"Alternative" Assets

[userqname]

A generation of Americans has been raised to believe that stocks and real estate always go up, and everyone should have a portfolio of stocks and bonds. As a result, those assets are very over priced in aggregate. Gold and silver are also very popular, it seems. So, I'm curious, what if any alternative assets do you own (or might want to own) that don't fall into those categories? In thirty years, what do you anticipate people will say has always profited as an investment?

[bryan]

I think commodities are rather underrated.

As we move to more of an access-based instead of ownership-based "economy," I think there will be _many_ new options for rentiers. Like so many.

If DRM takes hold (slightly coupled with shift to access-based economy above), I expect some new, scarce digital assets and markets to emerge.

Insurance (prediction markets) will become more accessible, useful.

And for the boring.. assets like antiques/art may bring more practical goods into their fold, BIFL-type items (though competition and profit opportunity may limit this.. generally I like the idea of diversifying your assets into high quality, practical/useful physical goods).

[chenda]

What's DRM ?

[jacob]

Digital Rights Management. What's technologically (and morally) possible eventually decides the product form that content creators make their money on => the form of most stuff out there. For example, most musicians make most of their money on tours because music is too easily pirated on the internet => Not many CD sales, so production value goes down.

An "internet expert" currently would use their (easily pirated) writing more as a form of advertising and make their money on consulting fees or first-view of instant updates => Not much effort put into books.

Alternatively, blogging was compensated not by readers paying the writer but via advertising and affiliate-links => More writing about products and services (which can be converted into $) and less about ideas (which can't).

Now with ad-blocking software becoming more widespread, we're beginning to see some whining from the content developers who have relied on that model, especially newspapers that previously relied on a subscription model => Less deep reporting. More op-ed's. Listicles. Farticles. Click bait.

Point being DRM determines what kind of content is valuable to provide and what isn't. People who work to provide aren't oblivious to the dynamics and most of them can't afford to ignore the environment they're drawing a salary from.

[chenda]

Thanks @Jacob, interesting...

[7Wannabe5]

The last two assets I invested in were a blood pressure cuff and stethoscope set for $10 and a $15 internet course on how to build robots. The next two assets I intend to invest in are 10 French pink pussy willow seedlings and some Egyptian walking onions for around $30. I have to buy at least $2000 worth of stocks/bonds this year so I can get my saver credit, but I don't see them as best ROI beyond that.

[userqname]

@bryan
Why do you think commodities are underrated? Do you mean just relatively undervalued compared to stocks and bonds? What about international sovereign bonds and international real-estate as a point of comparison?

Tell me about the _many_ opportunities for people prepared for this "access-based" economy.

What do you mean by insurance and predictions markets being more accessible and useful?

@Jacob

Now with ad-blocking software becoming more widespread, we're beginning to see some whining from the content developers who have relied on that model, especially newspapers that previously relied on a subscription model => Less deep reporting. More op-ed's. Listicles. Farticles. Click bait.

Are you saying this change will somehow lead to better journalism and less click bait? How does that follow?

[chenda]

@userqname - I think Jacob means it will mean less revenue hence less quality.

[IlliniDave]

In terms of investment assets, I own zero alternative assets. I don't know what generation the OP refers too, but I've seen stocks and bonds (and real estate, but I don't invest in RE) go up and down multiple times.

In terms of lifestyle assets, probably couldn't call any of those alternative either. A cabin I plan to live in 6 mos of the year when I ER, my house, a couple guitars I like to play. Nothing special, innovative, nor that I expect to actually make significant money on.

I don't think in 30 years anything different would be said than today. Nothing is always profitable. Risk and return(reward) are intertwined.

[Lucky C]

I have 4 cents worth of Dogecoin from spending a little time on learning about cryptocurrencies. Still waiting for a big Dogecoin comeback... Arrays of GPUs mining Bitcoin in the early days would have been great alternative assets to own.

[vexed87]

Bicycle parts... admittedly, my stock isn't huge.

[userqname]

I don't know what generation the OP refers too, but I've seen stocks and bonds (and real estate, but I don't invest in RE) go up and down multiple times.

We all have. Haven't you met anyone who puts faith in index investing? Or precious metals? Or anyone with loads of treasuries and mattress-cash, waiting for the next crash?

Everyone and their fixed-income mother has a retirement account now, which means the outperformer of the coming years may be something that's not on the radar of mutual fund companies yet. I'm curious how skeptics about those standard assets invest.

Crypto-currencies definitely qualify. Legos is certainly creative. BIFL (including healthcare equipment and your cabin) is appropriately outside the box. What else?

[7Wannabe5]

Boob-job?

[bryan]

@bryan
Why do you think commodities are underrated? Do you mean just relatively undervalued compared to stocks and bonds?

Yeah, relatively. Just think they should be in your portfolio. Personally I think it should be a mix of physical commodities and e.g. ETFs. Though there is the threat of commodity prices falling at the same time as the commodities becoming more scarce to acquire? In this case physical commodities are king.

A bit difficult to diversify in physical commodities if you aren't business-scale. So not sure what I could recommend for an individual investor other than what might make up a self-sustained renaissance man's means of production (timber, metals, sources of energy (dammed creek, sunshine, wind, etc), and you can continue to list for days what might be useful..).

Maybe add on to this list some "commodities" which are no longer being produced? I mean stuff like vacuum tubes, niches.

Tell me about the _many_ opportunities for people prepared for this "access-based" economy.

You need to either get your hand in the fees of that market (run a business or own shares of said business) or own the stuff that you will rent out (run a business or own shares of said business). Really, stocks might take this effect into account, e.g. maybe Tesla/GM no longer sell to consumers directly and instead do on-demand short-term leases. Then again maybe those big manufacturers don't like those business models so the "taxi" companies of old will run the fleet, BUT what if it was so turn-key easy that Joe six-pack could run some software and be leasing out his car when it is otherwise idle? This sentiment applies to essentially anything and everything. More of it will come about as IoT begins to take hold (aka "smart devices").

What do you mean by insurance and predictions markets being more accessible and useful?

Prediction markets are markets where you can make bets on future events occurring. This looks like futures and insurance as we know it.

With pretty new decentralization technology, there is the chance it will integrate into every-day technology stuffs and allow for more buyers/sellers of predictions (you could imagine that some integrations would have bets made automatically, unknown to the bettors... e.g. in the rentier models above, renter is required to make pay an "insurance deposit", which is used to buy insurance based on renters actions). One big issue with insurance is lack of liquidity.

Previously, your only choice as a typical person has been centralized markets like a stock exchange, insurance companies, or your government (the more capital you have the more options you have e.g. starting a company, walking into a meeting at GS, etc. still pretty wanting). Sometimes a website would pop up taking bets for popular events (sports, elections), but that's a lot of on-boarding friction compared to a technology you can bake in to a product or platform (plus additional counter-party risk of the centralized exchange and escrow).

The decentralization technology PMs will be built on will provide high assurance (no insurance failure to pay out possibility!!!*).

[*] assuming there is not a failure of underlying technology, e.g. forward progress of blockchain is stalled.

As the market becomes accessible to everyone (to open events up for predictions, to make predictions) you end up having some capability to insure your person (or business) in very fine-grained ways. Then you will have people creating securities that are bundles of predictions.. You should be able to get insurance for things where there was no offerings before (this doesn't mean it will be cheap though..).

And of course more competition for more accurate information about probability of future events (so as to make a profit). Information would become more valuable.

links:
http://restud.oxfordjournals.org/conten ... tract?etoc - Corporate Prediction Markets: Evidence from Google, Ford, and Firm X
https://www.youtube.com/watch?v=yegyih591Jo - Augur - How A Decentralized Prediction Market Works
http://www.truthcoin.info/archive/
http://bitcoinhivemind.com/archive/
http://www.econinfosec.org/archive/weis ... IS2014.pdf

[IlliniDave]

I don't know what generation the OP refers too, but I've seen stocks and bonds (and real estate, but I don't invest in RE) go up and down multiple times.

We all have. Haven't you met anyone who puts faith in index investing? Or precious metals? Or anyone with loads of treasuries and mattress-cash, waiting for the next crash?

Everyone and their fixed-income mother has a retirement account now, which means the outperformer of the coming years may be something that's not on the radar of mutual fund companies yet. I'm curious how skeptics about those standard assets invest.

Crypto-currencies definitely qualify. Legos is certainly creative. BIFL (including healthcare equipment and your cabin) is appropriately outside the box. What else?

I stare at one in the mirror every other workday when I shave! But that doesn't mean I'm naive enough to think anything always go up. The expected return of an investment is proportional to the real risk of losing some or all of your invested capital.

Overall it depends on what you're looking for. I'm not looking to outperform anything, just looking for a share of dividends/long-term capital appreciation and interest payments commensurate with my respective investments. So I can't really help with out-of-the-box speculation options.

I believe fewer people have retirement accounts than you seem to think (at least in the US).

[Toska2]

Health.
A stock pile of food.
Books on gardening / seed keeping
Consumables that aren't food such as soap, tp, shoes.

[JasonR]

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[userqname]

Alpha strategy is essentially BIFL everything.(BEFL?)

How far can this strategy be pushed? (Beyond house, canned food/garden, toothpaste/consumables, two spare generators+fuel, etc.)

What other types of necessities can be stockpiled?