Comments on: The Fugger Portfolio

By: Clive

Clive — Thu, 15 Apr 2010 19:04:05 +0000

Had great foresight that Fugger. Considering that the first stock exchange never started until around 75 years after his death (Amsterdam 1602).

More likely the quotation is a translation error. Fugger’s ‘Bonds’ were in the form of Crown loans to Charles V and Emperor Maximilian I in return for regular payments. As for property he achieved rental income against Agriculture and Mines. He sought out to monopolise copper in order to keep prices high and achieved such in Hungary, but didn’t quite achieve global monopolisation. He was also into mercury mines, silver etc.

So in some respects he did own shares in businesses, had a form of bonds through Crown loans, rented agriculture (property) and did have a high interest in metals (precious and other). Not sure however that he might have even been aware of inflation/deflation concepts.

By: craigr

craigr — Tue, 13 Oct 2009 16:18:07 +0000

Jim,

I have no idea. I found a few references about Fugger’s ideas and thought it sounded interesting in principle but didn’t go much further. The main thing really is that other people apparently have considered diversification among stocks, bonds, cash and hard assets a worthwhile strategy in the past. I mention it mainly to illustrate that principles of diversification based on economic environments has worked in many times and places.

By: Jim

Jim — Tue, 13 Oct 2009 16:10:34 +0000

Great read and a very interesting topic. With regards to the Jacob Fugger portfolio what would the 25% of bonds be investing in? Would it be the same as Harry Browne’s PP and be investing in long term treasuries? Thanks in advance.

By: craigr

craigr — Tue, 06 Oct 2009 05:55:01 +0000

Stratton and Matt,

Thanks for the updates. I’m actually not quite as opposed to REITs as Browne. If you are investing in a REIT index that is a proxy for property ownership it can have some uses. I’d consider this more in the variable portfolio however and not part of the core permanent portfolio holding. Earlier this year I considered buying some REITs for my variable portfolio. They aren’t up as much as the overall stock market (about +11% YTD but still almost -50% from their 2007 high), but if the real estate situation gets sorted out there is a real possibility that REITs could recover strongly.

By: stratton

stratton — Tue, 06 Oct 2009 04:32:09 +0000

Another thought on 25% in real estate of the Fugger portfolio:

Since REITs are leveraged an investor might hold about half (12.5%) the 25%. Put the rest into the bond portion. That way the REIT volatility won’t get the portfolio out of whack.

By: stratton

stratton — Tue, 06 Oct 2009 04:27:07 +0000

Fixed the para:

Right now, Oct 2009, REITs are deleveraging and issuing new shares while retaining cash. The market has reacted favorably to the share dilution because the lower leverage is seen as more favorable. As in the REIT will survive and not go bankrupt.

By: stratton

stratton — Tue, 06 Oct 2009 04:25:46 +0000

I think what CraigR is referring to is the leverage some REITs use. They are allowed by law to invest their money in treasuries or other real estate securities too. So a REIT with extra cash might hold them in REIT preferred stock or mortgages and leverage up on property mortgages for the ones they own. They may not be an actual mREIT, but they are getting close.

Right now, Oct 2009, REITs are deleveraging and issuing new shares while retaining. The market has reacted favorably to the share dilution because the lower leverage is seen as more favorable. As in the REIT will survive and not go bankrupt.

I wish someone would have a REIT index fund for low leverage REITs.