US investors were spoiled by US Treasuries which acted as a near perfect hedge to stocks during the 2008-2009 crisis. However, in real crisis, bonds rarely offer any comfort, and asset allocation fails (see post Death Spiral of a Country and IMF paper Systemic Banking Crises Database: An Update; by Luc Laeven ... – IMF). As a very timely example, we can examine Spain, which is not even to crisis level yet.
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| From TimelyPortfolio |
In Spain, there is nowhere to hide, and allocation offers no comfort.
Surely you could build a system based on the principle of "nowhere to hide" like
ReplyDeleteIF gold(LOCALCURRENCY) < 10MA THEN
switch 60% to bonds
switch 40% to stocks
IF stocks/LOCALCURRENCY < 10MA THEN
switch 60% to X
IF bonds < 10MA THEN
switch 40% to X
WHERE
IF gold(LOCALCURRENCY) < 10MA
X IS 3-month LOCALCURRENCY
IF gold(LOCALCURRENCY > 10MA
X IS gold
Wow that came out a lot more jumbled up than I intended, hope you get the idea.
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