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Thread: Rsk Parity Investing

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    Default Rsk Parity Investing

    Topic should say RISK parity investing... oops.




    http://finance.yahoo.com/blogs/breakout/risk-parity-investing-allocation-model-112532060.html?l=1


    So i saw that video above talking about the following four approaches instead of stocks and bonds. Commodities (He says do well in times of inflation), Equities (Does well in positive growth).., Credit (people be borrowin' money), Interest Rates.(fixed rate bonds for negative inflation) .. (these are the four buckets he looks at).

    Then I saw this article: (goldman predicts 18% growth on commodities) - which do well in inflationary times.

    http://finance.yahoo.com/news/goldma...19059.html?l=1

    So what does that mean? Inflation is coming? - Also from a post Melonie Did - mentioned 25% returns on commodities during QE in chart...

    Bottom line is I'm gonna add his fund to my tracker - SRPFX - but it's only a month old. Lets see how this plays out. (i'm not endorsing this in any way - it's for the sake of learning new ideas). We shall see.... Thoughts on this approach? It's only got a very short history but the principles of the four pronged approach sounds good.

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    Default Re: Rsk Parity Investing

    So what does that mean? Inflation is coming?
    When the gov't prints up 40+ billion of additional US dollars every month, with no 'real world' increase in wealth / value corresponding to those 'thin air' dollars, in a 'static' economy this must result in US dollar denominated price inflation ( as more dollars chase the same amount of goods and services ). However, in today's global economy, nothing is 'static'.

    Many pundits would tell you that, with near zero wage inflation to go along with price inflation, Americans have no choice but to reduce their demand for non-essential consumer goods and services in order to allocate a greater percentage of their stagnant ( or falling net of taxes ) incomes toward essential goods and services. The common interpretation is that US dollar denominated prices for food, energy, health care, insurance etc. will therefore go up ( as Americans have little choice but to pay the higher price ), but that US dollar denominated prices for large screen TV's, for lap dances, for new cars etc. will not ( as Americans cut spending in these non-essential segments - with the resulting reduced demand leaving no 'pricing power' for suppliers ).

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    Default Re: Rsk Parity Investing

    Well as long as lapdances are safe... j/k.. Yeah the indicators - and the open endedness of QE3 (or unquantitative endless easing) is going to cause some prices to go up for sure. And those higher prices will result in more people financing more things via loans and credit cards. The idea that borrowing money to get everything is ok needs to stop - But as a society we have very little appetite for going without....

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    Default Re: Rsk Parity Investing

    ^^^ I'm not as concerned about private individuals going into deeper debt to continue to cling to their former standard of living. One way or another, that will run up against a wall of additional credit availability.

    I am far more concerned about the US federal and state gov'ts going into deeper debt to continue to provide checks and benefits to allow non-working Americans to cling to their former standard of living ! In this case, the creditworthiness of the individual ( or lack thereof ) is irrelevant, and the borrowing and spending can continue until the creditworthiness of the US state ... or US federal gov't begins to be questioned by lenders. But, as exemplified by Greece and Spain, eventually gov'ts can run up against a wall of additional credit availability as well ... with VERY nasty potential consequences.

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