The Time Machine: What’s the best way to protect ourselves against the next market crash?If you had a time machine, and could go back to 2007, which stocks and other investments would you hold, buy, or sell? How about 1999, or even 1929? Do the best investments just prior to all market crashes have anything much in common?
How likely would your picks be to maintain, increase, or recover their value during and after the next crash?
Are you not worried, because you know you are invested in great companies, so can securely ride out a crash until the market resurges – which it always does? Do you see a drop like that as a good thing, because you can buy great stocks at bargain prices?
Or are you concerned enough to want to keep at least 10% of your investments in ”safe havens” – if so, what do you think the best ones are?
Do you think, like Travis does, that the next crash will be very different from the last one?
Do you think it is more likely to be caused by a cyclical panic sell-off, by bad government policies, by corrupt banking practices, by disruptions or shifts in the world monetary system, or some combination of these?
All thoughts, opinions, personal stories, and quotes from useful sources are welcome. Let’s share information, and learn from each other. Let’s figure out the best way to prepare, so we can have peace of mind and not be so fixated on financial and economic news that we don’t fully enjoy life.
This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.
“No stock market has out-performed the American over the long run. One estimate of long-term real stock market returns showed an average return for the US market of 4.73% per year between the 1920’s and the 1990’s.” – p. 126
“Nothing illustrates more clearly how hard human beings find it to learn from history than the repetitive history of stock market bubbles.” – p. 123
From “The Ascent of Money” by Niall Ferguson, 2008 paperback edition.
So – two days ago I pulled half my silver coins out of the storage vault and sold them to double my trading account. Before this year, that’s about the last thing I thought I’d ever do. I put in my limit orders for Tues. a.m. – feeling pretty good about my strategy – then started to feel a little uncomfortable about it. Wondered if I’m missing something, now that I’m more deeply investing in stocks. I may think I’ll be positioned to do well no matter whether the market keeps heading up for years, or crashes this month. But there are seasoned investors who visit or subscribe to Gumshoe who have been through 2008, some have been through previous crashes too. They would be bound to know a lot about wealth preservation. Even if I don’t see direct posts from any of them here, I’m going to research the archives for articles and comments by Travis that are relevant to this topic. Just phrasing the topic questions brought me more clarity on the subject, and I think just reading the questions is likely to help somebody else, somewhere, who otherwise wouldn’t have thought about this at all.
Just now becoming a new irregular, I have not read Travis’ comments concerning “…that the next crash will be very different from the last one.” Has he written how it will be different … longer, deeper, more swift … ?
Tim Wood, of cyclesman.com, would disagree with the basic statement. His research says that all have the same basic ‘DNA markers’ as a prelude to the crash.
Rick
Actually Travis used the word “crisis” not “crash”, here’s his comment which was a response to comment #10 under the the article linked below:
I think the TED Spread is perhaps an indicator of credit risk — though we now know that LIBOR was essentially a made up number manipulated by banks for many years. If you look at a longer term relationship between LIBOR and the S&P 500 it seems to me that the spread was perhaps an early indicator of the credit crisis that took down markets starting in 2008… but otherwise the two aren’t particularly connected… the last time the TED spread went over 50, in late 2011, it presaged a three year bull market without any meaningful corrections. I suspect that following the TED Spread would be a good way of looking for a future credit crisis, but I doubt that the next crisis will be caused by credit risk and counterparty risk… my guess would be that the next crisis will be very different from the last one.”
http://www.stockgumshoe.com/reviews/dailywealth-trader/dailywealth-trader-recommended-going-long-a-special-gold-fund/
Maybe Travis did use the word “crisis” but you used the word “crash” in the 4th paragraph of your article”:
“Do you think, like Travis does, that the next crash will be very different from the last one?”
That’s what rick pionkowski was quoting.
Just for the record.