Wednesday, December 3, 2014
Research Affiliates New Asset Allocation Website with Asset Return Forecasts
Chris Brightman introduces Research Affiliates new asset class website. It provides 10 year estimated return forecasts for equities, bonds, and commodities. Research Affiliates Asset Allocation Website.
Tuesday, November 18, 2014
How to Use Gold in Your Asset Allocation
Gold: First Eagle’s Potential Hedge Against Extreme Outcomes
John Hathaway discusses valuation, inflation/deflation, bullion versus gold stocks, and a few stock picks. Said John: "Before we get into that, let me add that for a conservative investor who simply wants protection and is risk-averse, whatever allocation he has to gold should be more heavily weighted to the metal, because that's safer. The only risk with gold is the price you pay. But for the investor who is more of a risk-taker, and sees gold as a strategy to get positive returns in the current macro environment, then that exposure should be more weighted to the stocks."
Further Reading: Barron's: The Golden Mean
From Barron's Penta: "Long considered an asset that only a conspiracy theorist could love, gold has suddenly become a staple in the model of private bankers and other advisors to the rich. Many experts now recommend about 5% of your assets be put in gold, chiefly as insurance...."
A useful heuristic for maintaining a proper exposure to gold in relation to your equity holdings is a ratio of 10:1. Chuck de Lardemelle’s response to a quarterly conference caller's question about why the IVA Worldwide Fund holds 6% of its assets in gold:
"Just as a last comment, if you look at the price of gold versus equities, we view gold as money and we ask how much that money could buy us in financial assets. Over time, you needed, on average since the Dow was created, roughly 10 ounces of gold to buy the Dow. And so we like that 10 to 1 ratio as long as gold's not too expensive. Right now gold, under that metric, is about 20% expensive [Gold was about 1270 at the time of the conference call]. We think it's worth the premium for being able to sleep at night, and we think that it could double or triple in constant dollars, but we like that kind of ratio of 10 to 1 versus our equity exposure. We have about 65% in equities. We have a bit more than 6% in Gold. I think that's an appropriate hedge in the portfolio."
International Value Advisors Update Call September 21, 2010
John Hathaway discusses valuation, inflation/deflation, bullion versus gold stocks, and a few stock picks. Said John: "Before we get into that, let me add that for a conservative investor who simply wants protection and is risk-averse, whatever allocation he has to gold should be more heavily weighted to the metal, because that's safer. The only risk with gold is the price you pay. But for the investor who is more of a risk-taker, and sees gold as a strategy to get positive returns in the current macro environment, then that exposure should be more weighted to the stocks."
Further Reading: Barron's: The Golden Mean
From Barron's Penta: "Long considered an asset that only a conspiracy theorist could love, gold has suddenly become a staple in the model of private bankers and other advisors to the rich. Many experts now recommend about 5% of your assets be put in gold, chiefly as insurance...."
A useful heuristic for maintaining a proper exposure to gold in relation to your equity holdings is a ratio of 10:1. Chuck de Lardemelle’s response to a quarterly conference caller's question about why the IVA Worldwide Fund holds 6% of its assets in gold:
"Just as a last comment, if you look at the price of gold versus equities, we view gold as money and we ask how much that money could buy us in financial assets. Over time, you needed, on average since the Dow was created, roughly 10 ounces of gold to buy the Dow. And so we like that 10 to 1 ratio as long as gold's not too expensive. Right now gold, under that metric, is about 20% expensive [Gold was about 1270 at the time of the conference call]. We think it's worth the premium for being able to sleep at night, and we think that it could double or triple in constant dollars, but we like that kind of ratio of 10 to 1 versus our equity exposure. We have about 65% in equities. We have a bit more than 6% in Gold. I think that's an appropriate hedge in the portfolio."
International Value Advisors Update Call September 21, 2010
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