The Faber timing model has moved into fully invested mode. U.S. Treasuries, as measured by the Ryan 10-year Treasury Index, crossed above their 10-month moving average last month, so the system is now in Treasuries, as well as all four of the other asset classes. Last month I suggested avoiding long-term bonds, on grounds of their clear overvaluation (if you believe serious inflation is on the way). Having had a month to reflect on that, I've decided to follow the system anyway. Really, you could justify not being in any of the asset classes based on their being overvalued (see Hussman this week for an especially gloomy view). If the current unpleasantness turns into a double-dip recession, Treasuries may well be the only one of the five asset classes with positive performance. They provide needed diversification to the portfolio.
Here are December's allocations:
- U.S. stocks: 20%
- Foreign stocks (EAFE): 20%
- U.S. Treasuries: 20%
- Commodities: 20%
- REITs: 20%
