I’ve been spending most of my free time now on risk mitigation strategies because while most people go on with their day to day lives, they seem to be oblivious to growing problems with the financial system.
CNBC had an interesting article entitled Treasury Secretary Bessent says White House is heading off a ‘guaranteed’ financial crisis that is a must read for anyone with an investment portfolio.
“What I could guarantee is we would have had a financial crisis. I’ve studied it, I’ve taught it, and if we had kept up at these spending levels that — everything was unsustainable,” Bessent said on NBC’s “Meet the Press.” “We are resetting, and we are putting things on a sustainable path.”
I’m not sure if the current “resetting” is actually working. The stock market has lost $4 trillion since the new administration came in and we haven’t even started the tariff trade war because that doesn’t start until April 2. If this is the cure to the problem then perhaps we’re better off with the disease?
I try to avoid politics on this personal finance blog but given the huge impact the current administration is having on everyone’s portfolio and livelihood, I can’t escape the correlation between the two any more.
I am now starting to throw every strategy at this market including collar strategy, covered calls, put buying and selling, and diversification. The ultimate goal here is to mitigate a lost decade or worse, a great depression.
The Everything Lost Decade
My primary concern is having a “perfect storm” of housing, stocks and bonds all correct at the same time. The charts below show the “lost decade” for stocks and housing.
S&P 500 “Lost Decade”
Investing in January 2000 wouldn’t have been a prudent decision unless you had a 20 or 30 year time horizon.
Housing “Lost Decade”
If you bought a house in 2007, it would take until 2013 for you to be “even” with your purchase. Again, the only way this would have worked out for you is if you planned on staying in the home for 10+ years.
I honestly don’t know what is going to happen. We are in whole new territory of ballooning debt in housing, auto loans, student loans, credit cards, commercial real estate loans, and national debt that something has to give.
Share The Wealth
What is your plan for a new lost decade in housing, stocks and bonds? Let me know in the comments below.
I wish I had a plan, but I do not. Or better said, my plan must be the default of continue on and try to ignore the noise. It’s probably not the “best” plan considering my age (57), but better than sell low and buy high. I’m seriously debating (internally) whether or not it’s in my best interest to update my net worth spreadsheet at the end of this quarter. Sigh
Thanks for the insight. I am not entirely sure either and I had planned on retiring next year but we’ll see how bad (or good) the market turns by the end of the year. It’s clear that the economy is slowing and that’s generally not good for markets.