The Future of Finance

I was offered the following link by dearieme in the comments. I haven't read it all yet but what I have read is certainly interesting.

The Future of Finance: The LSE Report

From Chapter 3...

Commodity investment should be especially shunned. Commodities as a general asset class offer a long-run return no better than zero % after inflation and less after fees. The cost of holding commodity positions is bedevilled by the herding of portfolio investors all seeking to roll over their futures positions at quarterly expiry dates. Commodity indices that act as the benchmark for performance can also be gamed by the investment banks that maintain them. The flood of portfolio investment going into commodities in the past few years has turned their hitherto negative correlation with equities into a high and positive correlation.

This goes right along with what I have been saying. If you hoard commodities with the intent to resell (and not just use yourself), then you will also need to pay taxes on the inflationary gains. That would push your return down even further. One of the following therefore better be true.

1. You better be buying commodities at a steep discount.
2. It is "different this time" AND it is different in way that is actually helpful to long-term commodity prices. A Great Depression would clearly not count.

From Chapter 6...

The Great Moderation – The Light that Failed

The Consequences of Disillusion

If nothing else, those are great section headings! I'm probably especially biased on the second one though. The illusion of prosperity ends in disillusionment.

Disillusionment

A feeling that arises from the discovery that something is not what it was anticipated to be, commonly held to be stronger than disappointment especially when a belief central to one’s identity is shown to be false.