Bearish books and what you can do if you agree with their dire prognosis
This weekend’s Financial Post contains two articles from me that may be of interest to readers of this site. One looks at two new books that are very bearish on the global economy and the stock market the next few years: Harry Dent Jr.’s The Great Crash Ahead and a new revised edition of Aftershock, originally published in 2009. You can read it here although the print edition has nice cover shots not only of the two new books but several more like it that have appeared over the years.
The other article, here, talks about how baby boomers in particular are starting to run out of investment time horizon. My point is that if you’re not prepared to go through another 2008, you either have to take some risk off the table now before things get worse, or use the kind of portfolio hedging strategies I’ve mentioned in this site. (See for example the talk I gave at the MoneyShow).
It is of course possible that the bottom is now in and that most of the portfolio damage the markets can inflict has already been inflicted on investors. Gloomy as the environment appears, the market has a way of doing what you least expect: who expected gold to plunge $100 this week?
How to have you equity cake and protect the downside
With interest rates so low, most of us still need equity exposure. When dividends pay more than bonds and carry with them the prospect of future dividend increases, that’s not an asset class you want to be out of, bear books or no. By hedging your long-equity exposure with inverse ETNs you can have your cake and eat it too — in theory anyway.
As for the two new bear books, read what Dan Hallett has to say in the “attic” above the version in the paper: he talks about “confirmation bias” and how bullish investors tend to avoid bear content and vice versa. We all tend to seek confirmation of our existing worldview but there’s value in considering the other side.
In the case of these two books, as I point out in the review, they don’t even agree with each other in their bearish prognosis. One thinks interest rates will rise, the other fall; one thinks the US dollar will rise (Dent); the other that the greenback will fall. Dent thinks gold will fall while Aftershock thinks it will rise. However, they both agree the China bubble will burst at some point and when it does, it will be bearish for stocks globally.
A comment on this site: while I do try and keep it updated with new content, such as what you’re reading now, you can always keep up with new FP articles and new Wealthy Boomer blog posts by reviewing the scrolling titles to the right. And of course, I’m on Twitter and Facebook (click on icons top right of this site) and also Linked-In.
A recommendation: Flipboard app for Apple iPads
If you have an iPad, I strongly recommend getting the free “Flipboard” app. It presents all these feeds in a sort of electronic magazine format. In particular, if you’re on Twitter, I suggest you “follow” my FindependenceDay list there. That list follows 500 good sources on financial independence and when you view it on Flipboard, it will be like a timely continually updated electronic magazine on Findependence Day.
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