Asset Returns and Positioning

The dominant portfolio assumption — that diversification across equities and bonds provides resilience — breaks down in the macro regimes that matter most: active devaluation, great power conflict, and late-cycle monetization. In those environments, financial assets move together toward the downside while real assets outperform in nominal terms. a-00098, a-00253

Core Historical Data

Asset returns during devaluation events (27 cases): a-00098, a-00253

• Gold: +81% average, +66% median
• Commodities: +55% average
• Equities: +34% average, +3% median (high variance)
• Nominal bonds: -5% average

Worst 20-year return periods across major countries (historical): a-00023

• Russia 1900-1918: -100% (complete market/property elimination)
• China 1930-1950: -100%
• Germany 1903-1923: -100% (hyperinflation)
• Japan 1928-1948: -96%
• France 1930-1950: -93%

Long-run real returns (1850–present): a-00015

• Cash (bills): +1.2% real average (but -0.1% since 1912)
• Gold: +1.3% real average (+1.6% since 1912)

Portfolio Construction Principle

“Portfolio framework: Rising Growth Assets (equities) vs Falling Growth Assets (bonds); Rising Inflation Assets (commodities/gold) vs Falling Inflation Assets (nominal bonds). Combined with country diversification.” — a-00021

The All Weather framework: hold assets that perform across all four macro environments (rising/falling growth × rising/falling inflation). In the current late-cycle environment (deteriorating growth + rising monetization risk), the balance shifts toward inflation-side assets.

Regime-Based Return Expectations

Inference

The “bubble valuation signal” — the ratio of financial assets to total (real + financial) assets — captures when an economy has become over-financialized. At historical peaks, the ratio has reverted sharply. Current US readings are at or above prior bubble peaks by this measure. a-00047