This time it's different......

[TUK020]

There have been a number of thought provoking posts (thanks Dealtn) about asset allocation, and the benefits of rebalancing across equities/bonds/gold etc.
Most of these cite evidence that goes back more than a century - usually in the form of the Barclays Equities/Gilts study. This adds credence in the form of tangible evidence of what has happened in a wide variety of market conditions over a long period.

But..... the very thing that adds confidence - the long time horizon - doesn't really contain much in the way of a recent invention (QE) that has material impact.

Does QE invalidate the whole asset allocation/rebalancing thesis?

[BT63]

Does QE invalidate the whole asset allocation/rebalancing thesis?

For a while, yes. Maybe a long while.

Ultimately, probably not. The things which were distorted usually mean-revert and overshoot in the opposite direction.

[OhNoNotimAgain]

Not really. QE is just a mechanism to debase the currency. That has been going on ever since the UK came off the gold standard in August 1914.

History, both recent and back to Roman times, tells us that debasing the currency never ends well because eventually the masses realise they have been stiffed to the benefit of the ruling elite. Subsequent civil disorder leads to collapses of empires or changes of regime.

I have no idea how this episode will end but real assets, gold, property and businesses hold their value as long as there is a legal structure to enforce it.
That has not always been the case and the modern state structure could be sorely tested when this period closes.

[Urbandreamer]

Does QE invalidate the whole asset allocation/rebalancing thesis?

I would argue both yes and no. I'm not the only one to think so either.

Yes it does invalidate the "traditional" asset rebalancing thing.
No it doesn't invalidate the need to rebalance.

It's just that bonds are a really questionable choice. Of course that just raises the question, "if not bonds, then what"?
I know that this is not the inflation thread, but I question assets too closely linked to the value of money.

Ps I very recently bought my first bitcoin. I would be underwater with it, but I'm just paddling. Losing 10% or so isn't worth worrying about when you are talking peanuts to get a feel for the idea, You may prefer gold instead.

[Wuffle]

It is notable how narrow the viewpoint is here.
You all think the world is ending because we 'finally' have some inflation.
Mr and Mrs working class, limited assets will tell you in no uncertain terms that the house they want to buy has been accelerating out of reach for years.
If they knew anything of the stockmarket, they would be quite angry about how far out of reach the lifestyle (one of comfort and safety) that most on here live has disappeared out of reach.
Nobody notices when they are winning.

W.

[Urbandreamer]

It is notable how narrow the viewpoint is here.
You all think the world is ending because we 'finally' have some inflation.
Mr and Mrs working class, limited assets will tell you in no uncertain terms that the house they want to buy has been accelerating out of reach for years.
If they knew anything of the stockmarket, they would be quite angry about how far out of reach the lifestyle (one of comfort and safety) that most on here live has disappeared out of reach.
Nobody notices when they are winning.

W.

Many people here have lived through times of high inflation. Double digit inflation has been here before.
We know that inflation doesn't mean the end of the world. Usually. What QE and inflation does mean is a new world that we must deal with.

I'm not sure quite what you mean by Mr & Mrs working class. My wife and I currently work and are reaching the end of our working days. Does that make us "working class"? Are we precluded from that term because we managed to invest through all that time. Will we become the idle rich when we retire?

As for Mr & Mrs working class being gloriously ignorant, well I am not sure that financial ignorance can possibly help anyone. Nor would I dream of claiming that people are so simply pidgin holed and disposed of. I work in an engineering firm and there was a share club ran by the shop floor back in the 90's.

Sorry comrade, but working people have long sought to improve their situation.

As for nobody noticing the winning, you jest don't you. The press is full of it.