Thoughts of various asset class type and their usage
Investment environment parameters
Economic cycle
boom
recession
Inflation rates
High
Low
Currency type
Reserved currency
Non reserved currency
Exchange rates regime for non reserved currency owners
Fixed exchanges rate
Floating exchange rates
Recession type
(hyper) inflationary
deflationary
Federal reserve monetary policy
restrictive
expansive
Asset class types
Government bonds
good position to hold when government is unlikely to default and threat of inflationary recession looms
interest rates are inflation adjusted
high opportunity cost to hold position when economy is booming
Cash
good position to hold when hyper deleveraging is occurring within the system and Federal reserve has not responded with expansionary monetary policy
high opportunity cost to hold position when economy is booming
Mortgage REIT
good position to hold when threat of deflationary recession looms and the Federal reserve have started loosening monetary policy.
a tenuous position to hold during periods of hyper inflation because the interest gets offset by the inflation
a tenuous position when the Federal reserve starts tightening monetary policy
a tenuous position to hold when over leveraging is rampant within the system
high opportunity cost to hold position when the economy is booming
Equity REIT
good position to hold when the Federal reserve starts tightening monetary policy.
Credit becomes less available and thus more expensive
number of construction project drops
less supply driving up demand for existing inventory
high opportunity cost to hold position when the economy is booming
Gold
Use as a protection against hyper inflations
a tenuous position when the economy is in the early stage growth
demand for gold will drop as more funds gets allocated to risk assets
a tenuous position when the economic is heading into deflation
there is less money/credit within the system as compared to the amount of gold
Oil
Useful for hedging against outbreak of war
a tenuous position when recession and economic activity worldwide slows
Growth companies
Useful for riding an economy boom
a tenuous position to hold during the late stage of a credit cycle when too much leverage has been built up within the system and valuation is excessive
Value companies
Useful for riding a deflationary recession when credit becomes more expensive
