The first year is in the books, on the bet between our CPA friend Lars and his rich Uncle Nils. Bold Nils is betting his $500,000 on precious metals, mostly gold. Lars, both naturally more cautious and investing as fiduciary of a family trust, has diversified among stocks, bonds, REITs, and a portion of Nils's metals mix. They are having dinner in the first week of the new year, and comparing results.
Nils's small September 30 lead has vanished in the last three months. Gold, silver, and platinum are down at least by half since then. Only palladium has improved. Lars, neither scientific nor handy, has learned as a by-product of the wager that palladium goes into catalytic converters. He guesses maybe it's improved with car sales.
Lars's 13.30% increase for the year is nearly double Nils's 7.65%. REITs and global and US stocks have all gained more than 15%. Even intermediate corporate bonds yielded almost 7%; Lars sees that as coming to an end before long (more on that in the two men's predictions, in next week's blog).
It's their custom that the winner for each quarter gets to choose the drink at the dinner where results are unveiled. After revealing but before discussing, Lars has ordered them a bottle of good Malbec, rich and purple befitting a good year.
Even with bragging rights, Lars doesn't really feel vindicated by this first year's results. He would have been content with Nils's almost 8% return. In an illogical way he would almost have preferred it, to maybe leave more room for his trust to grow in 2013. Lars is a little uneasy with his 2012 success, but the Malbec is good. Tomorrow he and Nils will rebalance to their initial allocations and start another year. They turn now to making predictions.