If he addressed the question, I missed it. (Yes, I read the whole article.)
I get that thinking medium and long term, and ignoring the possibility of a six month recession, is sound advice. However, given the state of the world (for instance, with Russia bringing up nuclear weapons) there are perfectly reasonable people thinking it would be prudent to expect a not-routine financial hit.
> Peter Lynch once said, “Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves.”
> The same is true of recessions.
> How do you prepare for one? The same way you prepare your finances for anything else.
> Instead of changing your portfolio because you think a recession is coming, create an investment plan that is durable enough to withstand a wide range of environments (one of which includes economic contractions).
> Give yourself a margin of safety with a high savings rate and an emergency fund not because it will help you survive a recession but because it will help you survive any number of curveballs life will inevitably throw at you.
> Pay your bills on time and create a good credit score not because it will help you during a recession but because it will help you anytime you need to borrow money.
It's a couple of vague abstract sentences which will make sense to people who are financially savvy, but that specific target audience would already know this advice.
From my take on the article, I think you just can't think about such short term events like the impact of the Ukraine war. It's most probably going to be back to some type of status quo in one or two years, so making bets on it is more speculating than investing.
So the advice here is to "stop trying to predict the future" and "make sure you have a resilient portfolio". That's as useful as saying "if you want to be smart, don't be stupid, simple!". Looks like marketing fillers are reaching new bottoms recently.
This is very bad and generic advice and it smells of just another a wealth manager advertisement. Junk.
If you have a mortgage and it is below property price rates (most likely), keep it or refinance for lower rates if you can. If you buy with mortgage, don't get over leveraged. Even if the property doesn't lose value, if you fail to pay your mortgage the bank will fire-sell it for lower to recoup their money leaving you in the red. And beware of bills piling up with inflation! Buy the smallest possible you can afford in a recession.
Now for savings. You can't compete with Goldman Sachs, JP Morgan, the bots, professionals. But you can take the other side of the bet of very short-sighted investors. Just do plain old and boring Sector Rotation. Pick large and liquid ETFs and REITs. Pick them very diverse.
Also mind there is likely a scenario of new and higher taxes, price controls, and a lot of other fun things to cover the upcoming Unfunded Liabilities Crisis, the Pension Crisis, public and private debt, etc.
If you are above 500k, I'd start looking for a second passport and offshore accounts. Have plan B and C.
I am surprised that during a recession, stocks usually tank.
You can either own part of the industry that produces stuff. Or you can own money with which you can place bids on the stuff the industry produces.
During a recession, the industry produces less. Now at first you might say: That is the answer. The industry produces less. So it has less value.
But if the amount of money is the same, the bids per piece of stuff should go up. Because there is the same amount of money bidding on fewer things. So the industry should still make the same amount of money.
Any easy answer to this, why stocks tank during recessions?
The "money" in the economy is actually mostly credit, and during a recession it contracts (usually from defaults) so the amount of "money" in the system is now less
Since the value of a stock is it's future cash flows discounted to the present and it's had it's current cash flows impacted, usually that makes forecasts revise those future earnings downward lowering the valuation of the company.
Other reasons are assets are sold to make up for lost income needed to pay for expenses, and stocks being liquid often get sold first.
Investors also need money. Somebody who loses their job has to access their investments to pay rent. This adds downward pressure on the market since people must sell.
> But if the amount of money is the same, the bids per piece of stuff should go up. Because there is the same amount of money bidding on fewer things. So the industry should still make the same amount of money.
That’s not how it works, so your premise is flawed.
Even if it is how it works, that’s not directly related to the stock market, because stock market valuations are speculative based on future earnings, not present earnings. Earning less money is not a prerequisite to a reduced stock valuation; often, growing slower than previously anticipated is enough.
To hoard liquid cash for buying opportunities. If the prices of commodities goes way up, individuals and companies need cash in hand more than the long term assets. Cash is king.
> Because there is the same amount of money bidding on fewer things.
But the reason there are fewer things is because producers are responding to less demand for things. It's not like a recession just knocks out production leaving demand untouched, causing the price to move along the demand/supply curve. You won't have the same amount of money as before being bid on the fewer things.
Whenever stocks go down, the real reason is that there is fewer people buying stocks than selling. The justification is obvious: if we know a recession is coming, the gains in stocks will take a hit, and people don't want to buy something that will lose value. So investors will stop buying stocks and some people who are more sensitive to price drops will sell their stocks.
I guess because the differences between the neoclassical homo economics and the biomachine homo sapiens become relevant when scared? The approximation of people as rational actors falls apart.
"The war is going to cause massive food shortages in the next year since so many agricultural commodities come from Ukraine and Russia." this argument alone makes this story laughable, it seems the poor sod who wrote this must have Google blocked, as it is very easy to check how much food Ukraine and Russia exports (in fact, Russia still has to import food). I was only waiting for another "argument" that China bought 50% of World supply of wheat, which was a bullshit spread my mainstream media.
"Inflation was already high and is only going to get worse because of the war". Why? US, French, British military equipment is hot now, nobody buys from Russians anymore as we all see how great is their stuff. Typically after the wars we saw rapid economic development, not stagnation. In fact a little inflation will help, as there will be no more stupid ways of "investing" money (cryptocurrencies are only the most pathological resource, there were many others, less popularized) so maybe there will be time for some real investments not hoarding money only.
"Supply shocks were already bad and are only going to get worse", what actually people were buying from Russia except oil and gas? What other Russian product you've bought in past 5, 10, 15 years?
China is clearly staying away from all this "trouble" that Russian have, in fact, China learned a quick lesson about true power of USA and NATO and their determination to support a country, which is not even NATO member. China also learned how great is post-soviet era military equipment, which both China and Russia still use and base its power on this. All those "innovative" solutions like Russian SU-57, Armata T-14 tank sound so great and fearful, the problem is that they don't really exist, I suspect that China might have the same issue. Maybe that's why we haven't heard about any recent Chinese provocation near Taiwan.
So, the question is, why so many bullshit in this article, as usually, the answer depends on what this guy is selling, and we learn this at the very end of the article:
"I also had Bill Artzerounian on the show to answer questions about the benefits of working with a tax advisor and the tax implications of selling a huge loser in your portfolio."
Ah look not sure if you've been following the detail but with a lack of supply of wheat, fertiliser, oil and gas this contributes massively to risk of food shortages.
You personally may not have been buying product from Russia or Ukraine but others will have been. They now have to look for replacement options creating market pressure.
Wheat and crops sourced from other countries still have to be harvested, so the oil prices going up (even if that was a single factor) can risk reduction in harvest and crop yields.
Oil supply is just one of the issues right now. Once you add fertiliser, crops, not to mention unpredicted or unreported factors, this is going to get painful for some.
And here is one of the most commonly-used chemical processes used to produce ammonia for fertilizer -- it often uses natural gas as an input: https://en.wikipedia.org/wiki/Haber_process
Food scarcity and food price increases could cause large amounts of human suffering. Despite any ongoing conflicts I think it should be a priority to maintain and improve food supply chains.
> Why? US, French, British military equipment is hot now, nobody buys from Russians anymore as we all see how great is their stuff.
Oil, for one. Which has knock-on effects for the transportation of just about every other product out there. Then there's the natural gas that Germany is dependent on, and Germany is a major manufacturer / exporter.
> what actually people were buying from Russia except oil and gas?
Oh, so we have to worry only about the global consequences of oil and gas prices. Is that all? Only oil and gas.
Using the Internet to put out their brand and philosophy out there so like-minded customers come to them instead of trying to chase down leads. And everyone who doesn't need a wealth manager / family office gets interesting content.
Aggregate household wealth may not be a great indicator of economic health. Demand may be up for many things, but do people have the money to sustain their lifestyle with the price increases? Distribution matters. If the top people saw the bulk of the gains, it won't help much because they can't spend it all themselves (see recent comments by Melinda Gates, the Giving Pledge, etc).
My wife and I used a web based inflation calculator to see how 10% inflation over ten years would effect the long term purchasing power of our retirement savings. A little scary, but it is good to plan long term how money can be saved by reducing expenses (for us, travel is a large expense) while still maintaining a good quality of life.
IMVHO every Citizen must do one single analysis in two questions: "do I think that those who led us to the recession can fix their mess?"; "who profit from that recession?".
Answering those question it's enough to start going to the court asking for removal of actual neoliberals in power for a long tail of crimes, the first one for crime against humanity. Otherwise that means Gustave Le Bon and Eduard Bernays was right saying that most humans are just animals in a flock to be led. So Democracy is impossible and abusing human being for profit is a normal activity...
[+] [-] jimhefferon|4 years ago|reply
I get that thinking medium and long term, and ignoring the possibility of a six month recession, is sound advice. However, given the state of the world (for instance, with Russia bringing up nuclear weapons) there are perfectly reasonable people thinking it would be prudent to expect a not-routine financial hit.
So it is at the least a very misleading headline.
[+] [-] throw0101a|4 years ago|reply
> The same is true of recessions.
> How do you prepare for one? The same way you prepare your finances for anything else.
> Instead of changing your portfolio because you think a recession is coming, create an investment plan that is durable enough to withstand a wide range of environments (one of which includes economic contractions).
> Give yourself a margin of safety with a high savings rate and an emergency fund not because it will help you survive a recession but because it will help you survive any number of curveballs life will inevitably throw at you.
> Pay your bills on time and create a good credit score not because it will help you during a recession but because it will help you anytime you need to borrow money.
[+] [-] politelemon|4 years ago|reply
[+] [-] SkipperCat|4 years ago|reply
[+] [-] artemonster|4 years ago|reply
[+] [-] alecco|4 years ago|reply
[+] [-] fangorn|4 years ago|reply
[+] [-] alecco|4 years ago|reply
If you have a mortgage and it is below property price rates (most likely), keep it or refinance for lower rates if you can. If you buy with mortgage, don't get over leveraged. Even if the property doesn't lose value, if you fail to pay your mortgage the bank will fire-sell it for lower to recoup their money leaving you in the red. And beware of bills piling up with inflation! Buy the smallest possible you can afford in a recession.
Now for savings. You can't compete with Goldman Sachs, JP Morgan, the bots, professionals. But you can take the other side of the bet of very short-sighted investors. Just do plain old and boring Sector Rotation. Pick large and liquid ETFs and REITs. Pick them very diverse.
https://www.investopedia.com/search?q=sector+rotation
https://www.investopedia.com/search?q=etfs+for+sector+rotati...
https://www.investopedia.com/search?q=recession+proof+invest...
Also mind there is likely a scenario of new and higher taxes, price controls, and a lot of other fun things to cover the upcoming Unfunded Liabilities Crisis, the Pension Crisis, public and private debt, etc.
If you are above 500k, I'd start looking for a second passport and offshore accounts. Have plan B and C.
[+] [-] TekMol|4 years ago|reply
You can either own part of the industry that produces stuff. Or you can own money with which you can place bids on the stuff the industry produces.
During a recession, the industry produces less. Now at first you might say: That is the answer. The industry produces less. So it has less value.
But if the amount of money is the same, the bids per piece of stuff should go up. Because there is the same amount of money bidding on fewer things. So the industry should still make the same amount of money.
Any easy answer to this, why stocks tank during recessions?
[+] [-] bgitarts|4 years ago|reply
Since the value of a stock is it's future cash flows discounted to the present and it's had it's current cash flows impacted, usually that makes forecasts revise those future earnings downward lowering the valuation of the company.
Other reasons are assets are sold to make up for lost income needed to pay for expenses, and stocks being liquid often get sold first.
[+] [-] UncleMeat|4 years ago|reply
[+] [-] helen___keller|4 years ago|reply
That’s not how it works, so your premise is flawed.
Even if it is how it works, that’s not directly related to the stock market, because stock market valuations are speculative based on future earnings, not present earnings. Earning less money is not a prerequisite to a reduced stock valuation; often, growing slower than previously anticipated is enough.
[+] [-] newah1|4 years ago|reply
[+] [-] jallen_dot_dev|4 years ago|reply
But the reason there are fewer things is because producers are responding to less demand for things. It's not like a recession just knocks out production leaving demand untouched, causing the price to move along the demand/supply curve. You won't have the same amount of money as before being bid on the fewer things.
[+] [-] lbotos|4 years ago|reply
For a stock price to fall someone has to sell, and someone has to buy, so someone is taking the long position in said company.
Additionally, the stock price is the belief on future profits so if the horizon looks worse then the past, then people may want to shift investments.
[+] [-] imglorp|4 years ago|reply
[+] [-] coliveira|4 years ago|reply
[+] [-] GlennS|4 years ago|reply
If you're an individual with some spare cash, buying stocks during a recession is probably a good idea, even if they falling.*
If you're a population, you probably don't have much spare cash.
There's some time lag stuff going on in there too.
*Blah blah 1990s Japan blah blah global diversification.
[+] [-] CPLX|4 years ago|reply
Because of the way the math works relatively small changes in future earnings and risk can have a large impact on asset sizes.
[+] [-] pengstrom|4 years ago|reply
[+] [-] piokoch|4 years ago|reply
"Inflation was already high and is only going to get worse because of the war". Why? US, French, British military equipment is hot now, nobody buys from Russians anymore as we all see how great is their stuff. Typically after the wars we saw rapid economic development, not stagnation. In fact a little inflation will help, as there will be no more stupid ways of "investing" money (cryptocurrencies are only the most pathological resource, there were many others, less popularized) so maybe there will be time for some real investments not hoarding money only.
"Supply shocks were already bad and are only going to get worse", what actually people were buying from Russia except oil and gas? What other Russian product you've bought in past 5, 10, 15 years?
China is clearly staying away from all this "trouble" that Russian have, in fact, China learned a quick lesson about true power of USA and NATO and their determination to support a country, which is not even NATO member. China also learned how great is post-soviet era military equipment, which both China and Russia still use and base its power on this. All those "innovative" solutions like Russian SU-57, Armata T-14 tank sound so great and fearful, the problem is that they don't really exist, I suspect that China might have the same issue. Maybe that's why we haven't heard about any recent Chinese provocation near Taiwan.
So, the question is, why so many bullshit in this article, as usually, the answer depends on what this guy is selling, and we learn this at the very end of the article:
"I also had Bill Artzerounian on the show to answer questions about the benefits of working with a tax advisor and the tax implications of selling a huge loser in your portfolio."
[+] [-] thevagrant|4 years ago|reply
You personally may not have been buying product from Russia or Ukraine but others will have been. They now have to look for replacement options creating market pressure.
Wheat and crops sourced from other countries still have to be harvested, so the oil prices going up (even if that was a single factor) can risk reduction in harvest and crop yields.
Oil supply is just one of the issues right now. Once you add fertiliser, crops, not to mention unpredicted or unreported factors, this is going to get painful for some.
[+] [-] jka|4 years ago|reply
Here's an example from 2021 where fertilizer shortages within North America caused an expectation of price increases: https://www.theguardian.com/environment/2021/nov/25/fertiliz...
And here is one of the most commonly-used chemical processes used to produce ammonia for fertilizer -- it often uses natural gas as an input: https://en.wikipedia.org/wiki/Haber_process
Food scarcity and food price increases could cause large amounts of human suffering. Despite any ongoing conflicts I think it should be a priority to maintain and improve food supply chains.
[+] [-] throw0101a|4 years ago|reply
"Russia-Ukraine war sends wheat futures to 14-year high"
* https://globalnews.ca/news/8663571/russia-ukraine-war-wheat-...
"Forget Oil. Putin’s War Is Wrecking the Wheat Market."
* https://foreignpolicy.com/2022/03/02/russia-war-wheat-econom...
"The importance of Ukraine and the Russian Federation for global agricultural markets and the risks associated with the current conflict"
* https://www.fao.org/3/cb9013en/cb9013en.pdf
May not be a big deal for rich people / countries, but other places may not be as fortunate and that could lead to turmoil:
"Nigeria’s need for wheat is rising—and so is the price"
* https://finance.yahoo.com/news/nigeria-wheat-rising-price-14...
> Why? US, French, British military equipment is hot now, nobody buys from Russians anymore as we all see how great is their stuff.
Oil, for one. Which has knock-on effects for the transportation of just about every other product out there. Then there's the natural gas that Germany is dependent on, and Germany is a major manufacturer / exporter.
> what actually people were buying from Russia except oil and gas?
Oh, so we have to worry only about the global consequences of oil and gas prices. Is that all? Only oil and gas.
[+] [-] throw0101a|4 years ago|reply
* https://awealthofcommonsense.com
* https://ofdollarsanddata.com
* https://theirrelevantinvestor.com
* https://ritholtz.com
* https://www.youtube.com/c/TheCompoundRWM
Using the Internet to put out their brand and philosophy out there so like-minded customers come to them instead of trying to chase down leads. And everyone who doesn't need a wealth manager / family office gets interesting content.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] giantg2|4 years ago|reply
https://money.yahoo.com/pandemic-wealth-inequality-180311704...
[+] [-] not_math|4 years ago|reply
> Therefore, a recession is now inevitable.
And two paragraphs below:
> Nothing is 100% certain in the markets or the economy.
[+] [-] sushibowl|4 years ago|reply
> There seems to be a growing consensus among smart people I follow right now:
i.e. the conclusion that a recession is inevitable is not the author's own, but just an argument coming from "smart people the author follows."
[+] [-] post_break|4 years ago|reply
[+] [-] rat_1234|4 years ago|reply
[+] [-] lupire|4 years ago|reply
[+] [-] SketchySeaBeast|4 years ago|reply
[+] [-] DeathArrow|4 years ago|reply
[+] [-] mark_l_watson|4 years ago|reply
[+] [-] a1445c8b|4 years ago|reply
[+] [-] ed_balls|4 years ago|reply
[+] [-] kkfx|4 years ago|reply
Answering those question it's enough to start going to the court asking for removal of actual neoliberals in power for a long tail of crimes, the first one for crime against humanity. Otherwise that means Gustave Le Bon and Eduard Bernays was right saying that most humans are just animals in a flock to be led. So Democracy is impossible and abusing human being for profit is a normal activity...
[+] [-] engineer_22|4 years ago|reply
[+] [-] btbuildem|4 years ago|reply
[+] [-] GoodJokes|4 years ago|reply
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