That is all absolutely useless information. People on 2+2 were arguing to go/stay in cash in 2011 lol because the pending crash was obvious due to the obvious high valuations. The only sane play imo is to stay in the market, continue investing at an AA you are comfortable with, and ride out the inevitable crashes. And hope like hell we don’t become the next Japan. I don’t always follow this advice myself, but I should.
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Yeah you definitely can’t sit out and I’m not advocating for it. That being said investing in stuff that generally does fine in a crash is not the same as sitting out. You still get decent returns.
I think the really important thing is to lever up (preferably in ways that can’t be margin called ldo) super hard when the market crashes so that you can pick up as much stuff cheaply as possible.
Personally I have to keep a certain level of near cash reserves on hand because my personal income is tied pretty tightly to the economy and fluctuates a lot, but everything above that has to go somewhere.
I’ll freely admit that one of my most deeply held ambitions is to get to a place where I can invest in real world stuff instead of financial products because the ask is much more reasonable and the returns significantly better (you do have to do a considerable amount of work to offset this).
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Okay, but this glut of demand is a result of a paradigm shift in thinking by the powers that be. Whenever there is the slightest hiccup in the economy, the conventional wisdom at the Fed, Treasury, etc. is that the money printer should go burrrrrrr. A bigger hiccup just means you need to burrrrrrr harder. Thus, the only way it makes sense to stay out of stocks is if you are predicting a collapse of the entire system AND have somewhere better to put your money as the US $, Treasuries, the US housing market and a whole lot of other investments are also going to collapse in such a scenario.
Yeah I definitely think the currency devaluating is how the next crash works out. Nominal values stay the same but real values decline… and the derivatives bets against those products don’t get triggered.
This is just the most probable thing IMO and again I have no crystal ball so I’m not predicting any kind of time frame for it. I think anyone who thinks they know what comes next in anything but very broad strokes is either delusional or selling something. We’re in totally uncharted waters economically right now because of that paradigm shift.
Still definitely a time for fear and not greed.
A possible outcome could just be that Bernanke solved banking though, lol. Just end up like Japan, done growing significantly and just sputter along without anything sexy happening in either direction. That seems most likely if you ignore that Americans are so batshit crazy/greedy/believe in our exceptionalism so strongly that they’ll never accept it and demand that America be Made Great Again, Again.
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I don’t see that working out for us tbh. I also think it’s very unlikely that Bernanke solved banking. At best he figured out the next level of banking which propels us into a new era with new problems. What’s for certain is that millennials absolutely cannot count on getting the returns that previous generations did and need to make at least some other arrangements for paying for retirement.
Because let’s be very clear a large drop in the real prices for literally anything would be great for millennials. We’re in a deep hole relative to previous generations financially. We would welcome a drop in prices for education, healthcare, housing, or retirement… and a market crash followed by a bear market for 1-5 years is what a discount on retirement would look like.
There are always going to be booms and busts. Keeping your money out of the market because you have a hunch the next bust is around the corner is a sure recipient to miss all the gains. Time in market always beats timing the market.
Nah, we had a drop in 2008 and it didn’t work out for me. Need a job to have money to invest. We should have printed harder and faster but that was Obama/R’s fault for being deficit scolds in a massive recession, not Bernanke’s.
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I’m not advocating timing the market. I’m advocating picking investments that are likely to perform well in a bust. For example Berkshire Hathaway is extremely diversified (inside the US LDO) and has a long history of getting paid hilarious amounts of money to bail out other companies when the market drops. There is also some big cap value stuff in Korea and Japan that likely won’t lose much ground if the US market tanks.
Buying stuff like that isn’t the same as sitting out in cash. Cash might be the worst investment asset there is right now EV wise.
At current mortgage rates someone making 85k and not otherwise debt laden could pretty much get approved for that much with no real issue. Even if you had 600 credit, the FHA would loan you over 500k and only need 15k down all-inclusive. And in many places you could get a down payment loan (or grant) to cover that.
Our co-op recently received an application for a 200k purchase from a young buyer who had just got a job making 50k. She had a 40k down payment grant from the state and literally no money at all. Her only assets were 2k in cryptocurrency bought with a margin account on Robin Hood. I think her parents paid for the application fee.
I should note that this wasn’t even close to the worst application we got in the past two years.
I don’t think the next big crash hits employment like 2008. It also depends on what you do for a living. If you think you’re going to lose your job in a crash that’s something you should be working on.
If you aren’t significantly out earning the median household income in the US personally that’s the only economic thing that matters in your life. Investment decisions will not help you when you have an income shortage. The median household income in the US doesn’t provide enough free cash flow after cost of living to ever retire, have decent healthcare, or really have any hope at all. It’s just a grim march toward something going wrong and either dying or going bankrupt. It doesn’t matter what kind of investment strategy you use when your biggest risk is getting sick and getting bankrupted by the medical system.
No one advocated timing the market. Im just telling you that I spend all day in my day job looking at investments, mostly credit related, and its as bad out there or worse than it was in '06/'07 (luckily, probably, a bit less leverage in the system)
Everything (exagerration but for simplicity) is predicated on unsustainably cheap debt and too much money chasing too few returns and it is going to get real ugly when the tide goes out imho. Basically money printer better go brrrr forever, we can’t ever have 2 percent fed rate again.
So yeah I’m doing all the normal investing stuff you are supposed to do, but when my savings get cut in half at some point not gonna bat an eye in surprise and my retirement calcs assume we’re gonna see that at some point.
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Millennials have gotten fucked every step of the way, so I see no reason to think the stock market will be any different. Whatever the worst possible time for a crash is for the millennial generation, that’s when a crash will happen. Maybe that’s not for a few more years, idk. Like LG, I’d prefer sooner to later.
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I mostly just think the headline is spot on.
In effect, many of the key ideas underlying economic policy during the Great Moderation — the period of relatively steady growth and low inflation from the mid-1980s to 2007 that also seems to be a high-water mark for economists’ overconfidence — increasingly look to be at best incomplete, and at worst wrong.
One thing I completely agree with is that a significant, sustained interest rate increase would cause a huge amount of pain. Like borderline instant depression if rates rise even moderately (something like 300+ basis points). The fed just seems completely all in on not letting that happen, which is totally uncharted territory. Nobody knows how this will turn out.
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Which makes me a bit worried about inflation, supply chains are all mega fucked and everyone is jamming through price increases. Interested to see what inflation looks like in 2022, but don’t think fed can raise rates in response
Well, if it makes you feel any better, I’m gen X and felt the same way. Was too young and made too little to invest much when the market was ripping throughout the 90’s. Then right when I was sort of established and in prime earning years the 2000 and 2008 crashes. During the long slow way out of the 2008 hole lost my job in a terrible job market and was out of work for 2.5 years right at the age when age discrimination becomes a thing. Went back for MS degree as an old fart and took on student debt. Spent all of our life savings and almost put house on the market (rather than lose it) before I finally found employment.
You just have to roll with things, do the best you can, and hope you ultimately don’t get fucked.
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This is definitely true for the portfolios for people in a conventional balanced fund made of of stocks and bonds. At this point, a significant increase in interest rates will drive down the price of both bonds and stocks. This basically breaks the whole concept of a bond/equity balanced portfolio which is supposed to benefit from negative correlations between equity and fixed income.
Has been for 10+ years now. I’ve never owned a bond and likely never will.
I would lean more toward broader diversification beyond stock and bond indices. Although fees can become a problem. If you have access to target date funds in a 401k alot of them will already incorporate stuff like commodities and real estate.