What on earth are we doing?

Image courtesy the Tidal Basin Group website about tropical storms.

Note: none of this is investment advice. It’s the opposite. See important disclosures and disclaimers here.

Big news, investors! Another round of outrageous investment products are being made available for you. Soon you’ll soon be able to “invest” in funds that track the performance of your favourite NHL team. But if you just can’t wait for uncorrelated asset classes like sports gambling, why not pick up scraps of legal fees from US court or litigation cases (not live so I won’t link to it). And if that’s still not good enough you can invest in the market of predicting catastrophes (or not). If there’s no catastrophe, you win. If catastrophe strikes, you lose. You can take the opposite approach too, if you want.

What on earth are we doing? Are the returns investors have earned in traditional assets like stocks and bonds – and even gold – over the last hundred years not good enough? Why is the demand for these alternative “investments” so powerful that the market have to fill the void? I try hard to understand, but I just don’t get it.

The pitch from these alternative investment managers always has to do with correlation. “These assets are uncorrelated to traditional investment markets” is what they say. Who cares? What matters is how they perform compared to a traditional investment.

Bonds and money market funds are ballast (dead weight). Stocks grow but you have to deal with volatility. But if that’s just not good enough, you can add an Eastern Conference NHL All-Star ETF or a US Law & Order: Criminal Intent Fund* to potentially and/or ever-so-slightly adjust your portfolio’s risk/reward profile. If you still want more, why not pick up some catastrophe bonds. I hear the hurricane season will be light this year.

The fees for these alternative, uncorrelated “investments” will be outrageously high. Alternative “investments” always are. That catastrophe ETF charges more than 2.5%. I can’t wait to see the fees the hockey and lawyer funds will charge.

For the love of everything good and fine in the world, stop it with this stuff. Investors: if you want to invest in the success of your NHL team, buy some season tickets. At least you can see your team play live, and if you can’t make a game, sell your tickets. If you want some legal excitement, I hear the old legal procedural TV shows from the 00s are pretty good, and if that’s not enough, go sit in a few trials at your local court. And catastrophe? If you think it’ll be a calm tropical storm season, book a trip to the Caribbean between June and November. If you think it’ll be a bad season, load up on bottled water and MREs (meals, ready-to-eat) and head down the Florida Keys during hurricane season. I’m sure you’ll make a pretty penny.

I made these up. They’re not real. But I fear they will.