Diversification: Dynamic Shift Of This Paradigm
April 06, 2009
– Comments (2)
College Professors, money managers, etc, have always preached diversification as a neccessity in any ones portfolio and as rule of thumb for asset allocation. This held true until the bursting of our bubble economy starting in 2008, at least their version of what diversification really is. I agree with asset diversification , much in a much a safer, and in my opinion the only way to reduce risk. Though Henry Hazzlitt predicted this is his book written after Bretton-Woods, a fiat money system always ends in ruin. What is diversification then?? My interpretation in a nutshell is as follows
1) Own some precious metals ( gold and silver ) and add to them when they are out of favor. They are the only international currency that retains its store of value.
2) Keep some of those overseas i.e Swiss Bank account deposit box, the Perth Mint in Australian and the Canadian prestige accounts
3) Never buy financials in any country- they are and will continue to be inherently insolvent as long as every loan is not backed by gold.
4) Own equities denominated in a variety of currencies. The reason being is although many think the dow or s&p components are cheap, Equities in Japan, China, Australia, New Zealand are two or three times as cheap.
5) The economic superpower will be China so get into these equities while they continue to trade at significant discounts relative to USA.
6) Real Estate is not an appreciating asset with the exception of buying a house in a city or country you think will be popular in the future.
7) No one can tell you an equity portfolio is diversified. I consider my portfolio diversified despite the fact it only contains miners, oil, and agriculture equities.
8) i worked at morgan stanely in college, and I was disgusted with the lack of knowledge of every broker there. My lasy day was when i heard some broker trying to push apple when it was nearing 200.
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