Why Diversification, Duration, and Scarcity Matter Today

The New Investment Paradigm

So today we're going to talk about two topics. The first is why we think we're in a new investment paradigm. And then we're going to talk about how to invest to be successful in this new investment paradigm.

Powerful Forces at Work

We think the new investment paradigm is hallmarked by two very powerful forces. The first being innovation. The second being financial instability. Innovation is being driven from AI. We are the firm belief that AI will be equally as disruptive as the internet was in the 1990s. The internet changed everything. We think AI will do the same. That's going to create a lot of investment opportunities.

The second hallmark is financial instability. We're in a world of big deficit spending, huge deficits, huge interest expense, big money supply. All of that leads to financial instability.

Allocating to Find Success

Starting with stocks. AI is a huge theme. Nvidia is obviously the biggest example of that. Nvidia is defying the laws of financial gravity right now. If Nvidia continues to grow at the same rates growing at now, it'll be bigger than the S&P 500 in less than a few years.

We don't think that continues. Remember, if you go back to the internet days, Yahoo had a market cap bigger than Amazon, bigger than Apple, bigger than Google. The winners of tomorrow have not yet been crowned today. We think things are going to look a lot different in the years to come. And we want you to prepare for that through diversification, diversification across technology stocks.

The second is fixed income. Financial instability translates to interest rate risk to the upside from our position. If you can bias your portfolio towards shorter duration, you could pick up your yield and what you could do is hedge against the risk that interest rates rise because of more financial instability.

And lastly, real assets. This is our biggest call right now. We want you to diversify your asset allocation into real assets. We want to see 5% to 10% of your assets into a diversified basket of real assets. Which real assets are we talking about?

Gold is a direct hedge against financial instability. We think everybody's portfolio now should have exposure to gold bullion.

Commodities. Commodities provide exposure or protection from financial instability they do, but there's also another kicker in there. Commodities provide exposure to innovation as well. The new world is going to require more energy more infrastructure. You need more commodities to facilitate that so you get the benefits of protection for financial instability by owning an asset with scarcity, but you also get exposure to the future world and the future world again more energy, more infrastructure.

Today we talked about the new investment paradigm and then we spoke about how to allocate to be successful in this new paradigm. The dynamics in the market are changing and they're changing quickly. Now is the time to diversify.

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