3 Principal Themes for Making Long Term Allocation Decisions

1. People and companies are working on great things everyday. Everyday a new solution is being discovered, a new client is being signed up, a new and more efficient process is being developed.

2. Natural Resources and Precious Metals are getting more depleted. At the same time, someone (see point 1) is working on a substitute or alternative away from that resource or metal.

3. Debt that is currently exists is either maintaining the same nominal value or is getting paid down.

How do I incorporate these themes into my long-term allocations?

1 - 1. I know I should always have some allocation to stocks. Everyday there is some company that is doing something that is making their company more valuable to society. However, on the flip side, what they're doing may effectively eliminate the need for another company. Thus my general slant is to invest in small caps and avoid large caps.

2 -1. I know there will always exist the risk of short-term shocks to the supply of natural resources and metals. This can create huge pricing shocks that affects our society, such as the price of gas and oil. But longer term the great people on earth will find a substitute away from that resource. So I'm willing to buy commodity related ETFs, but my time frame will be less than stocks. And I won't care that I miss out on a long-term rally within commodities.

3-1. I know when interest rates are low I want to consider taking on debt (borrowing). If I take out a mortgage to buy a house, an the home price increases, the value of debt will not increase with it. Conversely, I don't want to provide debt (lend) when interest rates are low. This is effectively what buying a government bond does.