LTA Thinking – Gold Vs. Long Duration Treasuries Which One Is A Better Long Term Diversifier Right NowIn a recent conference, I heard Nobel Prize winner Robert Engle talk about long term risk. To quote:
‘A risk is a bad outcome which has some probability of occurring.
A long-term risk is from an event which is far in the future.
Assets exposed to long term risk are less desirable than assets that are not. If the risk goes up, the price will go down even if the risk is far in the future.
Further, a hedge portfolio is one that is long assets that benefit from this risk materializing and short assets which are adversely impacted from it.
Hedge portfolios cost money.
Shorting the hedge portfolio earns risk-premium for those who can afford to warehouse it.’
Let us talk about the two main macro hedges in play today: gold and long-duration bonds…
The full note on this important topic can be downloaded at this link: Gold vs. Long Duration Treasuries: Which One is a Better Long Term Diversifier Right Now?