A Major Turning Point Could Be Here Now

 

“It’s the mark of a charlatan to try and explain simple things in complex ways and it’s the mark of a genius to explain complicated things in simple ways.” Naval Ravikant

Okay, so here it goes.

#1: There Are Only Four Places to Invest Your Money

An investors money can be in:

  1. Stocks
  2. Fixed income
  3. Commodities
  4. Real estate.

Cash =  fixed income security.

Cyrpto’s are either a technology (stock) or a currency (fixed income).  

Putting “money” under your mattress, cash is a fixed income security and/or gold is a  commodity.

Private equity is stock, its just not publicly traded stocks. Venture capital is stock, it’s just not a publicly traded either.

There is no fifth.

#2: Know which Core Asset is leading the other three.

When stocks are appreciating faster in price than the other three, be in stocks.

When fixed income are appreciating faster in price than the other three, be in fixed income.

When commodities are appreciating faster in price than the other three, be in commodities.

When real estate is are appreciating faster in price than the other three, be in real estate.

Now…

If you’ve been in my world for any amount of time then you have heard me speak about #1 and #2.

I bring this up because the investment world has a new leader.

And when the investor knows which asset is beating the other three, then they have an unfair advantage over almost everyone, they know the probability of a major market fall has increased noticeably.   

The problem…

Most people have been taught that the main investment ingredient is their age… or their self-described risk tolerance… or finding the right stock pick…  

But what if the key to investing well wasn’t any of those.

What if the solution to the problem (How do I protect my money?) is knowing which core asset is appreciating faster than the other three.

— — —

There are only four runners (read: assets) in the race. And the order matters.

The order today is as follows:

Runner #1 = commodities

Runner #2 = stocks

Runner #3 = real estate

Runner #4 = fixed income

I’ve got to point this out even though its’ obvious to some people, but sometimes reading the words make it more powerful: If an investor owns bonds, they own the fourth fastest runner in a four person race.

If an investor is only focused on stock picks and stock stories and stock fill-in-the-blanks,then they are going to miss the signal.

What signal?

That signal that tells the investor the order of investment stability.  

  • Commodities have been beating fixed income for 26 months.
  • Commodities have been beating real estate for 26 months.
  • Commodities have been beating stocks for 10 months.

Does this mean a stock crash is coming tomorrow? No.

Does this mean the world’s going to end? No.

Does this mean the investor should go to all cash? No.

Does this mean sell all your stocks and move to commodities at once? No.

What it does mean is something is changing or has changed. And its time the investor takes a hard look at their assumptions about “stocks for the long haul,” and where their money is allocated.

This change that started 10 months ago (read: commodities beating the other three) is not a trivial one.

As a reminder.

In 2000 the investment world sent the investors a similar signal.

  • Fixed income started beating stocks = April, July and October 2000
  • Commodities started beating stocks = May 2000
  • Real Estate started beating stocks = September 2000

The order of strength in October 2000:

Runner #1 = fixed income

Runner #2 = commodities

Runner #3 = real estate

Runner #4 = stocks

In 2000, the S&P500 made a quadruple topping pattern between March and September. And then spent the next two and half years falling a total of 50%

In Your Corner,

RCPeck-Dig Signature.JPG     
RC Peck, CFP

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