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Shutdown impact on air safety

On 1/23/19, National Air Traffic Controllers Association (NATCA), Air Line Pilots Association (ALPA), and Association of Flight Attendants-CWA (AFA) released a joint statement, which includes this shocker (highlighting mine):

Due to the shutdown, air traffic controllers… and many other critical workers have been working without pay for over a month. Staffing in our air traffic control facilities is already at a 30-year low and controllers are only able to maintain the system’s efficiency and capacity by working overtime, including 10-hour days and 6-day workweeks at many of our nation’s busiest facilities. Due to the shutdown, the FAA has frozen hiring and shuttered its training academy, so there is no plan in effect to fill the FAA’s critical staffing need. Even if the FAA were hiring, it takes two to four years to become fully facility certified and achieve Certified Professional Controller (CPC) status. Almost 20% of CPCs are eligible to retire today. There are no options to keep these professionals at work without a paycheck when they can no longer afford to support their families. When they elect to retire, the National Airspace System (NAS) will be crippled.


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Making Mistakes

From Shane Parrish at Farnam Street Blog:

When it comes to overloading our cognitive brains, the seven factors are: being outside of your circle of competence, stress, rushing or urgency, fixation on an outcome, information overload, being in a group where social cohesion comes into play, and being in the presence of an “authority.” Acting alone any of these are powerful enough, but together they dramatically increase the odds you are unaware that you’ve been cognitively compromised.

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Retirement Plan Contributions

With April 15 fast approaching, it is time to complete IRA contributions for 2018, and also to look at retirement plan contributions for 2019.  This year, for the first time since 2013, the limits for contributions are increasing almost across the board, with only catch up limits remaining unchanged.

For 2018, IRA contributions must be completed by April 15, 2019.  Contribution limit is $5,500, with $1,000 catch-up contribution for those age 50 or older.  Roth IRA eligibility begins to phase out for those with modified AGI above $120,000/$189,000 (single / married filing jointly), but it is permissible to contribute to a traditional IRA, then roll over some or all of the traditional IRA into a Roth IRA.  This rollover may result in tax consequences – any pre-tax contributions rolled over will be taxed as regular income.

For 2019, individual contribution limits are increased to $6,000 for IRAs, $13,000 for SIMPLE plans, and $19,000 for 401k plans.  Catch up amounts remain the same at $1,000 for IRAs, $3,000 for SIMPLE plans, and $6,000 for 401k plans.

Income limits for eligibility of contributions and amounts that are deductible are also increasing.  Of note, Roth IRA contributions begin to be phased out at $122,000/$193,000 (single / married filing jointly).

Employer contribution limits have also increased.  Total contribution limit is $56,000 for 2019.  Note that employers cannot deduct amounts exceeding 25% of employee compensation.  SIMPLE plans have lower limits.

For additional information, refer to the IRS website:


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Health Savings Accounts

Health Savings Accounts, or HSAs, provide the best tax benefits currently available.  Contributions are pre-tax, and withdrawals can be tax free as well.  In addition, funds in HSA accounts may be invested, and income and capital gains within the account are also tax free.  In order to establish or make contributions to an HSA, the owner must be enrolled in a qualifying high-deductible health insurance plan.  Other characteristics that are unique to HSAs:

  • The owner of the account may select the custodian.  Over 500 banks currently offer HSAs.
  • The account belongs to the owner and is not tied to the employer or the plan.
  • Balances roll over and do not have any “use it or lose it” conditions.
  • Although withdrawals are taxed as income plus a 20% penalty if used for purposes other than health care, the penalty is waived for those over age 65.  This causes the account to be similar to an IRA or 401(K) for tax purposes.
  • Contribution limits are $3,500 single or $7,000 per family for 2019.  Over 55 are allowed an additional $1,000 catch-up contribution.

According to Kaiser Family Foundation, 58% of employees whose employers offer a health care plan are offered at least one plan that meets the HSA requirements (for 2019), but only half of those eligible choose the HSA option.

How does a plan meet the requirements for HSA eligibility?  The high deductible requirements are best known.  For 2019, the plan must include minimum $1,350 deductible ($2,700 for families) and maximum $6,750 out-of-pocket expenses ($13,500 for families).  There are other requirements as well, the most important being that the plan may offer no benefit beyond standard negotiated rates prior to the deductible being met.  This means that common benefits such as co-pays for pharmaceuticals or doctor visits are not allowed.  The employer may offer plans that are HSA eligible without offering to administer the Health Savings Account itself, so employees should check to see if that is the case for any high deductible plans they may select.  The employer or the insurance company can answer that question.

Navigating the choices involved in HSAs is an area where a financial advisor can really help a client.

  • Consideration of annual health care expenses and current levels of savings or emergency funds.  Expenses would include the employee cost of plans offered, expected use, and worst case planning.  The legwork here includes not only cost of premiums vs. possible tax savings, but the increased expense of any maintenance medicines and services that the client requires on an ongoing basis.
  • Selection of custodian.  Custodians all have expenses, and these vary widely.  In addition, investment options within custodians differ.  They may include savings account only with fixed rate earnings, to CDs, to choice of mutual funds.  Vanguard explicitly lists only HealthSavings Administrators ( on their website.
  • Tax treatment.  Not all states allow HSAs to claim the same tax benefit.
  • Strategic use of HSA funds.  An HSA may pay for prior years’ eligible expenses (but not prior to establishment of the HSA).  If a client is able to pay their medical expenses as they go out of taxable funds, and they save their receipts, then in the event that they need emergency funds, they can take funds from the HSA up to that total.
  • HSA can pay any sort of medical expense, not just expenses that might be covered by the insurance plan:  Physician and hospital expenses, laboratory expenses, prescription drugs, and also vision expenses (including glasses and LASIK), hearing aids, and dental expenses.  Over-the-counter items are eligible, although many require a doctor’s prescription for reimbursement.  You can find lists online to check specific requirements.  Here’s one from Cigna:
  • HSA can pay Cobra premiums and Medicare premiums.
  • HSAs cannot be used if the beneficiaries also have set up access to a Flexible Spending Account.
  • Eligibility for contributions ends with Medicare enrollment.  Those over age 65 who have deferred Medicare may still make HSA contributions if they are covered by an eligible plan.

Health Savings Accounts offer great tax benefits, but they are not the best choice for everyone.

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Writing advice from James Baldwin

From Emily Temple at LitHub:

“Write a Sentence as Clean as a Bone” And Other Advice from James Baldwin

You Can Never Go Wrong Listening to This Guy

Ninety-four years after his birth (and more than thirty since his death) James Baldwin remains an intellectual, moral, and creative touchstone for many Americans—whether writers, critics, or simply people trying to live well in the world. Baldwin was an accomplished novelist, a legendary essayist, and an important civil rights activist—and most importantly for our purposes here, the man knew how to write a great sentence. His birthday is as good an excuse as any to revisit some of his teachings about the craft, and to that end, I’ve collected some of his best literary bon mots from essays and interviews below.

Write to find out.

When you’re writing, you’re trying to find out something which you don’t know. The whole language of writing for me is finding out what you don’t want to know, what you don’t want to find out. But something forces you to anyway.

-in a 1984 interview with The Paris Review

Spurn self-delusion.

I still believe that the unexamined life is not worth living: and I know that self-delusion, in the service of no matter what small or lofty cause, is a price no writer can afford. His subject is himself and the world and it requires every ounce of stamina he can summon to attempt to look on himself and the world as they are.

-from the introduction to Nobody Knows My Name

Use every experience.

One writes out of one thing only—one’s own experience. Everything depends on how relentlessly one forces from this experience the last drop, sweet or bitter, it can possibly give. This is the only real concern of the artist, to recreate out of the disorder of life that order which is art.

-from “Autobiographical Notes,” in the Collected Essays from Library of America

Read as much as you can.

I read everything. I read my way out of the two libraries in Harlem by the time I was thirteen. One does learn a great deal about writing this way. First of all, you learn how little you know. It is true that the more one learns the less one knows. I’m still learning how to write. I don’t know what technique is. All I know is that you have to make the reader see it. This I learned from Dostoyevsky, from Balzac.

-in a 1984 interview with The Paris Review


The story of what can happen to an American Negro writer in Europe simply illustrates, in some relief, what can happen to any American writer there. It is not meant, of course, to imply that it happens to them all, for Europe can be very crippling, too; and, anyway, a writer, when he has made his first breakthrough, has simply won a crucial skirmish in a dangerous, unending and unpredictable battle. Still, the breakthrough is important, and the point is that an American writer, in order to achieve it, very often has to leave this country.

-from “The Discovery of What It Means To Be an American”

Write with recklessness.

I find writing gets harder as time goes on. I’m speaking of the working process, which demands a certain amount of energy and courage (though I dislike using the word), and a certain amount of recklessness.

-in a 1984 interview with The Paris Review

Trust the editing process.

Sometimes it comes very quickly. Seems almost to come from the top of my head. But in fact, it’s been gestating for a long, long time. Most of the time it’s not like that. Usually it’s a matter of writing, recognizing it ain’t right or it won’t move. You tear it up and do it again and again. And then one day something happens—it works.

-in a 1976 interview with Jewell Handy Gresham

But know when to stop.

When you’ve finished a novel it means, “The train stops here, you have to get off here.” You never get the book you wanted, you settle for the book you get. I’ve always felt that when a book ended there was something I didn’t see, and usually when I remark the discovery it’s too late to do anything about it.

-in a 1984 interview with The Paris Review

Fight the conspiracy against you.

Any writer, I suppose, feels that the world into which he was born is nothing less than a conspiracy against the cultivation of his talent—which attitude certainly has a great deal to support it. On the other hand, it is only because the world looks on his talent with such a frightening indifference that the artist is compelled to make his talent important. So that any writer, looking back over even so short a span of time as I am here forced to assess, finds that the things which hurt him and the things which helped him cannot be divorced from each other; he could be helped in a certain way only because he was hurt in a certain way; and his help is simply to be enabled to move from one conundrum to the next—one is tempted to say that he moves from one disaster to the next.

-from “Autobiographical Notes,” in the Collected Essays from Library of America

Writing is hard.

Every form is difficult, no one is easier than another. They all kick your ass. None of it comes easy.

-in a 1984 interview with The Paris Review

Don’t be too ironic.

You are speaking to an old rat. I find much of so‐called avant‐garde writing utterly trivial. If there is no moral question, there is no reason to write. I’m an old‐fashioned writer and, despite the odds, I want to change the world. What I hope to convey? Well, joy, love, the passion to feel how our choices affect the world . . . that’s all.

-from a 1979 interview published in The New York Times

Don’t describe it, show it.

[My first drafts] are overwritten. Most of the rewrite, then, is cleaning. Don’t describe it, show it. That’s what I try to teach all young writers—take it out! Don’t describe a purple sunset, make me see that it is purple.

-in a 1984 interview with The Paris Review

Look deeply.

It is part of the business of the writer—as I see it—to examine attitudes, to go beneath the surface, to tap the source.

-from “Autobiographical Notes,” in the Collected Essays from Library of America

Simplicity is king.

You want to write a sentence as clean as a bone. That is the goal.

-in a 1984 interview with The Paris Review

Write towards truth.

I certainly can’t imagine art for art’s sake . . . that’s a European approach, which never made any sense to me. I think what you have to do, which is the difficult thing about a writer, is avoid slogans. You have to have the [guts] to protest the slogan, no matter how noble it may sound. It always hides something else; the writer should try to expose what it hides.

-from a 1979 interview published in The New York Times

Talent is less important than diligence.

Talent is insignificant. I know a lot of talented ruins. Beyond talent lie all the usual words: discipline, love, luck, but, most of all, endurance.

-in a 1984 interview with The Paris Review

Keep your distance.

Social affairs are not generally speaking the writer’s prime concern, whether they ought to be or not; it is absolutely necessary that he establish between himself and these affairs a distance which will allow, at least, for clarity, so that before he can look forward in any meaningful sense, he must first be allowed to take a long look back.

-from “Autobiographical Notes,” in the Collected Essays from Library of America

Write what you see.

I don’t try to be prophetic, as I don’t sit down to write literature. It is simply this: a writer has to take all the risks of putting down what he sees. No one can tell him about that. No one can control that reality. It reminds me of something Pablo Picasso was supposed to have said to Gertrude Stein while he was painting her portrait. Gertrude said, “I don’t look like that.” And Picasso replied, “You will.” And he was right.

-in a 1984 interview with The Paris Review

Remember why you write.

The bottom line is this: You write in order to change the world, knowing perfectly well that you probably can’t, but also knowing that literature is indispensable to the world. In some way, your aspirations and concern for a single man in fact do begin to change the world. The world changes according to the way people see it, and if you alter, even by a millimeter, the way a person looks or people look at reality, then you can change it.

-from a 1979 interview published in The New York Times

Just keep writing.

Write. Find a way to keep alive and write. There is nothing else to say. If you are going to be a writer there is nothing I can say to stop you; if you’re not going to be a writer nothing I can say will help you. What you really need at the beginning is somebody to let you know that the effort is real.

-in a 1984 interview with The Paris Review

I consider that I have many responsibilities, but none greater than this: to last, as Hemingway says, and get my work done.

-from “Autobiographical Notes,” in the Collected Essays from Library of America

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Mark Sisson on Eating for Menopause

Metabolism and Menopause: What Does Research Suggest Is the Best Dietary Strategy?

By Mark Sisson

After my recent post on keto for women, I got a lot of feedback. One of the most common themes: “But what about menopause?” I heard from dozens of women in both the comment section and in emails who were having trouble losing weight and dealing with the varied symptoms of menopause. Was keto the answer? Was Primal? Were they doing something wrong?

Rather than start with the assumption that going keto or Primal is the best way to deal with menopause, I figured I’d start from ground zero, drawing on the extensive scientific literature on diet and menopausal symptoms to see if I could arrive at some general trends and make recommendations.

But first, why do we even experience menopause? In the big picture, menopause is rather rare. Besides humans, orcas and pilots whales are the only other species where the females live significantly beyond their reproductive age. The average age of menopause hovers around 50, and most women can expect to live another 30 years or so. That indicates its importance. It wouldn’t have been uniquely established and preserved in just a couple species if it didn’t provide huge benefits to those species. And sure enough:

  • The presence of grandmothers in a population enhances maternal survival during childbirth.
  • They provide childcare so parents can be more productive, whether it’s going back to work in the office or foraging for nuts and tubers in the bush.
  • They impart wisdom to the youngsters—and to the community as a whole.
  • And, though parents probably wouldn’t count this as a positive, they spoil grandkids rotten.

To boot, many women I know say menopause ushers in the most focused, creative time of their lives. If their reproductive years (particularly perimenopausal ones) were characterized by hormonal chaos, they often find themselves grateful to be free of the perpetual fluctuation. But mostly they say they’ve entered a time of life when they feel more confident and self-possessed. (Joan Erikson, wife of noted psychologist Erik Erikson as well as author, psychologist, teacher, and artisan, writes insightfully about this transition.)

All this said, menopause can also present its share of physical difficulties for many, if not most, women at some point. But do these effects need to be as unpleasant as they often are? I’d venture to say no. I have a few posts in mind here, but let’s dig into dietary strategy today.

First, let’s establish what changes physiologically during menopause. What are the most common symptoms of menopause? And what does the evidence say about how diet affects those symptoms?

Weight Gain

This might be the most common complaint women have during and after menopause: Weight goes on more easily and is harder than ever to scale back. Nothing seems to work, even the dietary interventions that previously did.

Why is weight loss so hard after menopause?

  • Energy expenditure and basal metabolic rate both drop with menopause.
  • Lower levels of estrogen increase appetite and reduce satiety.
  • Lower levels of estrogen reduce activation of brown fat, the metabolically-active body fat which burns energy.
  • If you’re experiencing another common side effect of menopause—insomnia—your sleep-deprived brain’s reward system will be more susceptible to the allure of junk food.
  • You’re older. As we age, weight becomes easier to put on and harder to remove for both men and women.

Despite these roadblocks, there is hope. Something has to work. And even if it doesn’t work as well as you’d like, there’s something that works less badly than the others.

For one, glycemic load matters. Many studies find that the glycemic load of a postmenopausal woman’s diet is a strong predictor of her fat mass. Remember that glycemic load is often a roundabout way of indicting carbohydrates without saying “carbohydrates.”

What really does seem to work is the classic paleolithic diet: lean meat, fruit, nuts, vegetables, eggs, berries, and fish with no grains, legumes, sugar, dairy, potatoes, or added salt. 40% of energy from fat, 30% from protein, 30% from carbohydrate. Over 24 months, menopausal women on a paleo diet lost more fat, more waist circumference, and more triglycerides than those on a standard “healthy” diet.

Perhaps it’s the protein. Another study found that postmenopausal women who ate the least protein (under 0.8 g protein per kg bodyweight) had the most body fat and were physically weak. Those who ate the most (over 0.8 g per kg, 1.1 g/kg on average) had the least body fat and were more physically capable.

What’s clear is that weight loss has beneficial effects on menopause symptoms. It reduces inflammation, improves cancer biomarkers, regulates sex hormones, and improves endothelial function—to name a few. What’s also clear is that weight loss can have negative second-order effects in menopausal women, like bone mineral loss and loss of lean mass. So, it’s worth doing, and doing right. You have to strike a fine balance between losing weight and avoiding muscle loss. As your satiety signaling is likely thrown off, you might have to make a more conscious effort to track your food intake and make sure you’re not overdoing it.

Heart Disease

Before menopause, most women are protected against heart disease, at least compared to men. Once menopause sets in, a woman’s heart disease risk goes way up. A good diet for menopause, then, would have to reduce heart disease risk. What does the evidence say?

In overweight post-menopausal women, high-fat diets (where the fat came from cheese or meat) improved atherogenic biomarkers compared to a high-carb diet. Both the cheese-based and meat-based diets increased HDL and Apo-A1; the high-carb diet did not.

Meanwhile, high-carb diets were persistently linked to chronic low-grade inflammation and an elevated risk of heart disease in postmenopausal women.

Moving beyond broad macronutrient ratios, are there any specific foods or nutrients that play an outsized role in menopasual women’s heart health?

Dark chocolate may help with reduced endothelial function, another risk factor for heart disease. Postmenopausal women who consumed high-cacao chocolate saw their endothelial function improve in one study.

Green tea appears to help postmenopausal women reduce fasting insulin, a major but underappreciated risk factor for heart disease (and a host of other bad conditions).

Bone Loss

As estrogen plays a big role in the maintenance of bone mineral density and overall bone health, bones get weaker and lose density during menopause. A woman’s risk of osteoporosis, fractures, and other bone-related incidents skyrocket during and after the transition.

Intake of long-chain omega-3 fatty acids—found in fish, shellfish, and fish oil supplements—is associated with higher bone mineral density at the hips and spine (the most crucial parts for aging people) in osteopenic women. Osteopenia is lower than normal bone mineral density. It isn’t quite osteoporosis, but osteopenia can often progress into it.

Glucose loading actively impairs bone remodeling in postmenopausal women. The problem doesn’t go away just because you exercise, either. And it gets worse the higher your postprandial blood glucose goes.

The normal bone-relevant nutrients become even more relevant after menopause:

  • One study in postmenopausal women found that yogurt fortified with vitamin D3 improved bone mineral density, while regular yogurt without the vitamin D3 worsened it.
  • Another found that a gram of calcium a day wasn’t enough to stave off bone mineral loss in menopausal women during weight loss; they needed at least 1.7 grams per day.
  • Another study found that a collagen supplement increased bone mineral density in post menopausal women.

Brain Fog

Everyone’s heard of “pregnancy brain.” There’s also “menopause brain.” It’s characterized by brain fog, memory loss, lack of focus, and other cognitive symptoms.

Postmenopausal women who ate low-glycemic breakfasts had better cognitive function than those eating high-glycemic breakfasts.

Some research also suggests a role for micronutrient supplementation in menopausal cognitive symptoms:

  • Vitamin C can help. In one study, postmenopausal women who took 500 mg of vitamin C a day improved verbal recall, naming, and repetition. These improvements were accompanied by reductions in beta-amyloids linked to Alzheimer’s disease.
  • Resveratrol may help. In one study, it increased cerebral blood flow and improved overall cognitive performance during a series of tests, particularly in verbal memory.

Hot Flashes

Both fish oil and soy isoflavones have been shown to reduce hot flash occurrence, with soy acting faster on severe hot flashes and fish oil doing a better, but slower job of targeting both moderate and severe hot flashes.

Folic acid supplementation reduced the severity, duration, and frequency of hot flashes. A better source for folic acid are folate-rich foods, like leafy greens or liver.

Breast Cancer

A woman’s risk of breast cancer rises after menopause. After menopause, the inflammatory status of the breast goes up almost as a general rule. This explains at least part of the elevated risk for breast cancer postmenopausal women exhibit, and it’s true whether or not the woman is overweight or not. Menopausal breast fat is inflammatory fat.

Among Japanese women, those who ate the most noodles and other carbohydrates had higher levels of estradiol, which other studies have found correspond to a higher risk of postmenopausal breast cancer. Those who ate the most fish, fish fat, and saturated fat had lower levels, which correspond to a lower risk. Of course, the authors opine that this suggests eating more fish and say nothing about saturated fat, but we can’t really expect them to contradict decades of propaganda—I mean, evidence.

Oxidative Stress

Menopause is generally inflammatory; along with waist circumference, menopause status is an independent predictor of low-level inflammation and elevated hs-CRP (one of the most fundamental markers of inflammation). There’s a low level simmer going on, and it can cause a lot of problems. Diet can make it worse, or make it better.

High-glycemic diets—also known as diets high refined carbohydrates—are associated with more oxidative stress in post-menopausal women (for what it’s worth, the same is true in premenopausal women). Intakes of insoluble fiber and PUFA, including omega-3s and healthy sources of omega-6s like nuts, were linked to lower levels of oxidative stress.

Paleolithic diets, on the other hand, reverse inflammatory markers in postmenopausal women.

Folate supplementation reduces oxidative stress and normalizes blood pressure in postmenopausal women.

Genetics matter, of course. A growing body of evidence indicates that various genetic variants can influence the effects of some of these dietary interventions on the symptoms and risks associated with menopause.

Among Japanese and Japanese-Brazilians, for example, soy isoflavone intake protects against breast cancer only in those with certain genetic variants. It’s neutral otherwise.

There’s more to managing menopause than just diet, of course. Lifestyle decisions matter too. But that’s beyond the scope of today’s post. Maybe in the future.

So, can we make any recommendations? What are the takeaways? We see some trends emerge.

Dietary Takeaways

Avoid Refined Carbohydrates

Pretty much every study that looked at fast-digesting, low-nutrient sources of carbohydrates found they have a negative effect on most concerns of menopause, including bone health, breast cancer risk, heart health, weight gain, inflammation. Now more than ever, don’t eat them.

Limit Carbs To Only What You Use

If you’re an incredibly active woman, someone who CrossFits and runs sprints and swims laps and plays with grandkids, you can get away with more carbohydrates, and may even thrive with a few extra. But make sure you actually need those carbs.

Soy Isn’t a Bad Idea

I know, I know. Soy is evil, or something. But a number of studies indicate that soy can improve the overall menopause experience. Stick to whole soy vs isolated soy components. (And avoid GMO.) If you can include something like natto—fermented soybeans—a few times a week, you’ll get the benefits of soy isoflavones and vitamin K2.

Drink Green Tea

Several studies show that green tea (or green tea extracts) counters or ameliorates multiple menopause symptoms.

Eat Leafy Greens

Greens are a great source of folate and calcium, critical nutrients for postmenopausal health.

Eat Adequate Protein

1.1 g/kg should be the lower limit.

Eat Fish

A can of sardines (bone-in) provides omega-3s, calcium, and excellent protein.

Lean Toward a Higher-Fat-AND-Protein, Lower-Carb Diet

Make sure to stick with Primal foods.

Menopause isn’t easy for most women. Things are changing, hormones are in flux, and eating strategies you once employed may no longer work the same way. There’s no magic diet that fixes everything, but there are lots of little changes that can tilt the scales in your favor.

Try them out and let me know what you think.

In the meantime, I’d love to hear how you’ve handled menopause via diet. Thanks for reading, and take care, everybody.

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Most investment professionals are aware of the arguments for and against gold as an investment, and many hold strong opinions on its merit.  One way to categorize investments is that they may be held with one of three objectives:  as a short term trade with pre-determined price or other limits related to the position itself, a tactical position with specific buy-sell criteria based on macro or other data not as directly related to the position itself, or buy-and-hold, with sell criteria based on time and portfolio characteristics.

By considering gold in this way, there are very specific pros and cons:

Short term trade:

  • CTAs commonly trade gold using technical criteria, as it is a commodity.
  • It has been possible in the past to find success with trading systems that take advantage of known patterns (daily price fixing in London, for example).  However, with the advent of global round-the-clock trading, these patterns are becoming harder to find and exploit for the small trader.
  • Gold is not an income producing asset.  In fact, unless you are holding the physical gold, you will have to pay someone to hold it for you.  This makes it difficult to value using fundamentals, although there are many ways that “correct” gold prices have been determined by analysts.

Tactical position:


  • Diversification.  Over the last 10 years, the 60-day correlation between GLD and SPY has ranged from -.63 to +.67, with a majority of the last 5 years in negative territory.  The correlation between GLD and AGG has been -.32 to +.76, mainly below .5.  (Source:
  • Historical value.  Everyone “knows” that gold will always hold its value.  Cost of a suit in ancient Rome, etc.  This faith in gold is similar to the faith placed in fiat currency, like dollars or bitcoin.  Another similarity to currency is that gold has few industrial uses, and is mainly held as either jewelry or purely to store value.

One fact regarding gold is that its return is highly volatile, and perceived mis-pricing can persist over long time periods.  This is an argument in favor of short term trading and some tactical positions, but against buy and hold as well as other tactical strategies.

In today’s market, the best argument in favor of an allocation to gold is tactical.  It’s not a wild conspiracy theory to be concerned about the central bank balance sheet or levels of government debt, which are not just a US but a global phenomenon.  On July 30, Jamie Dimon, chairman and CEO of JP Morgan Chase, was quoted in USA Today:  “I don’t want to scare the public, but we’ve never had QE,” Dimon said. “We’ve never had the reversal. Regulations are different. Monetary transmission is different. Governments have borrowed too much debt, and people can panic when things change.”  It may become apparent over time that QE reversal is not an issue, just as time has proven that the mere existence of all that extra money did not cause a hyperinflation.  It may also become apparent over time that governments are finding ways to deal with their excess debt and other obligations.  If you decide that gold is a good way to hedge these risks, be sure you also have an exit strategy.  Otherwise this becomes a buy and hold position, which is not likely to result in positive real returns.

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