The way I like to think of it (influenced by some folks on YouTube) is that gold would be the replacement for LTT. So it would be more like t-bills + gold for the non-equity portion of the portfolio.Since 1980 Bonds have done well, 2.73% annualized real.
The way I've heard it put is that gold is like a zero coupon bond of infinite duration.
A barbell of T-Bills and Long dated Treasury's (that combines to a central 10 year bullet) in the prior 40 years to that however, 1940 to 1980, declined 50% in real (after inflation) terms (quite a steep decline in the 1940's/50's, a more gradual decline in the 1960's/70's). -1.62% annualized.
Push that to more extremes, T-Bills shifted extreme left to gold (and/or silver), Long dated Treasury's shifted far right to stocks, and 50/50 stock/PM. 1940 - 1980 6.44% real, 1980 to recent 4.73% real.
Cash deposited into a bank is you lending to the bank, free to do whatever they like with (within the limits of regulation).
Cash deposited into a brokerage becomes the brokers money, stock shares they buy are registered in their 'custodian' name, not yours. Some may even lend out those shares to others.
Your (owned) home is something physical that you can touch, as is gold. Deposited cash, bonds, stocks could vanish at the touch of a button, are more virtual - require computers/data networks in order to 'show'. In the case of Treasury's you're lending to someone who has a money printing press. In the case of borrowing from a bank they don't need deposits, they just create that money out of thin air (destroy it once it and any interest have been repaid).
I see no need for cash or bonds, land/stocks/gold is sufficient diversity for me. Yes I do use cash in the way of borrowed cash at 0% rates via credit cards, and each month I sell enough of stocks or gold (whichever is above target weighting at the time) to pay off that debt (credit card bill). Short or long bonds is pretty much a zero sum situation, in the UK the taxman doesn't even bother with taxing capital gains on UK Treasury's (Gilts) (credit capital losses) as that broadly would just be a cost/liability.
Yes a stock/gold barbell will be inclined to be more volatile (leveraged) than a T-Bill/LTT barbell, but you can de-leverage that to yield similar effect https://www.portfoliovisualizer.com/bac ... OmRbGFtQBZ such that differences ... are just noise.
Statistics: Posted by anoop — Wed Jan 08, 2025 4:04 pm
