A summation of the inflation-deflation debate, and some practical advice arising from it:

“The pair trade of being long gold and short equities that has worked since 2000, might have a few more years to go, especially if equities get more headwind from multiple-contraction and government interfering in the economy. But in the long-run, time is against that trade too, since equities have the income component. So, one might not short the lower-multiple or certain consumer-staples and commodity-related stocks. Without shorting, being long the latter stocks, being long gold, and having some cash (1/3 each) is probably the common-sense approach, and with a little luck, one can deploy the cash in the next “deflationary” wave should it occur.”

My Comment:

One third-gold looks awfully high to me, but only if you’re buying now. If you’ve been holding for years, take your bow. I’m assuming this division doesn’t include people’s homes. Otherwise, surely, paid-up real estate is a secure asset and a potentially income producing one as well.

I’d rewrite this: One third in your paid up house, a farm or income property of some kind. Another third in diversified currencies or in your currency of choice, either as cash or perhaps even in some select funds – though I’ve never held funds and wonder if they perform like the currency itself. My sense is they don’t. The last third in precious metals, commodities, water, and energy ETF’s, or if you’re knowledgeable enough, stocks. Here too, the funds don’t perform like the underlying commodity at all, USO being a case in point.

Correction: (October 27): Rereading this, it sound like I am recommending ETF’s for all the last part. I don’t. I recommend ETF’s for water and energy, because for the average person it’s easiest to buy that way. You should get physical gold for the long haul, and maybe an ETF to trade – which, is the question.