Asset allocation in uncharted waters

Megan McArdle is starting a new personal finance Q&A over at the Beast that Ate Newsweek.

Megan's got a pretty good understanding of finance... for a journalist.

My question, which is the only relevant question for this age group in personal finance at this time:
What should asset allocation be for people in their 30's and 40's given a stagnant economy, 8% GDP deficits, negative real interest rates, and Zimbabwe Ben promising to print money indefinitely?
If you've been reading this blog over the years, you know that my answer is and has been to buy real assets, stocks, and gold; have a little bit of cash, and don't touch a long-term Treasury with a 10-foot-pole. I'm still of the view that the only way out of this mess is a dollar devaluation money-printing orgy.

But I could be wrong. Look at Japan. They're 20 years ahead of us into the Depression, and their stock market is still down 75% from the peak, their interest rates are still near zero, and they still haven't seen inflation despite racking up debts that surpass even Obama and multiple bouts of Bernanke-esque money-printing. There are differences, of course. Japan has much worse demographics and much better trade balance than the U.S. But the biggest difference, I think, is that the Bank of Japan hasn't had a batshit insane chairman like Zimbabwe Ben who has openly committed to destroying the yen.

So that's where I am. Let's see what Megan says.

UPDATE: More on what the heck's going on with Japan, and what it means for us, here.


Anonymous said...

Ideal financial strategy for people in their 30s and 40s...?

Euthanize your parents. Really, inheritances are the only way anyone "our" age will ever get ahead.

Doo Doo Econ said...

Anonymous, haven't you heard of probate or inheritance tax?

W.C. Varones said...


Those considering euthanasia would be wise to do so before December 31, as the death tax is going way up in 2013.

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