In "old normal" times managing a retirement portfolio was a fairly easy task. There were interest rates worth investing for, and there were diversification assets that really were diverse and really did hedge one another. Even three years after the 2008 crash we still have a few of what I used to call inflation days followed by a few deflation days on and on and on. We know them now as "risk on" or pro-growth days versus "risk off" or recession days. Under such a regime we either have to trade incessantly or we must own everything or nothing. Think about it.
I've been presenting some of the more intelligent and expressive spokesmen for risk on and risk off. Please do read or re-read Sean Corrigan's extremely persuasive case for "risk on". Corrigan http://www.zerohedge.com/print/377456 demonstrates conclusively that crude goods (commodities) have been and are the leading edge in an age of emerging markets and "funny money" partly due to real and perceived growth and partly due to spillover of funny money (speculation). There is no real output gap or oversupply of labor and un-used factories to prevent inflation in Corrigan's view since previous funny money periods (2001-2005) created useless facilities and jobs which are not helpful and were not written down after the crash(es). Plus the currency risks losing the confidence of its holders in which case "all fall down" as my grandmother would have put it. He's in the "Austrian" or austerity camp.
The other intellectual approach which I call the muddle through method is favored by John Hussman and the great mass of media and economists. Re-read this one: http://hussmanfunds.com/wmc/wmc110509.htm Another recent explication by this school was featured in an interview by Kate Welling of Mark Lapolla: http://welling.weedenco.com/html/1307_LI_Lapolla.pdf Lapolla is very thorough as are Corrigan and Hussman, but he thinks that for all its faults QE and its predecessor bailouts have worked and are working, but that we will have very slow growth and no inflation. He buys into the output gap inflation-limiting belief, and he believes China will also collapse to save us from inflation. Given his views on labor and Bernanke, Lapolla is clearly in the democrat and Keynesian camp.
I am quite clear in my mind that these three are each selling something besides their ideas, but their reasoning is logical and lucid. We cannot invest now without some overview. It may not matter much who is right to a 25 year old professional just beginning to invest. But for those close to or in retirement it means everything to be right. Take some time to read these three articles.
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