Three Things I Think I Think – What If It All Comes Crashing Down?

Here are some things I think I am thinking about:

1. Do you need gold if it all comes crashing down? The Dutch Central Bank stated that we would need gold to recapitalize the system in the case that it all comes crashing down. I’ve never understood this view to be honest. If the whole system comes crashing down you’re not gonna care about gold and recapitalizing the system. If this zombie apocalypse scenario unfolds my guess is you’ll be fighting (perhaps hand to hand) for resources. The only metal you’re going to be worried about is lead. For bullets. You’re not going to be lugging around gold bars so you can purchase stuff at the store. So, sure, gold could be used to recapitalize the system, but if the system ever needs to be recapitalized with gold I wouldn’t go out buying gold bars assuming that you’ll somehow be safer because of them. After all, the guy with all that lead isn’t going to be graciously accepting payment in gold bars because he’s going to be too busy taking your gold from you at gunpoint.

2. The case for stocks over bonds? Here’s a chart from CNBC claiming that stocks are now more attractive than bonds.

(Click on image to enlarge)

I guess this could be true. But who cares? Asset allocation shouldn’t be thought of as an all-or-nothing game. We know, for a fact, that stocks will earn a premium over bonds in the long-run. So there’s always a case for stocks over bonds. But the reason we own bonds is because stocks, while superior in the long-term, will inevitably be worse in the short-term at times. And bonds are where we get our short-term certainty. So, unless you’ve got some sort of mythical 100+ year time horizon for your liabilities, then you should probably own some cash and bonds despite the fact that they’ll generate worse returns than stocks in the long-run.

Here’s 46 pages on the topic if you need some nighttime reading.

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Gary Anderson 4 weeks ago Contributor's comment

It depends on how deep into negative we go whether policy is a failure. Bank run negative is a failure. Kelton is right about that.