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… Read More »
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… Read More »
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.
Yes, sorry Rusty I was really correcting myself not you! And should have thought to say that.
I mean “correcting myself not Rick”. As an endless fountain of errors lately, I think I’ll get some sleep and come back tomorrow, I had a post on the real history of gold confiscation planned for today but it can wait a day. That’s a subject that the extremists on both sides have distorted a lot so I want to lay out what really happened with actual reliable references that anyone can check.
I’ve adjusted my strategy slightly, and am feeling very comfortable with it once again. Here it is, for anyone either interested or willing to play devil’s advocate: 1) When the markets get nervous, precious metal funds always go up until people calm down again. When markets crash, those funds (and good mining stocks) keep going up for quite a while, sometimes years. If this is news to you, look for yourself – you might start with the $SLV chart, from October 2008 to present. Even better, look at what happened to gold and silver spot prices after the Internet stock… Read More »
I see nothing I would disagree with. I have HL as a core holding and have done well selling covered calls against it. Also small lots of Sprott phys gold and silver funds,Sand for royalty and misc. others. When the market crashes I think it will happen at lightening speed given how the world financial structure never sleeps. The world is operating on a vapor money supply IE the ability to tax by governments and the ability of debtors to repay based on assets and future earnings. Future earnings are ephemeral and so is the ability to collect taxes when… Read More »
I like the idea of a list of high quality gold / silver stocks to trade around. Like many others, I’m holding quite a few losers in precious metals equities, keeping them for the possible moonshot. In addition to your best assets list, Arch1, I would add a reliable rifle and ammunition.
jack I am well equipped tho I have no intent of doing a Custers last stand ,,,,,,firing off a 12 gauge shotgun at night [ala Joe Biden] does earn the notice and respect of the neighbors.
Farmers and ranchers all have guns for “predator control” and practice the three S system,,,shoot shovel and shutup,,,,,,and we all respect each other. Few coyotes and feral dogs here-abouts.
Patricia, would you care to give more details on your strategy in #3? I got into mining stocks around 2007 and am sitting on a substantial loss. I’m mostly still holding because the underlying concerns that got me into them in the first place are unchanged, but it would be nice to do something more intelligent with the funds in the meantime. Fortunately I am a bit ahead on physical gold/silver, no plan to sell those.
bezoar, I have no details to offer, it’s a work in progress, and you are better off reading everything Travis has said on mining stocks. (You can just search this site with “gold” to get some good results). I don’t plan to become an expert on mining stocks, not interested enough to spend all the time, and figure why should I when I have so much reason to trust the folks behind SGDM? And Travis’s occasional analysis of majors? I think Rick Rule said that about 80% of the junior mining companies are junk (I think Dr. KSS mentioned once… Read More »
Hi Patricia, thanks for your reply. More specifically, I wanted to stay in the precious metals space but don’t have the time or knowledge to stay on top of the mining stocks. Was curious about which precious metal funds you have been using. Your strategy makes a lot of sense and would be a good way for me to diversify out of these individual miners. If you don’t feel comfortable elaborating more on your strategy, no worries. I agree with you completely about the majority of mining and biotech stocks being junk… I have learned this the hard way, and… Read More »
Amen to that bezoar! SGDM is my favorite, I tend to favor Eric Sprott’s endeavors because he saw and sees the “financial house of cards” rottenness which hurt the world economy in 2008 and is going to hurt us further. I’ve been listening to him since about 2007. His biggest mistake was in trying to make actual predictions about where the prices of gold and silver would end up in how many years. He’s stopped trying, it’s unknowable. I can easily forgive anyone for those mistakes though because NOBODY dreamed that central banks would do the insane things they’ve now… Read More »
SGDM: For heavens sake….between September 2014 and now you would have lost 20+%. I thought you were trying to guard against a mere 10% loss ! Looks like youre creating your own crash.
Thanks for the recommendations. I think I will sell the individual stocks and convert to SDGM or GDX. Are you trading back and forth between mining indexes and gold backed funds for your strategy? I will have to look at some charts to figure out one of my own. I have previously owned CEF which is backed by holdings and not a “paper” fund, probably similar to the other ones you mentioned. Unfortunately tax issues can get complicated in these allocated funds, which was one advantage of miners. Yes I fully agree with you to be cautious any time someone… Read More »
Alan, re: SGDM: you are anti-gold, pro-cash, you’ve made that clear. So I wouldn’t expect you to think that this is an excellent buying opportunity for this fund. But you’ve also said you’re a buy-when-there’s-blood-on-the-streets guy. Mining is cyclical, and is in a bottom (unloved) right now. This sector has its own blood-on-streets phases. If it goes down more, I’ll be even happier, because it gives those of us who like precious metals as a safe haven even more opportunity before it moves back into an uptrend – which it always, always, does eventually. Read Travis’s analysis of SGDM if… Read More »
I have a problem with that word DIVERSIFY. If I back all the horses in a race, will I profit or just lose more slowly? So, if Im gonna lose (which of course I would) would I be better to invest in T Bills, which return less than inflation, or stick my money in a ‘high’ (ha ha) bank deposit? In short, if all I want to do is preserve capital, wheres the least loser? Given that all the well paid bankers, hedge funds, economists, casinos, bookies etc have a hand in my wallet…..is there such a thing as a… Read More »
Absolutely Alan dividends and DRIPS in Aristocrats IMHO Best2ALL!-Benjamin
From zacks, relevant to this thread if it works:
Consequences of the Stock Market Failing
http://finance.zacks.com/consequences-stock-market-failing-5834.html
Best2ALL!-Benjamin
That seems to be pretty much the standard view based on the last half of the 20th century.That said I feel it is a little too simplistic as we are now experiencing things that have never been seen before in the history of this nation and perhaps the world. I am not prepared to go to length here but the bank bailout [crony capitalism in my view} and the subsequent actions of a greatly politicized Fed. in bringing interest to essentially zero which has forced huge amounts of money into the stock market artificially pumping it up is readily seen.… Read More »
I think I agree with both of you: the Zacks article is a good basic description of the downward economic spiral related to market crashes – but “unprecedented” is a word we hear all the time now in regards to global gov’t debt, central bank policies, and the trillions in derivatives held by investment banks and hedge funds. One of people who tried to sound the alarm before the 2007/2008 financial crisis is Janet Tavakoli, and what I like the most about her is that she’s an expert on derivatives – one of the most complex subjects on Earth –… Read More »
Patricia thank you for the link,,I had not previously known of Janet Tavakoli , but I tot.ally agree with her, It is painfully obvious to me that the fraudulent housing bubble and resultant failure could not have happened without venial complicity of the Govt, including both political parties. In my opinion a certain Barney Frank acted as the best Senator money can buy and his legacy is ongoing and being built upon by others. I think of the scene in DR. Frankenstein’s Monster when the peasants arm themselves with pitchforks and torches and go hunting.
Seems to me to be all a question of timing (what isnt?). I started trading straight after the 2007/8 crash and invested with Martin Weiss through something called The millionaire contrarian portfolio (spit!!). I was totally naive in those days. He advocated leveraged shorting of the $ and buying gold at $1800 per oz. As you can imagine, that hasnt worked out too well since then and it simply has to be the worst rated investment strategy on the net. But of course, had he been right, he’d have been beatified (a rare privileged for a Jewish guy 🙂 .… Read More »
I was hoping you’d show up here Alan, a contrarian viewpoint to keep us thinking and questioning our approach – by “our” I mean we who think PMs are a safe long-term bet. I think of them more as a savings account that can never go to zero, and as insurance against the clueless folks who always seem to end up gaining political power everywhere on this amazing, beautiful, but chaotic planet of ours. You’re right, my main question can’t be answered with any certainty – but the focus here is intended to be how to prepare for something less… Read More »
Ah! Then the answer is simple. 2008, Have enough cash to last you 2 yrs ….forget whatever stock you own….drink G&T’s, and youll be back into a hazy profit by 2010. You see, if you have more than enough cash in the bank, neither fear nor greed is a problem.
I guess you trust