Genies and Asset Prices

In this link, Tyler Cowan of George Mason University is asked the following question:

You are an investor with $10 million planning to cash out in 20 years. A genie appears and offers to send you the price of one but only one asset 20 years from now to inform your investment decisions (a stock, currency pair, commodity, equity index, etc.). What do you want to know?

LINK: MARGINAL INVESTOR

This simple question is actually quite an interesting thought experiment. Cowan states that he would look for “a price with some persistence, and which contains lots of information about other prices too.” He settles on the Shanghai Composite Index. It makes sense that an economist would provide this answer. China is poised to become the world’s largest economy and surely the performance of its major stock index should be a revealing indicator of many other asset prices as well.

Barry Ritholtz of Ritholtz Wealth Management addresses this question and argues that it is fundamentally inadequate.

LINK: BARRY RITHOLTZ.

He claims that discovering only one asset price is a flawed proposition, and that it cannot tell you where to definitively “park your money”.

Ritholtz is right. Asset prices are completely relative, and as wealth managers our mission should be to use comprehensive strategies that account for the fact that we cannot guess the future when managing client portfolios.

But sometimes you can ask and answer a question just for fun. So here I go: I would like to know the name and price of the stock with the largest weighting on the Shanghai Composite. Does that count?