What’s Next

by | Nov 24, 2004 | Archives

This November 24, 2004 Gary Scott message looks at how too enhance wealth through correct asset allocation of international investments during times of run away U.S. debt and trade deficits have led to a US dollar crash.

Since no solution to the U.S. debt and trade imbalances let’s look at how various international investments fare in varying scenarios.

A long term research by asset allocation expert Ibbotson Associates looked at various returns over 95 years of differing assets classes under varied conditions.

The asset classes we bonds, T-bills. Equities, Housing and Silver. Over the entire 95 years the return was:

Equities: 11.9% per annum
Housing: 6.7% per annum
Bonds: 4.8% per annum
T-Bills: 4.6% per annum
Silver; 4.2% per annum

However the results were very different when the economy was split and viewed in five different conditions, Stable. Moderate Inflation, Rapid inflation and Deflation.

During Stable Times the reruns of the asset classes were:

Equities: 14%
Housing: 5.9%
Bonds: 5.3%
T-Bills: 3.1%
Silver: 0.7%

In Moderate Inflation this barely changed to:

Equities: 14%
Housing: 5.9%
Bonds: 5.0%
T-Bills: 4.6%
Silver: 0.7%

Rapid inflation brought huge changes:

Equities: 9.6%
Housing: 7.0%
Bonds: 3.6%
T-Bills: 5.%
Silver: 17.9%

Deflation brought even greater change:

Equities: -6.2%
Housing: -0.5%
Bonds: 4.8%
T-Bills: 4.6%
Silver: -15.3%

So where are we now and where might we be heading. I have some opinions, but before voicing them, want to hear yours. Were do you think the economy is headed. Please let me know.

Until tomorrow, good investing!