Real assets for real people
“The Revenge of the Real” is a book by Benjamin Bratton that explores the implications of the COVID-19 pandemic on politics and society, advocating a “positive biopolitics” that effectively manages life and health in a post-pandemic world.
But if you were expecting from this post a discourse on biopolitics, my apologies. I’ve borrowed from this book’s title because it’s an apt description of what’s happening in the investment world. The imaginary, the artificial, the digital, the drivers of investment returns for several years, are being supplanted by the real, the tangible, the things that if you drop them on your foot, they hurt.
Those evanescent bits of digital nothing, so long touted as the new “digital gold” are becoming passé; the real thing is what people want. Artificial intelligence is being found to depend on real energy and materials for its value. It’s slowly dawning on investors that man cannot live on information alone.
And that just because you can, doesn’t mean you should.
The essentials of life are all material things. Matter and energy. Information merely describes their arrangement. No manipulation of information can fix your leaky faucet. You can’t live in a data structure or eat large language. And you sure can’t delight your sweetie with a beautiful bitcoin ring.
Commodities are the new what’s old is new again. Things that can’t be manufactured out of thin air. Real things, real estate.
Which one will do best tomorrow or next week? Heck if I know. My advice to investors is unchanged; diversify. Don’t become enamored of any one; worship is for idols and gods, not assets. The financial world is a fickle place. But as a broad theme, the real is gaining currency.
I’ve already cited some specific examples; at least six ETFs in this category are featured in the Financology Model Portfolios: CPER, IAU, SLV, PLTM, COMT, REET. I don’t know which one will do best over any given time frame and don’t care, because a good portfolio isn’t just a collection of isolated assets, it’s a gestalt thing.
I’ve also mentioned a few individual stocks such as TPL & FPI for energy and agriculture and may also in the comments, but they are not recommendations. For one thing, if I like them I probably own them and don’t want to create appearance of conflict of interest. For another, my reasons for owning them aren’t generally applicable to others; usually it’s just because I want to. They’re things I feel good about owning. And I probably bought them years ago and that doesn’t mean they’d be good buys now.
But the process might be useful to others. If you buy something you like and believe in, you’re less likely to bail on it during temporary setbacks, a common source of lost returns.
This is not to suggest abandoning everything else. Information technology isn’t going away. Diversification is said to be the only free lunch in investing, and my experience has borne that out.
In general though, it’s important to recognize that the tide is turning. I called attention to this in Rotation and Outlook 2026. And what we’ve seen since only confirms it. After years of the artificial, the real is getting its revenge.
The anti-AI trade is red hot. Here’s what’s beating artificial-intelligence stocks.
The non-AI-disruptible.
Here’s a quotable quote from the State of the Union:
“We have an old grid, it could never handle the kind of numbers — the amount of electricity — that’s needed,” Trump said. “So I’m telling [companies] they can build their own plant; they’re going to produce their own electricity.”
Is Trump reading Finster?
Has The AI Bubble Sprung A Leak?
“And you might have to build your own nuclear power plant to run it all.”
Wow
Car Repo rate at 30 year high, ……………………1.7 million cars
Remarkable that Nvidia posted “blowout” financials and outlook yesterday yet is down several percent since before the announcement.
Like a repeatedly administered drug, tech dazzle is just losing its potency. Imagine what it will be like when tech titans start posting the merely ordinary.
There’s an excellent interview with Russell Napier here once it gets going. I’ve linked to the tapescript. He’s been preaching from the same hymn sheet as yourself for some time and for the same reasons. https://www.themebfabershow.com/episodes/xvzCybmV3b3
Anyway with regards to real stuff this is one anecdote he tells:
“I’ll tell you one more story. I was in New York not long ago talking to the experts in the world of crypto, and I won’t mention their names in AI, and just as a tester, I said, you’d be far better off in shipyards than AI and crypto and everybody laughed. But of course, it’s been true now for about four years. You know, the shipyards have been significantly outperforming Nvidia, but nobody cares because it’s not big, it’s not bright, it’s not shiny. So there is, as you point out, a bull market going on elsewhere.”
Thanks for the lead, ll. Faber has a lot of good stuff.
I often wonder how much of where the media go is a follow-the-money kind of thing. If bright and shiny draws attention, it can draw a lot of money too. Alas it’s not necessarily things that most people want and need. I can’t help but suspect that things like the lack of affordable housing and medical care are connected with bright and shiny things hoovering up such vast amounts of capital.
Eventually reality prevails, and returns have begun to follow.
The Daily Reckoning weighs in:
HALO: The Great Rotation Has Begun
Let’s take a look at some specific investments that are benefitting from the shift. For starters, please see the Financology Model Portfolios. The “compact” 20:20:30:30 ETF portfolio can serve as a foundation … it is already a broadly diversified multi-asset-class portfolio specifically designed to be underweight overvalued supercaps.
It also features allocations to real estate and commodities via REET and COMT. For additional real asset exposure, one could add some metals mining ETFs such as RING for gold mining, SLVP for silver mining, and PICK for all the other metals. Although I have emphasized that metal mining stock is not a substitute for metals themselves, these funds or other mining stock investments can be useful if you want to beef up the metals exposures in your stock allocation.
For energy and agricultural commodities stocks, there are a number of fine ETFs available too. Personally I like to go max upstream to the land that produces them, for ecample the individual stocks TPL and FPI (Texas Pacific Land and Farmland Partners Incorporated). CRESY (I won’t even try to spell it out) is an Argentinian pampas ranchland stock. Gladstone Land (LAND) is another farmland stock. Weyerhauser (WY) owns vast tracts of North American timberland. Residential real estate is another category that is not about to be obsoleted by AI. A couple favorites there are Avalon Bay (AVB) and Camden Property Trust (CPT). St Joe (JOE) owns prime real estate in the Florida panhandle, and Six Flags (FUN) amusement parks, though it has been troubled by belt tightening in its core constituency. CTO owns an eclectic mix of sunbelt retail property and Florida mineral rights.
The individual stocks especially are examples, not recommendations. But in general they are consistent with the real stuff, high asset low obsolescence (HALO) theme. As always, please do your own due diligence before investing. I do highly recommend considering not merely narratives, but getting out the old green eyeshades and digging into the financial statements, especially balance sheets, before investing in any stock. And to diversify, regarding class, sector, geography and style factors not as brick walls but tilts in emphasis.
It’s easier to say what I would avoid. The Nasdaq and the S&P. The all-world stock index fund VT has all the supercap and tech exposure I care to have. But it is in a sense the single least risky stock ticker I know of, because it owns virtually all of them. For it to go to zero the entire world stock of publicly listed business would have to vanish. In which case you have bigger problems than your portfolio value.
It bears emphasis that none of what I’ve said here denies the value of AI. Rather I’m saying that it will require real resources to work, some of which have yet to be fully appreciated, and that a rebalancing of markets is both needed and in progress.
Here’s one of the best pieces I’ve run across to give some idea of where AI came from and where it’s going. Howard Marks. with some help from Claude:
AI Hurtles Ahead