting of the hairs, etc. There's just one problem as I see it. It's backward looking over the past 70 years and does not take into account what will happen to any portfolio or asset class in a deflationary environment. All of these asset classes mentioned depend on one thing--and ever increasing amount of bank lending and expanding credit.

You show no allocation to cash, which is the best performing asset class over the past 8 years. Why not? All of the asset classes mentioned may have increased slightly or not at all in dollar terms, but in terms of real money (gold) they are losers by a large margin. That's why a million bucks just doesn't buy you much any more.

These asset classes may protect an investor during inflation. But when the great unwinding finally hits, there is no place to hide no matter what your "mix". It then has just been another case of intellectual analysis.
Aug 13 10:12 am |Rating: 0 0 |Link to Comment |View article

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Defining a Set of Core Asset Classes

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