Beyond The Headlines

Time Traveler’s Portfolio

With almost every other tech billionaire building a space rocket these days, it dawned on me that time travel compared to space travel remains still completely undiscovered. There is no cryptocurrency, SPAC (special purpose acquisition company), VC fund (venture capital), or ETF (exchange-traded fund) that invests in time travel (that I know of). Not yet, at least.

If I were a physicist, I’d be curious what kind of laws of physics we need to bend to make it happen. If I were an engineer, I’d be researching durable and light materials to build a time machine. Since I’m an investor, it should be no surprise that I’d like to know what kind of portfolio I’d take with me on this journey!

Humanity has shared tales of time travel from ancient Hindu, Buddhist or Japanese myths to more recent Washington Iriving’s 1819 Rip Van Winkle or H.G. Wells’ 1895 The Time Machine or the Hollywood’s Back to the Future 1980s Trilogy and more.

It’s already the fall of 2021; we are a few months short of two years with a global pandemic impacting our lives, economies, and investments. With debt ceiling talks, trillion-dollar spending plans, new taxes, inflation, political shifts worldwide, climate change, COVID variants, and more, uncertainty abounds. It might be a good time to zoom away with a time machine, and take a longer-term view forward and back, and see if we can make wiser decisions about what’s right in front of us: today.

Time travel can potentially have both directions. Physicists still seem to be arguing which direction is more likely. To sharpen our investment thinking, in our discussions, we sometimes indulge in mental experiments. We like to take some ideas to their logical limits, which can reveal something new about our approach. Time traveler’s portfolio serves that purpose.

If we were going back to the past, what kind of investments would we take with us? Stocks, gold, cash, real estate, let’s even consider cryptocurrencies for a minute. If we go back a hundred years or more so, five hundred years, whatever skills we acquired in this life might have no value in the past. Even a farmer or a writer trained in today’s technology and language might have difficulty finding gainful employment at our new destination. Bringing a small fortune, a nest egg with us, makes a lot of sense.

We’d be ready to dismiss cryptocurrencies in a heartbeat, they weren’t around yet, and they would be of no value to anyone. Real estate, let’s say we can take a timeless property title with us back; it could potentially work and serve as shelter or source of income. If it’s a high-tech online retailers’ warehouse, though, it would need to be repurposed.

What about cash? If we ignore the fact that future dates are printed on today’s money and choose a currency that’s been around unchanged long enough to matter still, we could be ok or even better off. Today’s dollars are worth a fraction of 1921 dollars. In other words, each dollar today would buy around 15x as much a hundred years ago. If we travel further back, before the current dollar, we might have trouble finding takers for our cash, though.

Stocks are promising but tricky. The successful ones tend to grow in value over time, which means that if we take today’s shares with us back in time, they’d be worth a lot less. Who would want to buy today’s Apple shares and bring them back to the day when Steve Jobs only started his company? We could be creative and take some shares of companies that experienced a past success but faced a slow demise more recently. This way, we’d buy their shares cheaply today and be able to sell them for much more in the past. That’s an arbitrage worth considering. We might have to make a few stops on the way and pick up Kodak or Polaroid on the way. Neither is around anymore, but both experienced their glory at some point.

What about gold? Interestingly enough, we might be able to travel to almost anytime in the past, at least the last few millennia, and do just fine with gold. Whether it’s the Middle Ages, Ancient Greece or Rome or Babylonian or Egyptian times, few would say no to gold, and that’s food for thought.

What about the future? If we were to transport ourselves a hundred years to 2121 or a thousand years to 3021, what portfolio would we’d take with us? When I think of cryptocurrencies, I think about how technology changes quickly. I picture myself with a VHS cassette and a floppy disk in my time machine, neither would be very handy today. Will the same happen to cryptocurrencies? Something new and better will replace them? Or will they be long forgotten as a short-lived phenomenon of the past? I’d think twice about taking this bet.

Real estate is peculiar when it comes to the future. I always thought that if I buy a house, a mall, or a warehouse, I still have one home, one mall, one warehouse after a hundred years. They don’t mushroom over time the way corporate profits can. Hopefully, I kept my purchasing power in the process while paying property taxes and maintaining the asset. With real estate, best case, it’s still around and usable a hundred years later. Having said that, traveling around Europe over the years, and parts of the US, too, I have seen so much formerly valuable, desirable, coveted real estate that’s abandoned, forgotten, and unusable today – ghostly structures of past manufacturing plants or castles among them.

If not crypto, not real estate, what about cash? We know how paper currencies of today are built to lose value over time. Inflation slowly or not so slowly erodes our dollars’ purchasing power, euros, and hundreds of currencies that aren’t with us anymore. We are also running the risk that the currency we take with us will no longer be used once we arrive at our destination. My grandparent’s house had a drawer full of paper money that turned worthless over time. Poland changed currencies many times over. French francs, Italian lira, Spanish peseta aren’t around anymore. Picking the right paper money might be challenging, and hoping it maintains much of its purchasing power over a hundred or a thousand years might be wishful thinking.

What about stocks? No matter how we pay for services or goods, businesses will provide those and charge for them. They may come and go and reinvent themselves in between.

Isn’t it interesting that we can make better assumptions about the future by looking back? There is a mutual fund that bought 30 stocks in 1935 and hasn’t bought anything new since. The businesses they owned, merged, sold, had spin-offs; in other words, they transformed, but the wealth invested in them continued and grew. This fund is a bit of an extreme, and stock investing doesn’t get more passive than that. If we were to travel to the future, it would be great to have someone keep an eye on our holdings, an investment firm that values longevity and continuity over generations. Our fortune, nest egg, would be in good hands, waiting for us at our future destination.

What about gold? It has a millennia-long track record of keeping purchasing power over time; the odds are it will continue in the future. A bar of gold has technologically made no progress in 5,000 years. The edges might be sharper, but a bar of gold is a bar of gold and will be very much the same bar of gold 5,000 years from now.

Lastly, we don’t have to pick one asset to take on our past or future trip. We can have a collection of assets. Going back in time, we might want to bring gold, very selected stocks, and wisely chosen cash. Going forward in time, we’d want stocks, gold, or even better, an investment philosophy perpetuating portfolio over time, and on longer trips into the future, we’d pass on cash and very reluctantly consider real estate.

I know; it’s just a mental experiment. I used to think that interest rates could be only positive; there is no room in economic theory for negative rates. The idea itself undermines the very foundation of money, capitalism, investment. Why would I pay someone to borrow money from me? Yet, that’s exactly what anyone buying negative-yielding bonds today is doing. Our central bankers are defying the laws of economics or common sense, for that matter. Why wouldn’t we one day defy some laws of physics and jet back and forth in time? When the day comes, you’ll know what kind of portfolio you’d want to bring with you. And with this fresh perspective of a time traveler, maybe we can make wiser choices right here, right now – today.

Happy Investing!

Bogumil Baranowski

Published: 10/28/2021

Disclosure:

The information provided in this article represents the opinions of Sicart Associates, LLC (“Sicart”) and is expressed as of the date hereof and is subject to change. Sicart assumes no obligation to update or otherwise revise our opinions or this article. The observations and views expressed herein may be changed by Sicart at any time without notice.

This article is not intended to be a client‐specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally.