portfolio construction

[jk]

i hghly recommend this article on portfolio construction at portfoliocharts.com

limitations- it looks at the period 1970 to the present. i wish it went back to 1910 or so. the last 50 years have included 40 years or so of a giant bond rally. also the inverse relationship of stocks and bonds has been strong over that period, but imo cannot be relied upon going forward. the interval covered in the study includes the 70's, when stocks and bonds were positively correlated, but its return measure is the 15th percentile return over any 15 year period.

nonetheless, i urge everyone to read this piece.

[thriftyandboringinohio]

Thanks jk. I did read the article, it's a fresh look at the benefits of diversification, and how it's easy to do that all wrong.

[jk]

Thanks jk. I did read the article, it's a fresh look at the benefits of diversification, and how it's easy to do that all wrong.

yes, i also found it thought provoking. otoh i can't bring myself to buy long bonds right now, even though i know both nominal and especially real rates can go even lower. also i expect a recession or at least significant slowdown late 1q22 into 2Q22, when all the fiscal stimulus has been withdrawn, the treasury is rebuilding its tga account, the fed hasn't yet given up on tapering qe or raising rates, and omicron is cresting.

if it's bad enough i expect more stimmies sometime between mid '22 and mid '23. this will lead to even more inflation as the stimmies increase demand even as supply chains become still more dysfunctional. my concern is that this kind of inflation will not necessarily increase commodity prices. any thoughts on this?

it might be interesting to share our current allocations as food for thought.

currently i'm about 38% in cash [awaiting a sell-off to deploy most of it], 17% phys and gold miners, 17% eastham partnerships, about 7% in oil e&p and some pipelines, 6% sruuf and urnm, 4% other commodity producers + agriculture + farmland, plus some odds and ends.

this allocation reflects both my belief that inflation will continue, also that it will be reflected in commodity prices. it also reflects my belief that esg has caused prematurely significantly inadequate capex in hydrocarbons and closure of nuclear facilities, and that in fact nuclear will have to grow - if not in the u.s. or even in europe, then in asia.

i'm curious about how others are dealing with our current circumstances.

[thriftyandboringinohio]

...if it's bad enough i expect more stimmies sometime between mid '22 and mid '23. this will lead to even more inflation as the stimmies increase demand even as supply chains become still more dysfunctional. my concern is that this kind of inflation will not necessarily increase commodity prices. any thoughts on this?...

I have done well with the Milton Friedman approach, “Inflation is always and everywhere a monetary phenomenon". When I view the pandemic stimulus through that lens it doesn't worry me much. Sure, it's a lot of money borrowed, but everything is relative.

Most money is printed by lending. Compared to all credit worldwide, both private and public combined, these stimuli aren't so big. Plus it's a less corrosive sort of printed (borrowed) money. When these payments go directly into the hands of millions of individual people, they spend it right away on goods and services at existing businesses. That seems better than loaning a big corporation hundreds of millions to buy back shares, or to mal-invest in the latest half-baked fad. The stimulus goes right into the production-consumption economy, creating jobs and orders for raw materials. The corporate borrowing gets stuck inside FIRE, driving up asset prices and doing far less good, and even that arrives far later.

Sooner or later we'll need a cycle of wage inflation, and this might be it. Wages have been stagnant or falling for 40 years; labor's share of GDP has fallen for 40 years; and wages no longer reflect increases in productivity. If that trend keeps up much longer there will be nobody left with money to consume any of this stuff.

[jk]

I have done well with the Milton Friedman approach, “Inflation is always and everywhere a monetary phenomenon". When I view the pandemic stimulus through that lens it doesn't worry me much. Sure, it's a lot of money borrowed, but everything is relative.

Most money is printed by lending. Compared to all credit worldwide, both private and public combined, these stimuli aren't so big. Plus it's a less corrosive sort of printed (borrowed) money. When these payments go directly into the hands of millions of individual people, they spend it right away on goods and services at existing businesses. That seems better than loaning a big corporation hundreds of millions to buy back shares, or to mal-invest in the latest half-baked fad. The stimulus goes right into the production-consumption economy, creating jobs and orders for raw materials. The corporate borrowing gets stuck inside FIRE, driving up asset prices and doing far less good, and even that arrives far later.

Sooner or later we'll need a cycle of wage inflation, and this might be it. Wages have been stagnant or falling for 40 years; labor's share of GDP has fallen for 40 years; and wages no longer reflect increases in productivity. If that trend keeps up much longer there will be nobody left with money to consume any of this stuff.

friedman may be fine for thinking about macro inflation, but i'm interested in decomposing that to find implications for specific assets. a finer grain look sees the dispersion of price increases reflecting specific issues of production vs demand. e.g. autos both used and new, suburban houses both used and new skyrocketed because of specific factors in those markets, constrained supply in relation to increased demand. energy prices have increased markedly because of underinvestment from both the prior failure of shale investment on the whole to produce commensurate returns, and from diminished investment in large non-shale projects with multi-year development needs leading to production in a rigidly unrealistic esg future.

as for the size of the stimulus, the fed balance sheet has grown by over $7trillion, or roughly 1/3 of u.s. gdp. federal spending financed by paper bought by the fed [via the principle dealers] is straightforwardly money printing. yes, directing it to people with a high propensity to spend directs much of that stream into the purchase of goods and, to a lesser extent in these times, services. however, in the absence of any increase in the supply of those things the market can clear only by raising prices. since people were largely precluded from consuming much in the way of services, and mortgage and rent moratoria decreased spending on housing services, increased goods spending meant a lot of the stimulus went to china.

i agree that the greater power of labor vs capital is a desirable effect of the great resignation, since labor has gotten none of the return on its increased productivity for many years.

in what ways will the increase in wages and savings filter into the u.s. economy? and how much will still be siphoned off to china, et al?

more broadly, what are good inflation hedges going forward? this last question is the one i continue to ponder.

[thriftyandboringinohio]

...more broadly, what are good inflation hedges going forward? this last question is the one i continue to ponder.

You and me both jk. Let me do some homework and come back with more thoughtful comments here about inflation hedges

[jk]

You and me both jk. Let me do some homework and come back with more thoughtful comments here about inflation hedges

so far, as i indicated in post #3 above, the only assets i've really fastened on is oil+gas, uranium, and real estate. i'm certainly open to hearing counter-arguments about those 3, since my level of conviction is strong but not absolute.

similarly i'm holding a big allocation to gold knowing it's not really a great inflation hedge - instead it's a chaos hedge and a store of value over the long term. i favor it over, e.g. bitcoin which touted to be a store of value, because of its thousands of years of history and, more importantly, because it is an asset being held and further accumulated by central banks around the world. i figure if it's good enough for them, it's good enough for me.

then there's my sprinkling of other real assets:
1. moo,rja, mos and ntr for agriculture- i worry that the last 2 might get squeezed by a rise in energy prices, both to run their factories and as an input cost.
2. fpi and land- farmland etf's; joe- land along the fla panhandle
3. very small amounts of fcx, grn and krbn

i hold about 2.5% in international assets, but i'm waiting for a selloff accompanied by a spike in the u.s. dollar to buy a significant slug of em value [recommended by both gmo and research affiliates], as well as some more commodities

do you see any holes in my theses on these? other ideas? thoughts about allocations among these or other assets? how are you allocated?

[thriftyandboringinohio]

My allocation right now is about:

energy 6% (was previously higher)
value 29%
small cap 2%
mid cap 3%
emerging mkt 4%
Tbill/cash 23% (my dry powder)
physical gold 15% (been holding it for decades)

rental property 18%


jk your farmland is interesting, it may be a great inflation hedge if it is under cultivation and generating rents from farming. Almost a proxy for the commodity itself.
Inflation hedging is indeed fascinating. Value stocks and large consumer goods are generating near record profits right now, and I would expect them to continue.

[jk]

do you think of your value allocation as defensive [equity that will go down less than growth in a big sell-off] but has some exposure on the upside? or just a cyclical change in sectors that you expect to perform well on the upside? or, of course, both?


here is some investment thinking i have around farming:

i don't hold a lot in farmland [fpi and land]. my worry about farmland is that with weird climate changes the value of particular holdings could be hurt by repeated flooding, drought etc.

i own ntr, but can't decide how i feel about it - it produces both phosphate and nitrogen products. nitrogen fertilizer depends on ammonia as a feedstock, which in turn depends on natural gas, which i think will rise in price.

food, of course, is always in style, and i think climate problems will reduce outputs and raise ag commodity prices, which will encourage the use of more fertilizer on land that remains fertile. the argument against higher ag prices is that increasing tension between the u.s. and china will eventually cause the chinese to find other sources of ag products, most likely from south america as they're in a snit with australia.

of course you can invest in ag commodities themselves - if not futures directly then dba and rja.

moo brings in machinery producers, fertilizer, and processors like adm, seed and herbicide and insecticide providers like monsanto.

i've got a toe in each of these pools but wish i could simplify that by focusing more. i just don't know which to focus on.

[thriftyandboringinohio]

The value stocks seem to have a good outlook for gains.
The market as a whole looks over-priced to me, and the value sector has the most juice left in the lemon.

Overall my allocation is defensive. I want to minimize losses in the next down draft, and be ready to catch the elevator back up.
Right now I'm willing to accept lower gains, but I'm still getting some returns.

[thriftyandboringinohio]

I just corrected my allocation to show my rental property at 18%, a typo in the original

That's giving me decent returns, and will work as an inflation hedge if it stays high for a long time.
I'm not going to raise rents this year, I'd rather stay occupied and avoid turnover costs.

[Milton Kuo]

I am expecting a prolonged period of high inflation going forward and have tried to put my money into things that will do reasonably well in a high inflation environment and are not grossly overpriced at the time of purchase. I am keeping a fair amount of cash and a small bit of U.S. Treasury bonds on hand in the event a deeper dislocation occurs that offers a real buying opportunity. (I did not think March 2020 was a real buying opportunity for most U.S. equities.) Here is my current asset allocation:

Precious metals: 28%
Equities: 21.3%
Real estate: 22.8%
Cash: 21.7%
U.S. Treasury bonds: 4%
Other: 2.2%

Some additional details on my investments that some might find interesting. The vast majority of my precious metals is in gold but I do have a slug of silver and a sliver of platinum, too.

With regard to equities, I have about 7.2% of the total portfolio in stocks of the international oil companies. The percentage would be far, far higher--something on the 15% to 20% range--had not all the fearmongering of "stranded assets," "everyone will drive an EV vehicle within 5 or 10 years," and actual government meddling scared me out of taking a bigger stake. The last slug of ExxonMobil I purchased had a dividend yield of over 10%. The remainder of the equities are in European (developed) indexes, the MSCI emerging market index, precious metals mining companies, and a slug of stocks that pay high dividends and have a long history of doing so.

Since 2020, I have been bleeding off my U.S. Treasury bond (20 years to maturation) position and have used the proceeds primarily to buy gold mining stocks, which appear to be the only equities that I can find that seem inexpensive. I am currently waiting for another run up in bond prices to sell more of my position to raise cash. As much as I'd like to hold the bonds and potentially capture more capital gains from them, I feel that it's gotten to the point where I'm picking up quarters in front of a steamroller. I suppose it may get to a point where I could eventually sell to someone picking up dimes, nickels, or even pennies in front of a steamroller but even the tiny position I have in bonds is causing me to lose sleep.

One asset I suspect very few have, which I have grouped into my Other category, is Scotch whiskey. I am using the WhiskyInvestDirect platform to buy barrels of aging whiskey as a hedge against inflation. It's probably not going to have spectacular returns but I suspect it'll do better than U.S. equities and other investment instruments that the Federal Reserve has hyperinflated. I originally purchased with the idea that it would be an asset that is less correlated with everything else. Unfortunately, in the March 2020 correction, my investment in whiskey had a drawdown of approximately 30% which is about how much the major stock indices went down. Still, I feel that with improving wealth in emerging market economies (substantial demand for premium spirits), high inflation, and perhaps continued stratification of wealth in the west, particularly the U.S., I think that Scotch whiskey will do okay. If I could find an investment that could guaranteed "do okay" (I'm not even asking for good much less great) in the future, I'd put almost every penny I have in it considering the mess the Federal Reserve has made of everything else. I continually add to my position in Scotch whiskey and intend to do so until it hits 10% of my portfolio.

I have purchased assets in my portfolio to try to minimize drawdowns and I have essentially zero speculative positions. To that extent, my returns over the past few years have been depressingly bad: I've never had a down year but low, single-digit nominal returns are far too common. On the plus side, during the March 2020 correction, my maximum draw down was in the single digits. I can safely say 6% but I think it may have been as low as 3%.

[jk]

i'm curious about your scotch investment. do you own allocated barrels or an interest in a pool of whiskey [strange image- makes me think of scrooge mcduck doing laps in his pool of gold coins].? how big are the barrels? is it a particular branded scotch, or even type of scotch- islay or speyside? do you have the option of taking delivery and drinking it yourself? [one advantage over deliverable gold]

in general i share your defensive stance- i'm not looking to make a killing. i'd be happy to just keep up with vaguely defined inflation.

re: the risk of "stranded assets" in hydrocarbons- i'm really not worried about that. for one thing there are now 1.2 billion ice cars on the road, and about 30 million ev's. in i-forget-how-many years it is projected that there will be 1.5 billion ice vehicles and 300 million ev's. we're going to be burning significant amounts of gasoline and diesel for a long time.

new england, where i live, depends on heating oil, propane and natural gas to get through the winters. betwen the winters warming and improved technology heat pumps have become viable alternatives, but i don't see all the housing switching over any time soon. and then there's the fact that hydrocarbons are the feedstock for innumerable plastic items, as well as natural gas used to produce fertilizer. we depend a lot on big trucks to move items around. they use special filters to clean up their exhaust, and the filters are filled with - essentially- ammonia. the ammonia is produced from natural gas. most of the trucks have automatic shut-offs if the ammonia is depleted.

maybe, too, people will realize e.g. that the large number of ev's in china are essentially coal burning, since that's the biggest source for the electricity they consume. if only we'd stop kidding ourselves!

similarly, if only more people would get realistic about planning a transition instead of virtue signaling by taking absolutist positions, they'd recognize that burning natural gas is a big step forward from burning coal, and even burning diesel is a [somewhat smaller] step forward from burning coal. so i don't see stranded assets. to the contrary i think the lack of capex for hydrocarbon exploration and development is going to make proven reserves ever more valuable.

financially it's somewhat like investing in tobacco companies after the warnings went on the packs, only "better" [financially]. the tobacco companies were beaten down in price and have since had a long period of good returns in price and dividends. now imagine there was only a finite supply of tobacco.

in the 70's energy was something like 30% of the s&p iirc. recently it hit 2%.

i think hydrocarbons have a robust future, and their emissions will have to be dealt with by offsets, not elimination. i've been following the free materials sent by thundersaid energy [which i recommend] and their realistic path to carbon neutrality includes a large amount of offsets, e.g. in the form of turning marginal lands into diverse forests - the plant and tree growth absorbs significant carbon, more so than monoculture plantings, and judicious harvesting of mature trees produces lumber - which people don't want to burn - and allows for mature forests to continuously be growing new trees to suck up more carbon.

i suppose my uranium positions are more speculative. i think there will exist a growing market for nuclear power [china has said they are planning on building 154 nuclear facilities in the coming year alone]. compare the choices made by france and germany - france gets 70% of its electricity from nuclear, while i think merkel made a big mistake shutting all nuclear facilities post fukashima. the result is that germany is in fact burning a lot of coal [what progress!] while having the most expensive energy in europe.

the risk to uranium would be a change of technology. occasionally i come across an article saying fusion power is in reach, but i remember reading about tokamaks in the early 1970's when people were saying the same thing. [it reminds me of the line that brazil is the country of the future, and it always will be.] i don't know if thorium is a real alternative and how that would affect sruuf and urnm.


-----------------------
ps re correlation of whisky investment. during a big drawdown the mantra is that people, e.g. needing cash for margin calls or following an algorithm which lowers exposure during periods of higher volatility, sell what they can, not necessarily what they would wish to sell in a normally trading market. thus, in such periods, your whisky will be sold because it is liquid.

[Milton Kuo]

i'm curious about your scotch investment. do you own allocated barrels or an interest in a pool of whiskey [strange image- makes me think of scrooge mcduck doing laps in his pool of gold coins].? how big are the barrels? is it a particular branded scotch, or even type of scotch- islay or speyside? do you have the option of taking delivery and drinking it yourself? [one advantage over deliverable gold]

I have an interest in a pool of whiskey and I do not believe that there is a way of owning individual barrels, at least not at a cost that makes it a viable investment that actually has a positive return. As I mentioned in my oiriginal post, I am buying through the WhiskyInvestDirect platform, which is a company that is partly owned by BullionVault and uses the same technology stack for its Internet platform and has a similar business model. The whiskey is owned by investors through bailment, an aspect of English law. It is possible to take physical possession of the whiskey but, being that there are a lot of strict regulations on what can be called Scotch whiskey, a small-fry individual doing so likely does not have the means or facilities to store the whiskey in a way that it can still be called Scotch whiskey.

The barrels are of various sizes but they all must conform to the Scotch industry's regulations. Multiple types of barrels are used so there is no one size that describes them all. All of the whiskey I have bought and had available to be bought were stored in barrels (190 - 200 liters and oftentimes they are barrels that used to age American bourbon) and hogsheads (225 - 250 liters). I think I may have seen whiskey offered in butts (475 - 500 liters) but I did not buy any because at larger barrel sizes, it takes longer for the whiskey to develop a good flavor. There are other types of barrels such as port pipes, madeira drums, and quarter casks but I have not seen any whiskey offered for purchase on the platform stored in those barrel types.

There is no brand of Scotch whiskey offered through the platform which actually makes this less speculative than buying bottles of whiskey albeit one probably loses the opportunity for an investment to skyrocket in price. In general, all of the major brands you know of (Johnnie Walker, Ballantines, Glenlivet, etc.) use the same pool of whiskeys and are largely just marketing. Of course, better brands generally speaking use better whiskeys and some may have a secret blend of whiskeys but, to the best of my knowledge, there is nothing truly unique about them that another brand couldn't easily duplicate, at least from a flavor perspective. This may be different (I don't know for certain) for the very highest end whiskeys, which may have their own stocks of aging whiskey that they do not sell to anyone else.

There are essentially two types of whiskeys: malt whiskey and grain whiskey. Malt whiskey is more expensive and tastes better while grain whiskey does not have as much flavor but its production is much less expensive and the process for distilling grain whiskey lends itself to industrial-scale production. As for the regions of malt whiskey, the platform makes available whiskeys from all available regions.

The end users of the whiskey investors own are the big spirits companies: Diageo, Pernod Ricard, etc. In a sense, what WhiskyInvestDirect does is free up capital for these companies to do something else (maybe something stupid like stock buybacks but also maybe in expanding production facilities). Whiskey must be aged a minimum number of years before it can be bottled and for the higher quality whiskeys, that period can be 8, 15, or 18+ years. Without WhiskyInvestDirect investors, the big labels would have to sink their capital into barrels of whiskey and would not have any liquidity until the barrels were bottled and sold.

I spent quite a bit of time researching the whiskey industry and WhiskyinvestDirect before dipping my toe into it so I'm fairly comfortable that the platform can be trusted and I'm relatively certain of the kinds of returns I am expecting. I intend to hold each purchase of whiskey for about 8 or more years before selling. I have not sold any whisky so far but there have been two bulk bids (a big distillery buys because they need stock for bottling) which, had I participated, I would have realized a ~20% CAGR over about a 2.5 year holding period. That's a far higher return than I expect what most of the whiskey I've purchased will return but it does seem to validate that I will be able to sell in the future for a return that's worth my while. Of course, this brings up the issue that there may be some froth even in the market for barrels of aging whiskey. My research indicates, though, that the prices I'm paying are still quite reasonable based upon my intended holding period.

I should note that this investment is perhaps even stranger for me considering that I do not drink at all. Generally speaking, I find all alcoholic beverages to be bad-tasting and cannot tell the difference between a good-tasting Scotch from a great-tasting Scotch. I can distinguish between rotgut and good Scotch, though: the rotgut (and all low-quality alcoholic beverages in general) is noticeably unpleasant-tasting to me.

If anyone is intrigued about investing in Scotch whiskey, WhiskyInvestDirect's web site has a tremendous amount of information on the whiskey industry in general and about how the company is run. This is one of the more fun investments I've made and, in a world full of utter bullshit (thousands of cryptocurrencies, non-fungible tokens, and non-existent statues), the price of the assets seem sane.

https://www.whiskyinvestdirect.com/

Finally, if anyone here decides to also invest in Scotch whiskey through WhiskyInvestDirect, please consider using the following link so I can get a referral, which gives me a tiny discount on what I pay in regular storage/warehousing fees.

http://www.whiskyinvestdirectaffiliate.com/miltonkuo

2021-12-26 -- Addendum
Looking at my account, it turns out that I have purchased whiskey that is aging in a butt (475 - 500 liters). Also, my anticipated return on the whiskey I'm buying is 8% nominal, net of all fees. I believe that whiskey should keep pace with inflation and there's a chance that in a high inflation environment that it will do a little better than one would expect.

[Milton Kuo]

in general i share your defensive stance- i'm not looking to make a killing. i'd be happy to just keep up with vaguely defined inflation.

I desperately need to make a killing but just can't find anything that's sane. The often-occurring, single digit returns I've made over the past few years have induced tremendous anxiety in me as seemingly everybody else is getting massively rich. In this environment, if you're not getting rich, you're getting poor.

re: the risk of "stranded assets" in hydrocarbons- i'm really not worried about that. for one thing there are now 1.2 billion ice cars on the road, and about 30 million ev's. in i-forget-how-many years it is projected that there will be 1.5 billion ice vehicles and 300 million ev's. we're going to be burning significant amounts of gasoline and diesel for a long time.

Yes, I thought through all the reasons for making the investment in crude oil but the drumbeat of "we will no longer need oil" was overwhelming. Even Jeremy Grantham and GMO were making the case although, in the case of Grantham, he did say that the industry had been so beaten down that it probably couldn't go lower. The thing that worried me the most was and is all the government intervention. I suspect you've read that Bill De Blasio has enacted a law that bans natural gas in new buildings in New York City. It's obviously a stupid law but there are no limits to the stupidity of these kinds of people and there will be all kinds of collateral damage before corrective action is taken. I got slaughtered in Peabody Energy (the equity holders were wiped out partly due to all the inexpensive natural gas from the shale oil fields but Obama's policies certainly did not help) and that experience made me wary of going too big in the oil companies, which the "good" people all hate.

In the end, I invested because the dividend yield was too good to pass up; I had way too much cash making essentially zero nominal returns; I convinced myself that, "I'll collect the rich dividend, likely see capital appreciation as the price gets bid up to reduce the yield, and I'll be able to get out before it goes to zero (LOL)"; and finally, I convinced myself that Standard Oil would find a way in our kakistocracy to keep itself from going bust. With all the idiocy and outright insanity in the entrenched politicos, I see war on the horizon and warfare requires a lot of crude oil.

Speaking of war, David Rosenberg has stated that the equities of defense contractors are appealing. Personally, I don't see them as inexpensive but if war is on the menu, they may be a place where reasonable returns can be found. I am very uncomfortable with the way the defense contractors work (cost-plus) and how that has resulted in a situation where space shuttles blow up, airplanes fall from the sky, and trillion dollar fighter jet programs deliver a crappy jet that is likely a dog in a dogfight and still has unresolved problems with pilots suffering breathing problems or being on the verge of losing consciousness.

Beyond all that, I recognized all the plastics, chemicals, and other petroleum-based products that have no substitutes could not go away, especially since the people pushing for the elimination of crude oil are the most voracious consumers of it (private jets, gas-guzzling cars in an entourage, all the plastic packaging used in their hyper-consumption lifestyle, etc.) I think another issue is that as Americans are impoverished, they will keep their automobiles longer.

i suppose my uranium positions are more speculative. i think there will exist a growing market for nuclear power [china has said they are planning on building 154 nuclear facilities in the coming year alone]. compare the choices made by france and germany - france gets 70% of its electricity from nuclear, while i think merkel made a big mistake shutting all nuclear facilities post fukashima. the result is that germany is in fact burning a lot of coal [what progress!] while having the most expensive energy in europe.

the risk to uranium would be a change of technology. occasionally i come across an article saying fusion power is in reach, but i remember reading about tokamaks in the early 1970's when people were saying the same thing. [it reminds me of the line that brazil is the country of the future, and it always will be.] i don't know if thorium is a real alternative and how that would affect sruuf and urnm.

I'm avoiding all investment in uranium after getting massacred in the 2000s. I still own shares of uranium companies that I purchased in the 2000s that are down 75% - 80% from my purchase price and that is after the tremendous run-up we've seen in the past two or so years of the biggest speculative bubble in history. I think nuclear energy most certainly has a place in the energy supply of the world but investing in it is just too difficult for me. It should be obvious to everybody by now that nothing about China can be trusted and counting on them to be a customer is sheer folly.

Beyond that, I am still uncomfortable with the safety of nuclear power generation and management of nuclear waste. I've heard enough unbelievable lies/idiocy/incompetence from people who are supposed to be "authorities" that I am highly suspicious of all the claims of, "It is impossible for this generation of nuclear power plant to melt down" and no one has offered a better solution to the problem of nuclear waste processing. Specific to the U.S., this country has turned into a kakistocracy and there's no way in hell a kakistocracy will ever be able to not have a catastrophe in nuclear waste processing and storage.

ps re correlation of whisky investment. during a big drawdown the mantra is that people, e.g. needing cash for margin calls or following an algorithm which lowers exposure during periods of higher volatility, sell what they can, not necessarily what they would wish to sell in a normally trading market. thus, in such periods, your whisky will be sold because it is liquid.

The initial draft of what I intended to post here was much longer and covered a lot of different ideas but I edited out most of it since I suspected most people would be irritated by so much text. One thing I edited out was what I saw in March 2020. It's too much to hope that whiskey would be a countercyclical investment but I was hoping that it would not have nigh perfect correlation with equities, at least on the downside. As it is, it fell almost exactly as much as the major indices but it has not gone up as much after the Federal Reserve once again goosed the casino. While I was not surprised, I was a bit disappointed. However, what really surprised me in March 2020 was that there was a stretch of one or two trading days (maybe it was an entire week, I can't remember) where everything in my portfolio went down in price, even my U.S. Treasury bonds.

I had experienced the all-assets-down of 2008 and thought that I wouldn't be shocked or surprised when the next crash came, thinking that my position in USTs would increase in price, giving me some confidence that I constructed my portfolio correctly. This experience has me wondering what will actually happen if and when a bona fide stock market crash occurs, one where the S&P 500 and NASDAQ fall at least 60% from current levels. What is the "safe" asset? Since 1980, the safe asset has been USTs but I'm not so certain that will be the case the next time. Of course, what the safe asset will be is practically entirely dependent upon the whims of the mandarins in the Federal Reserve. Will they defend the purchasing power of the U.S. dollar or will they defend hyperinflated asset prices?