OIL & GOLD--INFLATION TANGIBLES
How to Wring Extra Return Out of Them
- Worldwide ETFs Portfolio -
5.5 years June 28, 2002--January 4, 2008
See Comments below
Comments 1/11/2008
What's missing from this picture? That old-time favorite inflation hedge for the masses, real estate. To be sure, crops, and other materials, are similar hedges. But shares in gold or oil are among the simplest, easiest way to acquire and hold measureable inflation hedges.
That's true of real estate, too. You can buy REIT shares. If real estate is such a good inflation hedge, why has it collapsed? Well, of course you know the answer. It got to be too good an inflation hedge, way overpriced in its underlying tangibles, buildings and land.
The seqence in place seems to be that assets classes take turns running up to ferociously unsupportable levels, leaving a vast vacuum below. When the safety-valve trips (whatever it is), they overcollapse into the abyss below.
Common stocks (the internet and tech companies into 2000-2002), then concurrently real estate and financial services (2007- ?), a double whammy within whose domains all of us live and are firmly grounded.
See GOLD vs SP500 Tips from last year which warns of the implications of GLD reacing the 2 rank. Please look at the chart and see that when gold gets there, it may linger quite a while.
Back to the chart on this page, the secret to its power is continously switching to the best choice between the two funds. This can be done easily by rankings between any two pairs of stocks or funds. For example, it works well with broad indexes like and between the Nasdaq 100 and the S&P 500. No market timing is required. You are always invested in one or the other. You do better than holding either one alone. Here is a brief example in selection among DJIA, SP500, and Nasdaq100, trading their ETFs, two out of three of the most heavily traded indexes in the world.
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