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  • Christian Armbruester

Get Real

I remember talking to a macro trader in 2011. He advised me to pile into real assets, because you know, the world was ending. Since then, the value of commodities, real estate and collectibles has been resolutely obliterated by the performance of financial assets, as in stocks and bonds. With the ratio of real versus financial assets now sitting at a hundred year low, and the prospect of higher inflation for longer, is this second time lucky?

Doubtful. It’s not as if house prices haven’t gone up in the last few decades, it’s just that Google and Tesla have gone up more. A lot of that has to do with financial engineering. A barrel of oil is a barrel of oil, but a company can borrow to increase its operating leverage. Another factor is the ease at which one can transact in listed assets. Stocks and bonds have daily pricing, but try valuing a painting, or selling a house when it comes time to rebalance your portfolio.

Then there are the logistics. It’s not like we can store a ton of copper in our basements, so we need warehousing. Properties need maintenance and we had better get insurance for that Rembrandt we hold dear. All of which costs money, whereas stocks pay dividends and bonds coupons. Of course, there is the Omega trade. In the end, when the financial system is wiped out, the economy is utterly destroyed, and civilisation fails, we will probably be able to deal in Gold, but not with shares of GameStop.


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