Photo Credit: Boston Public Library || Should end the saying “Slower than molasses in January“
Life is somewhat predictable in the short run. That said, there are always surprises that make us say, “This has never happened before.” Here are a few examples:
- The policy response to the current C19 crisis. (Note: the C19 crisis itself is not new — we have had the Spanish Flu and the Black Death, which were far worse.)
- For those in the US, 9-11-2001 was a huge surprise.
- Few expected that the financial crisis in 2008 would be so large.
- No one expected the interest rates would rise so high 1979-82.
- The high inflation era of the ’70s was a total surprise. In one sense, what is more amazing is how much it has made Americans fear inflation. That said, look at the fear the Germans have of inflation.
Personally, I have always taken moderate risk in my financial dealings. My asset allocation has always been between 80/20 and 60/40 (risky/safe). I don’t go “all out,” nor do I cower in fear. I look for opportunity, but I always leave something on the side in case something goes wrong.
Unexpected things go wrong with considerable frequency, particularly when private & public debt levels get high. With little slack in the system, panics have a greater impact. This is a cost of the Fed encouraging higher levels of debt. They create the higher severity of the crises, because high debt levels leave the economy inflexible. People and institutions are relying on debts being paid.
As a result, with the highest debt levels we have ever seen in the US, I am going to improve the already high credit quality of the equities and bonds that I purchase for myself and clients. This is not sustainable, and if the Fed continues its path to becoming the universal bank of the US, we will face other problems, notably no economic growth.
My main point here is own some assets that are safe. I own short-term bonds that pay little, and I don’t care that there is almost no yield. I know that the principal is secure, and that if things get worse, I have buying power. I used the buying power back in March. I will do it again.
Make sure you own a decent amount of safe assets.
A very good point of view, it reminds one never to swing for the fences and never to cower in fear. A moderate approach in unusual times.
Where are these “safe assets”???
Lots of people were indoctrinated to think US Treasuries were “risk free”, because earlier generations of Americans paid their debts (or at least pretended to). Under both political parties so called leadership, the US Government has not achieved balanced spending during David’s lifetime. (I said balanced SPENDING not balanced budget).
Neither party has a plan to control spending, both are currently trying to outspend the other with temporary welfare programs that somehow never go away.
Prisons use ramen noodles and cigarettes as currency, and to be blunt those are looking far more stable than the US dollar. And the rest of the G7 are also in poor fiscal shape, with demographic headwinds worse than the USA. Gold has a tendency to get confiscated unless you have a hidden tomb to bury it in (and many of those were plundered). Oh, and you have to be dead, otherwise someone will follow you to your hidden gold stash.
Property taxes and mandatory rent waivers have made real estate into just another confiscation vehicle. Under Marxism, even if a lying politician fraudulently labels it democratic socialism, there are no safe assets.
If you are going to recommend “safe assets”, please explain what assets would meet that criteria. Crates of dehydrated ramen noodles? Cigarettes? Toilet paper rolls?
To the extent that Marxism, under whatever label, prevails… the US standard of living will collapse like it did in Venezuela (and everywhere else it has been tried)
No safe assets under Marxism.
Remember, while the college grads in the US are throwing temper tantrums to get Marxism, the people of Latin America are risking their lives (literally) to escape it.
David,
Did you see the poll taken on LinkedIn’s CFA Institute subgroup, regarding Charlottesville changing the CFA exam format to maximize the CFAI’s revenue? Over 70% of membership opposed, but member opinions mean nothing to the bureaucrats in Charlottesville.
It used to mean something to pass the CFA exams, but the value of membership was questionable. Now the exams are questionable, and Charlottesville has told membership to go stuff it.
There is no point in maintaining membership anymore. LOTS of people were dropping membership before the covid lockdown, lots of companies had stopped reimbursing membership dues, financial industry layoffs caused many to drop membership too.
And now Charlottesville tells members that the bureaucracy is more important than members.
I know you try to be diplomatic David, but to anyone with even a little self worth, this latest insult from Charlottesville went way over the line. Time for all members to stop funding a bureaucracy that does not care about us at all.
(PS — some may wish to remain adjunct members of their local society)
OU812: I saw that poll on LinkedIn, but can no longer find it. I wonder if Charlottesville threatened LinkedIn to take the poll down. When I saw it, 71% of CFA members in the poll were against cheapening the exam and the value of the designation. It is already a big problem that members who pass three exams in three years are considered the same as dimwits who take ten tries. Now the bureaucrats in Charlottesville want to cheapen the exams further with online testing, as if cheating isn’t a big issue already.
I dropped membership. My employer doesn’t care. My clients are not swayed by the annual “click here if you have more ethics than Enron” question that gets sued before they take another $300 fee for themselves. The knowledge I gained studying for the test many years ago does not require an annual membership fee.
None of the unethical bureaucrats in Charlottesville has explained why they keep a massive endowment fund of OUR money instead of funding programs for existing members. They have to pay for John Rogers mistress and ex-wife I suppose. The tryst was reported in WSJ and NYT dealbook, but Charlottesville pretends like it didn’t happen.