I recently read up on the
Golden Butterfly and then spent some time last night reading
this awesome discussion (thank you Interest Compound,Tyler, and others that was a good read!). And now, I'm having some really heavy messed up thoughts about my portfolio. I will try to express my cognitive dissoance, just to see if anyone else has had similar issues and managed to dig themselves out of the murk, one way or the other.
Some of my aversion to gold is social, I don't want to have my investments at all associated with those late night TV hucksters. But really I don't like Gold because
it doesn't do anything. Why would I put my money is something that is objectively worthless, and only carries subjective value? The fluctuations in the price of gold seems to me to run purely on fear and speculation, which are not things that I want controlling a portion of my life. I mean, would I buy
.22LR ETF, or a
5gal Prepper-Soup Tracking Fund? (I kid, mostly, wait, is there any ammo tracking fund!?)
So, I don't believe in investing in gold because I don't believe in its value and I think that people who get wrapped up in it are silly. But wait, don't I think that about a lot of things in our economy? I mean, I invest in Large Cap equities, and most of those are companies that sell oil to run clown-cars, product companies making plastic crap we don't need, and retailers that merchandise said-crap so people can drive their clown-cars there and use the financial companies' products to in-debt themselves for consumer junk. But, I have no problem investing in those things because I understand that's just how our world economy works - a huge amount of it is junk that *I* don't value, but others do, and I can put my money to work in that system and reap rewards so I can go do the things I value and at least live my life better.
Is Gold so different? Sure, a lot of
morans are pitching gold as an investment, but that doesn't mean that gold doesn't work as intended, right?
So, I detach myself from my personal value judgement of the asset and the people most-often pitching it, and just look at its historical performance. I consider its ability to act as a counter-weight to both stocks and bonds in times of economic nastiness (even if I don't agree with the reasons why it acts that way). I look at the historical SWR of the Permanent Portfolio and the Golden Butterfly (
longest draw down of only 2 years?!?!!?) and consider what this could mean for my own impending FIRE. And I consider my ability to sleep at night during year 9 of a 10 year draw down in equities. This all makes me want to just accept Gold for what it is and use all the tools available to me (which is obviously a bet that it will continue in the future to act like it did in the past).
Up until fairly recently my asset allocation has been almost entirely US equities. I have accepted the high risk because I believe in the long term prospects of US businesses, and because I have the ability to make a fairly big 'stache in the next few years that will enable a rich life with a 4% SWR. But man, the prospect of maybe getting decent returns AND avoiding looooong draw down periods, that sounds so nice! So, here I am, drinking coffee wondering why I place different value judgments on a bunch of different assets that subjectively I actually think the same about. dissonance.
How do I learn
to stop worrying and learn to love the gold like I love the rest of the market?