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The picture in the header is what the sunrise looked like on Sunday as we started our hike. Pretty epic.

A reader nudged me the other day about why I've been writing a less lately. The answer can be summed up by a sarcastic Tweet from Barron's columnist Steve Sears who said "America, 2020. Investment risk died. RIP" in response to a low reading on the VIX. The story on the ground is miserable bordering on dire but the stock market has managed to steadily move from the lower left to the upper right (paraphrasing Dennis Gartman who is fond of that description for something going up in price). The vast majority of economic data points have had and are likely to keep having lousy reports except for stock prices which are an economic indicator of sorts.

I can't recall such a disconnect. To the extent "risk happens fast" (Mark Yusko) clients are hedged a bit but have been riding the market higher so I am not calling a bubble because I've missed the move, I haven't, even if performance has lagged. As an advisor, it is crucial to preserve clients' reasonable portfolio income needs which is why I hedge a little and for clients still in the accumulation phase it is important that some bad market event doesn't scare them away from markets as happened with people after the Great Depression.

So if the market just goes up almost every day regardless of the story on the ground then maybe blog posts chronicling that sort of environment don't add a lot of value.

To the main point of today's post, @sairarahman Tweeted "You can’t put money into Bitcoin or the stock market. What’s your next choice?" I find this to be a fascinating thing to ponder. With enough time devoted to the question it might cause you to think about and maybe even improve your process for asset allocation. I threw my hat in the ring with

  • real estate
  • gold
  • TIPS
  • a little Ethereum
  • a few Swiss francs
  • Aussie & NZ sovereign debt

Real estate of course offers growth potential without any reasonable likelihood of going to zero. Depending on the timeframe you study and the location it might outperform the stock market or it might lag it but I think there are similarities in the long term results and so if stocks are off limits, it makes sense to me.

I own a little gold now for clients and personally so I don't know why a "no stocks, no Bitcoin" thought experiment would change that.

Same with TIPS. I don't know why people would buy regular treasuries with no yield unless their objective was to speculate on capital gains. There is essentially no yield and while it is possible everything we learned in college about price inflation was wrong, TIPS protect against having to eventually face the consequences of many years of QE and the like.

Ethereum is a different crypto currency. The asymmetry here (it either goes to a bazillion or it goes to zero) has a legitimate place in investors' portfolios. For now, there remains no great way for investors to access it in a brokerage account. The products from Grayscale, and recent entrant Bitwise, can and usually trade at massive premiums to their underlying net asset value. I still own GBTC from two years ago. The last time I looked its market price had about a 30% premium to NAV. I would expect that on the day that a Bitcoin ETF is approved, that 30% will come out all at once. What does an advisor say to a client at that point? "Oof, my bad." SkyBridge, as in Anthony Scaramucci, is supposedly going to launch a traditional mutual fund that will own bitcoin which would not have the premium issue. I will take a look if/when it launches but it's better to buy when everyone hates crypto not when they love it.

The Swiss franc is viewed as a haven protecting against dollar devaluation and continues to grind higher against the dollar despite Swiss National Bank's efforts to cause it weaken.

Aussie and New Zealand sovereign debt used to be great sources of yield. That advantage over the US has evaporated, but it's not negative, so I'd need to do a little more work on that tranche but of course there is some yield domestically with bank loans and high yield.