paramount: yes, precious metal may play some roles as it is a hedge against inflation/deflation scenario. I don’t know how though.
masayako: I don’t know how diversification would help if they are somehow all correlated altogether.
simonbart: yes, low cost indexing works if you are happy with the returns. However, it is argued by Rich that value-based investing can out-perform your method.
sdsurfer: I don’t really agree with your number on ROI but I agree with your points. If one can find an absolute return scenario that meets the standard, who cares if the value drops or not? I have not taken that into account and I should think more about it. There is pockets of values even in the most over-valued market, that can be exploited to an informed investor.
Now let’s look at the issue from another angle. So we are saying that the policy makers have some enormous power in destroying the attractive of cash from a normal valuation point of view (I mean normally, you move money from over-valued assets to under-valued assets in your asset allocation, but currently I think cash is under-valued but policy makers are a threat to that asset class). In fact, US tax code & monetary policy have been rewarding debt accumulation and consumption, punishing savings and capital investment, as long as I can remember. You thought it would take a huge crisis such as the one we witnessed few years ago to change them, but they are still just kicking the can down the road.
So the question is, do they truly have that power? Wouldn’t such policy come back to hurt themselves because at the end of the day, only savings and capital investment by entrepreneurs can save the day. The government’s Keynesian policies encourage people to spend, or even take the initiative itself and start disposing huge public public spending–all this to get rid off the lack of demand and make businesses sell their products. But they destroyed savings in the process, forsake future higher productivity resulted from creative destructive in favor of selling products created at the current time that is not aligned to people’s need.
So it is apparently folly. The question then becomes in the presence of a mad crowd, is it only sensible to join them to keep alive?
