OK, I've had a chance to read the interview. In short, El-Erian recently wrote a book in which he postulates that that the U.S. consumer is in big trouble and that consumer spending will slow dramatically, but that this does not necessarily spell doom for the global economy because the growing middle class in emerging markets is becoming such a force. He says that while a typical U.S. investor has 80% of their stock holdings in U.S. companies, they would be much better off having a third in the United States, a third in industrialized countries outside of the U.S., and a third in emerging markets.

Of course, this decoupling theory is nothing new, but the article is definitely worth checking out. If what El-Erian says is true, it is quite bullish for commodities in the long run. I am considering adding this book to the list of ones that I want to buy. The main reason why I haven’t bought it already is the advertisement that I saw for it in a financial paper the other day. At the bottom of the ad, it had a testimonial from a famous person who had read the book and was saying how great it is. Who is this person you ask? Alan Greenspan gruppppp (excuse me I just threw up in my mouth).

Deej

Thanks for posting, Deej. Interesting stuff. I might have to check out his book (despite the fact that Greenspan rec'd it!).

Coincidentally, I've been working on an asset allocation strategy for my 401(k) recently (probably goes without saying that it's a fund portfolio). As of today (could change tomorrow!), I've come up with the following broad allocation:

52% US Stocks		
	26% Large cap	
	26% Small and Mid-cap	

30% International Stocks		
	15% Developed Markets	
		10% Large cap
		5% Small cap
	15% Emerging and Frontier Markets	
		12% Emerging Mkts
		3% Frontier Mkts

18% Real Estate and Commodities		
	10% REITS and real estate operating companies (REOCs)	
	8% Broad-based commodities (via an ETF (DBC) and an ETN (DJP))

My working assumption is that the portfolios of US domestic stock funds include roughly 20-25% foreign stocks. If this assumption is true, that means roughly 40% of my allocation is US and 40% is international.

FWIW, I thought a 15% allocation to emerging markets was aggressive. I don't know many folks who would ratchet up their EM exposure to 33%.

Huk