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If I have inflation fears, and I think we are in a stock bubble, where should I put my money. It seems like whatever you do there's more risk now than in the pa

If I have inflation fears, and I think we are in a stock bubble, where should I put my money. It seems like whatever you do there's more risk now than in the past. I'm genuinely asking. It seems like I'm being forced to make bets more so than 10 years ago.

lotsofpulp 5y ago
The house is invested in keeping stock prices stable and rising, and it is not a good idea to bet against the house.
- weatherlite 5y ago
  > The house is invested in keeping stock prices stable and rising, That's not really accurate - the goal of the Fed and all central banks is to keep prices stable and employment levels optimal. If inflation is going out of control then prices won't be stable and employment won't be optimal, in such a case the stock market might have to take a hit. Also, it's pretty clear most central bankers understand the current inequality level is not good.
  - baskethead 5y ago
    The Fed wants inflation. It’s deflation they are concerned about and something that could happen when super bubbles deflate.
    - weatherlite 5y ago
      They want 2% inflation, not out of control inflation.
- jack_pp 5y ago
  That's true until you can't withdraw your funds from the house because the house was a degenerate and fucked with it.
- baskethead 5y ago
  More so housing prices because a large chunk of the financial system is based around house prices. If house prices drop by 25%, it can collapse entire financial systems from the fallout. The only problem is that the fed really doesn’t have much more it can do. Interest rates are too low right now and the market can easily lose faith in the Fed which means utter chaos could occur and deflation will run rampant.
  - yourapostasy 5y ago
    > More so housing prices... The entire edifice of the global financial system is anchored around real estate valuation (the dirt, not so much the improvements and not so much the price) and the network effects wrung out of it by the infrastructure accreted around it (most often paid by public taxation and the bulk of its monetization privatized), only made possible by the structural support embedded into credit finance, accounting and tax policies granted it as an asset class unique unto all others. There can be temporary price corrections, even deep ones, even lasting as much as a generation or two, but at this point so much is secularly bound to real estate valuation that it is one of the pins on the OR-gated-multi-pin hand grenade of single-planet-forever-growth economics. Real-estate-the-dirt valuation is like the core tranches and/or core dynamic allocation strategy of one's investment thesis/theses, or the ballast in a ship. Forex dwarfs real estate as both a market and asset class, but policies do not treat forex as favorably over the long-term and in credit structures. Also, for those who feel hard real estate market data (including visibility into contract terms) is opaque and inscrutably difficult to obtain, you're in for a treat when you get into the forex market (or for that matter, bonds, derivatives, etc.); pricing data is only the tip of the iceberg, and uniform cross-exchange visibility into order books is not seriously available in those markets the last time I investigated trading each of them (would love to be pointed in the right direction if I have my information wrong, though). Depending upon how one models it, residential housing prices are like a second or third derivative off of the above opinionated, personal take on the key interrelationships with my embedded biases/prejudices/blindsights. Once the first two tiers of Maslow's hierarchy are secured functionally into perpetuity at a stable "price", if I had to choose between putting wealth into dirt or into technological advancement to improve our mastery over energy (information being a valuable subset of energy), matter, and spacetime (solving distribution problem spaces being a valuable subset of spacetime), I'd choose the latter every time. In my personal opinion (YMMV of course), as a species we've sufficiently implemented the hypothesis that technological advancement is key to ever-improving conditions for the majority, such that it is worth at maybe a plurality subset of the species seeing where that path leads.
- jshaqaw 5y ago
  This. I’ve been investing professionally for almost 20 years. You know those internet memes with the bell curve iqs…. For much of my career I was contrarian to this view but after watching the government responses to repeated financial asset crises, you don’t want to be positioned too far from what the voting masses will demand if they see their home prices or 401ks sharply decline. Can governments keep this up forever? Logic would say no but then again doomsayers have been arguing about the unsustainability of trends for all five decades of my life. The “smartest” investors I know always see a climax around the corner when finally all the accumulated problems come to roost. Guess what. Last fifty years you didn’t want to be sitting out of assets holding cash. This stuff is hard. It’s really really hard as you get older and your hopefully accumulated savings are high relative to your current income and your expected remaining working life earnings. In your 20s you can ride up a bubble, lose it all, and chalk it up to a cruddy learning experience. Later in life it gets exponentially harder because mistakes are permanent and irrecoverable. You can play the game and risk it in what seem like expensive assets. Or you can sit it out and fall behind without any compounding to create wealth and offset inflation. The latter option isn’t really an option unless you start with so much wealth that you can just spend down principal being eroded by inflation year after year and still have enough. Good luck!
  - deleted 5y ago
    [deleted]
  - ianai 5y ago
    Which is the jump off point for portfolio management theory and risk tolerance approximation. The problem with the future though is wide systemic problems vastly unlike seen previously. The US population will get smaller as the baby boomer generation is larger than its successive generations. That’s almost the definition of negative market growth and in some cases (health care) it is. That also looks like what Japan has undergone for the last several decades. Climate change is a whole other bag of large systemic change likely to increasingly play out the younger the investor is. My point here is the future 50 years will not be as rosey as the last 50 years. And the last 50 years haven’t been exactly rosey. Edit-my proscription would be: people, not just investors, need to be willing to put in a lot of work and potentially ever increasing work into anticipating and acclimating to the world that’s headed our way. Study up on macroeconomics, micro, portfolio theory, some climate and migration patterns, and how your governments and institutions work. Maybe then you have a chance at survival. Also look for ways to make not just your life better but the conditions for life better for your neighbors, family, and future generations. Resist “tearing down the wall keeping the century-high tide away for the sake of a few pennies a brick.” Resist tearing down “the other” because while it might feel viscerally satisfying it actually creates an environment of prosecution and suffering that you will eventually suffer. Embrace the struggle of survival because it’s what we the living must do.
- newaccount2021 5y ago
mupuff1234 5y ago
Short to mid term inflation isn't that dangerous, sure ~5% loss isn't great but it's better then losing it all in the stock market. So I think being somewhat more liquid isn't the worst idea these days. For smallish amounts (30k) you can buy i-bonds that have a 7% return.
- deleted 5y ago
  [deleted]
pragmatic 5y ago
What’s worked for me over my career is having a job in tech. Keep the money in the market and ride it out for the long term. I see no signs that this is going to change in the short term.
lamontcg 5y ago
> If I have inflation fears I think this is actually unlikely in the 10-year horizon because everyone is so paranoid about it. Right now mostly we're seeing supply-chain shocks, not durable inflation. There is some data to back up the great resignation that there are fewer workers now and they have greater negotiation power. But we're a ways off from a general wage-price spiral, and I suspect that we're more likely to see aggressive policy action to kill that off, even if it tanks the economy. Short term though I don't think this is the top of the bubble. Realistically the Fed isn't going to do that much over the next year or two, they move slowly. This correction will probably make them scared to act too quickly and they'll wait to see if it causes a reversion to stagnant wage growth. What I would be most worried about right now is that over the next 2 years the wage growth seems to stick. That will cause the Fed to really panic about inflation and act like Volker to pop the bubble, which should unwind in a deflationary depression. The alternative is that the Fed does nothing and watches a 1970s-style wage-price spiral evolve (which I think would be the actual best outcome since it would be debt relief and would reduce wealth inequality). I don't think the Fed will do nothing though very clearly given how literally everyone is terrified of inflation and wants the Fed to tighten. Austerity is probably coming.
tim333 5y ago
His former company's projected class returns the best seems "emerging value" stocks. (https://www.gmo.com/europe/research-library/gmo-7-year-asset-class-forecast-4q-2021/ https://www.gmo.com/europe/research-library/gmo-7-year-asset...) What exactly you buy to achieve that I'm not sure.
asdfasgasdgasdg 5y ago
People have claimed gold was a hedge against inflation and financial asset bubbles for a long time. Sometimes it is even true. Of course gold has solidly underperformed the market for the last ten years (S&P 500 up hundreds of percent, gold flat). The fact is there is not an investment that exist which will both perform as well as the stock market and be anti-correlated to the stock market during downturns. Imo, this is not something to worry about too too much. If there is a big stock market crash, then you just hold on to your stock throughout. You'll get "poorer", but so will everyone else, since they are all invested the same as you are. For a member of the investor class, whose true needs are likely to be met under any foreseeable circumstance short of complete social collapse, the most important thing isn't maintaining a certain absolute level of wealth. It's maintaining a certain relative level of wealth. And the main way to do that is to avoid consumptive activities that significantly drain your capital at the bottom of a downturn.
- tmountain 5y ago
  This is financial wisdom at its finest. Cooler heads prevail, and the only real way to lose historically is to panic sell. This too shall pass… HOLD
  - baq 5y ago
    Tell that to folks who bought Nikkei 30 years ago.
    - asdfasgasdgasdg 5y ago
      If an economy is not growing then the value of productive capital in that economy will not grow either. That's the root of the problem in Japan, and it has little to do with temporary downturns like a stock bubble popping. To be clear, I don't assert that maintaining relative wealth is the sole concern of an investor. There are others. But I think it's the most important aspect of sudden downturns provided that you still believe in the long term real growth of the productive capacity of the economy you're invested in. Also, if you don't believe in that, then the only practical alternative I'm aware of is to invest in an economy you believe in more, or to invest in a slice of the overall economy you think is more likely to grow. Failing that, there simply aren't any good options.
ajross 5y ago
It only seems like that because 10 years ago everything was going up. Everything is a bet. In bear markets most people lose money. Effectively here, you're just asking for "give me a sure thing" investment advice (which never works). If there was a sure thing to guarantee you wouldn't lose money everyone would do that. But yet we all still lose money.
weatherlite 5y ago
My 2 cents is that the need for diversification is greater now than it used to be; I see both Ray Dalio and Grantham talk about this. How to and into what you should diversify is something you need to research, I'm no expert. What I'm doing is reallocating into relatively unloved assets classes (silver, emerging markets etc). Also having some cash on the side seems to make sense to me though many others disagree. Being 100% invested in the S&P 500 is fine if you don't need the money in the upcoming decade, but the upside is likely not gonna be great. We all know the saying that staying 100% invested in a low cost index fund (like S&P 500) is one of the best ways to increase wealth historically. And yet we all also know that in certain periods and countries this strategy failed miserably (such as investing in the U.S stock market before the great depression, before the dot com, or in Japan before Nikkei collapsed). When I say miserably I mean a lost decade or sometimes 2-3 decades like in Japan. Grantham builds a strong case why this is now happening in the U.S. I hope he's wrong, I'm sure there will be a correction but hopefully it won't be that devastating, but I can't ignore what he's saying. Historically extreme overvaluation ended in corrections.
- baskethead 5y ago
  If you look at the 2009 crash, there is no such thing as diversification anymore. All asset classes around the world dropped except for US treasuries. There’s too much interdependency now among all asset classes. So thinking that diversification will save you from a systemic crash is wrong.
  - weatherlite 5y ago
    You're right. And if we look at other bubbles that burst then we can reach other conclusions than 2009. Who knows what the 2025 crash will be like; will the central banks be able to buy everyone out again? How do you do it if inflation is high? And also - if the Nasdaq takes a massive hit will people be so eager again to go in or will they prefer companies that actually have earnings?
  - long_time_gone 5y ago
    Doesn't your second statement > All asset classes around the world dropped except for US treasuries kind of invalidate your first statement? > there is no such thing as diversification anymore
asdfsd234234444 5y ago
The markets go up and down. Inflation, well...
mountainriver 5y ago
Crypto yo /s
deleted 5y ago
[deleted]
throwthere 5y ago
Short horizons just hold cash or short term govt bonds/I bonds and stomach the loss. Long horizons hold index funds and ignore the ups/downs/blog posts/talking heads. Nothing’s really changed.
eaenki 5y ago
The answer is too complex. I can safely say everyone in this thread knows shit about finance. Short answer is a bunch of different uncorrrlated plays/tools such as: -Volatility trades -multi leg options on any asset class really -credit markets -algorithmic hedge funds Etc
jdavis703 5y ago
> If I have inflation fears, and I think we are in a stock bubble, where should I put my money. Invest in the one thing you have the most control over -- yourself. Open or buy a business in a sector that has a clear path to profits (think laundromat, not some tech startup with unknown product market fit). Or get a degree for a new, higher paying career. Otherwise you'll always be taking a bet on the federal reserve board, or Fortune 500 CEOs or wherever you decide to put your money.
- MisterMower 5y ago
  How many new housing units are being built without laundry hookups? A laundromat is a terrible investment. The pool of customers will constantly shrink over time. They’re predatory, too: preying on people who can’t save enough money to buy a used $400 washer and dryer.
  - jdavis703 5y ago
    A laundromat was just an example. There are plenty of urban places where the revenue is going to be fairly stable... Or maybe increase as housing overcrowding increases due to limited apartment construction. I've lived in neighborhoods like this. But you could also consider other commodity businesses like vending machines, cleaning services, corner stores, etc.
ravenstine 5y ago
At this point, pretty much everyone has to participate in stocks in one way or another. We wouldn't have to do this if all the wealth wasn't going somewhere. If people aren't getting by unless there are multiple incomes and investments then they're being robbed at some level. Now the current advice is to throw your earnings into index funds. What next? Some kind of double-or-nothing grift?
i_am_proteus 5y ago
TIPS: Treasury Inflation-Protected Securities Backed by the United States Government, yield is some low percentage plus the inflation rate.
aaaaaaaaaaab 5y ago
If you’re confident that bubble is about to pop, then short positions obviously :^)
pjc50 5y ago
I call this the "spaceship earth" problem: we're on a bounded planet with a heavily linked global economy. We're all linked together. The risks we're facing are also to a great extent global; pandemics, fuel supplies, climate change, local wars going nonlocal. After a certain point you can't buy your way out of that. Do you think you could guarantee your fuel prices for the rest of your life, no matter what happens? Can you guarantee that your consumer goods prices will remain the same despite a global shipping jam? Do you think the prices of labour that you buy can be kept stable when a million more people are dead than expected in the US due to a pandemic? So how can you really inflation-protect an investment? You have to invest in other things; personal, community and national resilience. Got to plant the occasional tree in whose shade you will not sit.
- tarsinge 5y ago
  Refreshing perspective, thanks.
  - pjc50 5y ago
    Thanks - I'm influenced by Keynes and "anything we can actually do we can afford" / the view that money maps to a share of real resources. The contrapositive of that is "if it can't actually be done, it doesn't matter how much money you have". The pandemic has reminded people that supply shocks are real and the market cannot magic capacity from nowhere at zero notice. Growth provides more wealth. If the economy contracts - degrowth - somebody has to lose wealth. You can insure against that, move it to someone else, but like any kind of risk transfer that also costs money. I also note there are very few things you can buy a 25 year supply of and store conveniently in your house (apart from "housing" itself as a good!), but solar panels almost count as this and are a good hedge against inflation.
wombat-man 5y ago
Well target date funds can cushion the impact of market drops while still giving you most of the benefits of a rising market. I use vfifx but pick a year that coincides with when you may want to exit. I also have a larger buffer of cash these days, and have a scheduled purchase of the target date funds weekly. There's no magic safety net. You could try to bet against the market through the options market, but timing is everything.
- prirun 5y ago
  Be careful using target date funds in a non-retirement account subject to taxes: https://www.mymoneyblog.com/vanguard-target-retirement-funds-nav-drop-cap-gains-distribution.html https://www.mymoneyblog.com/vanguard-target-retirement-funds...
  - wombat-man 5y ago
    Interesting. Kinda seems like a one time event but not ideal. Thanks for pointing this out, I'm going to have to do some thinking about this.
    - prirun 5y ago
      I moved some bonds to Wellington Fund early in 2021 and got hit with it in December. I wasn't expecting a big capital gain w/o selling and am also re-thinking whether I want to be in this for 2022.
throw0101a 5y ago
> If I have inflation fears Ben Felix of the Rational Reminder podcast looked at different asset types as possible inflation hedges and came to the conclusion that there really aren't any: * https://rationalreminder.ca/podcast/150 https://rationalreminder.ca/podcast/150 > I'm genuinely asking. It seems like I'm being forced to make bets more so than 10 years ago. You're no worse off than any other human being that has ever lived. The fact that we have better understanding of economics simply allows us to actually know about the problems that people in the past went through blindly. Generally speaking, humans have never had it so good as we do now: > ou can't make people happy by law. If you said to a bunch of average people two hundred years ago "Would you be happy in a world where medical care is widely available, houses are clean, the world's music and sights and foods can be brought into your home at small cost, travelling even 100 miles is easy, childbirth is generally not fatal to mother or child, you don't have to die of dental abcesses and you don't have to do what the squire tells you" they'd think you were talking about the New Jerusalem and say 'yes'. * Terry Pratchett, http://groups.google.com/group/alt.fan.pratchett/msg/ee9e9fb9a4d23837 http://groups.google.com/group/alt.fan.pratchett/msg/ee9e9fb... You probably have a warm and comfortable place to live that doesn't take much effort/energy to keep going. You have easy access to food and aren't subsistence farming or worrying about starvation. You have clean water and sanitation. You have the access to the best medicine that humanity has ever known. Take a step back and reflect on the blessings you have compared to your (great-(great-)grand-parents. For money, personal finance isn't that complicated: spend less than you make and save a little each month for retirement: * https://en.wikipedia.org/wiki/The_Index_Card https://en.wikipedia.org/wiki/The_Index_Card It'll work out if you don't go crazy/stupid with your paycheque.
mbar84 5y ago
Buy at least some bitcoin, especially at these prices (36K USD/BTC). Not financial advice...
logifail 5y ago
> If I have inflation fears, and I think we are in a stock bubble, where should I put my money Pay off your mortgage faster than required, if you have one? If interest rates might go up significantly, I figure every $/£/€ you don't owe is a good one.

lotsofpulp 5y ago

The house is invested in keeping stock prices stable and rising, and it is not a good idea to bet against the house.

weatherlite 5y ago
> The house is invested in keeping stock prices stable and rising, That's not really accurate - the goal of the Fed and all central banks is to keep prices stable and employment levels optimal. If inflation is going out of control then prices won't be stable and employment won't be optimal, in such a case the stock market might have to take a hit. Also, it's pretty clear most central bankers understand the current inequality level is not good.
- baskethead 5y ago
  The Fed wants inflation. It’s deflation they are concerned about and something that could happen when super bubbles deflate.
  - weatherlite 5y ago
    They want 2% inflation, not out of control inflation.
jack_pp 5y ago
That's true until you can't withdraw your funds from the house because the house was a degenerate and fucked with it.
baskethead 5y ago
More so housing prices because a large chunk of the financial system is based around house prices. If house prices drop by 25%, it can collapse entire financial systems from the fallout. The only problem is that the fed really doesn’t have much more it can do. Interest rates are too low right now and the market can easily lose faith in the Fed which means utter chaos could occur and deflation will run rampant.
- yourapostasy 5y ago
  > More so housing prices... The entire edifice of the global financial system is anchored around real estate valuation (the dirt, not so much the improvements and not so much the price) and the network effects wrung out of it by the infrastructure accreted around it (most often paid by public taxation and the bulk of its monetization privatized), only made possible by the structural support embedded into credit finance, accounting and tax policies granted it as an asset class unique unto all others. There can be temporary price corrections, even deep ones, even lasting as much as a generation or two, but at this point so much is secularly bound to real estate valuation that it is one of the pins on the OR-gated-multi-pin hand grenade of single-planet-forever-growth economics. Real-estate-the-dirt valuation is like the core tranches and/or core dynamic allocation strategy of one's investment thesis/theses, or the ballast in a ship. Forex dwarfs real estate as both a market and asset class, but policies do not treat forex as favorably over the long-term and in credit structures. Also, for those who feel hard real estate market data (including visibility into contract terms) is opaque and inscrutably difficult to obtain, you're in for a treat when you get into the forex market (or for that matter, bonds, derivatives, etc.); pricing data is only the tip of the iceberg, and uniform cross-exchange visibility into order books is not seriously available in those markets the last time I investigated trading each of them (would love to be pointed in the right direction if I have my information wrong, though). Depending upon how one models it, residential housing prices are like a second or third derivative off of the above opinionated, personal take on the key interrelationships with my embedded biases/prejudices/blindsights. Once the first two tiers of Maslow's hierarchy are secured functionally into perpetuity at a stable "price", if I had to choose between putting wealth into dirt or into technological advancement to improve our mastery over energy (information being a valuable subset of energy), matter, and spacetime (solving distribution problem spaces being a valuable subset of spacetime), I'd choose the latter every time. In my personal opinion (YMMV of course), as a species we've sufficiently implemented the hypothesis that technological advancement is key to ever-improving conditions for the majority, such that it is worth at maybe a plurality subset of the species seeing where that path leads.
jshaqaw 5y ago
This. I’ve been investing professionally for almost 20 years. You know those internet memes with the bell curve iqs…. For much of my career I was contrarian to this view but after watching the government responses to repeated financial asset crises, you don’t want to be positioned too far from what the voting masses will demand if they see their home prices or 401ks sharply decline. Can governments keep this up forever? Logic would say no but then again doomsayers have been arguing about the unsustainability of trends for all five decades of my life. The “smartest” investors I know always see a climax around the corner when finally all the accumulated problems come to roost. Guess what. Last fifty years you didn’t want to be sitting out of assets holding cash. This stuff is hard. It’s really really hard as you get older and your hopefully accumulated savings are high relative to your current income and your expected remaining working life earnings. In your 20s you can ride up a bubble, lose it all, and chalk it up to a cruddy learning experience. Later in life it gets exponentially harder because mistakes are permanent and irrecoverable. You can play the game and risk it in what seem like expensive assets. Or you can sit it out and fall behind without any compounding to create wealth and offset inflation. The latter option isn’t really an option unless you start with so much wealth that you can just spend down principal being eroded by inflation year after year and still have enough. Good luck!
- deleted 5y ago
  [deleted]
- ianai 5y ago
  Which is the jump off point for portfolio management theory and risk tolerance approximation. The problem with the future though is wide systemic problems vastly unlike seen previously. The US population will get smaller as the baby boomer generation is larger than its successive generations. That’s almost the definition of negative market growth and in some cases (health care) it is. That also looks like what Japan has undergone for the last several decades. Climate change is a whole other bag of large systemic change likely to increasingly play out the younger the investor is. My point here is the future 50 years will not be as rosey as the last 50 years. And the last 50 years haven’t been exactly rosey. Edit-my proscription would be: people, not just investors, need to be willing to put in a lot of work and potentially ever increasing work into anticipating and acclimating to the world that’s headed our way. Study up on macroeconomics, micro, portfolio theory, some climate and migration patterns, and how your governments and institutions work. Maybe then you have a chance at survival. Also look for ways to make not just your life better but the conditions for life better for your neighbors, family, and future generations. Resist “tearing down the wall keeping the century-high tide away for the sake of a few pennies a brick.” Resist tearing down “the other” because while it might feel viscerally satisfying it actually creates an environment of prosecution and suffering that you will eventually suffer. Embrace the struggle of survival because it’s what we the living must do.
newaccount2021 5y ago

mupuff1234 5y ago

Short to mid term inflation isn't that dangerous, sure ~5% loss isn't great but it's better then losing it all in the stock market. So I think being somewhat more liquid isn't the worst idea these days. For smallish amounts (30k) you can buy i-bonds that have a 7% return.

deleted 5y ago
[deleted]

pragmatic 5y ago

What’s worked for me over my career is having a job in tech. Keep the money in the market and ride it out for the long term. I see no signs that this is going to change in the short term.

lamontcg 5y ago

> If I have inflation fears I think this is actually unlikely in the 10-year horizon because everyone is so paranoid about it. Right now mostly we're seeing supply-chain shocks, not durable inflation. There is some data to back up the great resignation that there are fewer workers now and they have greater negotiation power. But we're a ways off from a general wage-price spiral, and I suspect that we're more likely to see aggressive policy action to kill that off, even if it tanks the economy. Short term though I don't think this is the top of the bubble. Realistically the Fed isn't going to do that much over the next year or two, they move slowly. This correction will probably make them scared to act too quickly and they'll wait to see if it causes a reversion to stagnant wage growth. What I would be most worried about right now is that over the next 2 years the wage growth seems to stick. That will cause the Fed to really panic about inflation and act like Volker to pop the bubble, which should unwind in a deflationary depression. The alternative is that the Fed does nothing and watches a 1970s-style wage-price spiral evolve (which I think would be the actual best outcome since it would be debt relief and would reduce wealth inequality). I don't think the Fed will do nothing though very clearly given how literally everyone is terrified of inflation and wants the Fed to tighten. Austerity is probably coming.

tim333 5y ago

His former company's projected class returns the best seems "emerging value" stocks. (https://www.gmo.com/europe/research-library/gmo-7-year-asset-class-forecast-4q-2021/ https://www.gmo.com/europe/research-library/gmo-7-year-asset...) What exactly you buy to achieve that I'm not sure.

asdfasgasdgasdg 5y ago

People have claimed gold was a hedge against inflation and financial asset bubbles for a long time. Sometimes it is even true. Of course gold has solidly underperformed the market for the last ten years (S&P 500 up hundreds of percent, gold flat). The fact is there is not an investment that exist which will both perform as well as the stock market and be anti-correlated to the stock market during downturns. Imo, this is not something to worry about too too much. If there is a big stock market crash, then you just hold on to your stock throughout. You'll get "poorer", but so will everyone else, since they are all invested the same as you are. For a member of the investor class, whose true needs are likely to be met under any foreseeable circumstance short of complete social collapse, the most important thing isn't maintaining a certain absolute level of wealth. It's maintaining a certain relative level of wealth. And the main way to do that is to avoid consumptive activities that significantly drain your capital at the bottom of a downturn.

tmountain 5y ago
This is financial wisdom at its finest. Cooler heads prevail, and the only real way to lose historically is to panic sell. This too shall pass… HOLD
- baq 5y ago
  Tell that to folks who bought Nikkei 30 years ago.
  - asdfasgasdgasdg 5y ago
    If an economy is not growing then the value of productive capital in that economy will not grow either. That's the root of the problem in Japan, and it has little to do with temporary downturns like a stock bubble popping. To be clear, I don't assert that maintaining relative wealth is the sole concern of an investor. There are others. But I think it's the most important aspect of sudden downturns provided that you still believe in the long term real growth of the productive capacity of the economy you're invested in. Also, if you don't believe in that, then the only practical alternative I'm aware of is to invest in an economy you believe in more, or to invest in a slice of the overall economy you think is more likely to grow. Failing that, there simply aren't any good options.

ajross 5y ago

It only seems like that because 10 years ago everything was going up. Everything is a bet. In bear markets most people lose money. Effectively here, you're just asking for "give me a sure thing" investment advice (which never works). If there was a sure thing to guarantee you wouldn't lose money everyone would do that. But yet we all still lose money.

weatherlite 5y ago

My 2 cents is that the need for diversification is greater now than it used to be; I see both Ray Dalio and Grantham talk about this. How to and into what you should diversify is something you need to research, I'm no expert. What I'm doing is reallocating into relatively unloved assets classes (silver, emerging markets etc). Also having some cash on the side seems to make sense to me though many others disagree. Being 100% invested in the S&P 500 is fine if you don't need the money in the upcoming decade, but the upside is likely not gonna be great. We all know the saying that staying 100% invested in a low cost index fund (like S&P 500) is one of the best ways to increase wealth historically. And yet we all also know that in certain periods and countries this strategy failed miserably (such as investing in the U.S stock market before the great depression, before the dot com, or in Japan before Nikkei collapsed). When I say miserably I mean a lost decade or sometimes 2-3 decades like in Japan. Grantham builds a strong case why this is now happening in the U.S. I hope he's wrong, I'm sure there will be a correction but hopefully it won't be that devastating, but I can't ignore what he's saying. Historically extreme overvaluation ended in corrections.

baskethead 5y ago
If you look at the 2009 crash, there is no such thing as diversification anymore. All asset classes around the world dropped except for US treasuries. There’s too much interdependency now among all asset classes. So thinking that diversification will save you from a systemic crash is wrong.
- weatherlite 5y ago
  You're right. And if we look at other bubbles that burst then we can reach other conclusions than 2009. Who knows what the 2025 crash will be like; will the central banks be able to buy everyone out again? How do you do it if inflation is high? And also - if the Nasdaq takes a massive hit will people be so eager again to go in or will they prefer companies that actually have earnings?
- long_time_gone 5y ago
  Doesn't your second statement > All asset classes around the world dropped except for US treasuries kind of invalidate your first statement? > there is no such thing as diversification anymore

asdfsd234234444 5y ago

The markets go up and down. Inflation, well...

mountainriver 5y ago

Crypto yo /s

deleted 5y ago

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throwthere 5y ago

Short horizons just hold cash or short term govt bonds/I bonds and stomach the loss. Long horizons hold index funds and ignore the ups/downs/blog posts/talking heads. Nothing’s really changed.

eaenki 5y ago

The answer is too complex. I can safely say everyone in this thread knows shit about finance. Short answer is a bunch of different uncorrrlated plays/tools such as: -Volatility trades -multi leg options on any asset class really -credit markets -algorithmic hedge funds Etc

jdavis703 5y ago

> If I have inflation fears, and I think we are in a stock bubble, where should I put my money. Invest in the one thing you have the most control over -- yourself. Open or buy a business in a sector that has a clear path to profits (think laundromat, not some tech startup with unknown product market fit). Or get a degree for a new, higher paying career. Otherwise you'll always be taking a bet on the federal reserve board, or Fortune 500 CEOs or wherever you decide to put your money.

MisterMower 5y ago
How many new housing units are being built without laundry hookups? A laundromat is a terrible investment. The pool of customers will constantly shrink over time. They’re predatory, too: preying on people who can’t save enough money to buy a used $400 washer and dryer.
- jdavis703 5y ago
  A laundromat was just an example. There are plenty of urban places where the revenue is going to be fairly stable... Or maybe increase as housing overcrowding increases due to limited apartment construction. I've lived in neighborhoods like this. But you could also consider other commodity businesses like vending machines, cleaning services, corner stores, etc.

ravenstine 5y ago

At this point, pretty much everyone has to participate in stocks in one way or another. We wouldn't have to do this if all the wealth wasn't going somewhere. If people aren't getting by unless there are multiple incomes and investments then they're being robbed at some level. Now the current advice is to throw your earnings into index funds. What next? Some kind of double-or-nothing grift?

i_am_proteus 5y ago

TIPS: Treasury Inflation-Protected Securities Backed by the United States Government, yield is some low percentage plus the inflation rate.

aaaaaaaaaaab 5y ago

If you’re confident that bubble is about to pop, then short positions obviously :^)

pjc50 5y ago

I call this the "spaceship earth" problem: we're on a bounded planet with a heavily linked global economy. We're all linked together. The risks we're facing are also to a great extent global; pandemics, fuel supplies, climate change, local wars going nonlocal. After a certain point you can't buy your way out of that. Do you think you could guarantee your fuel prices for the rest of your life, no matter what happens? Can you guarantee that your consumer goods prices will remain the same despite a global shipping jam? Do you think the prices of labour that you buy can be kept stable when a million more people are dead than expected in the US due to a pandemic? So how can you really inflation-protect an investment? You have to invest in other things; personal, community and national resilience. Got to plant the occasional tree in whose shade you will not sit.

tarsinge 5y ago
Refreshing perspective, thanks.
- pjc50 5y ago
  Thanks - I'm influenced by Keynes and "anything we can actually do we can afford" / the view that money maps to a share of real resources. The contrapositive of that is "if it can't actually be done, it doesn't matter how much money you have". The pandemic has reminded people that supply shocks are real and the market cannot magic capacity from nowhere at zero notice. Growth provides more wealth. If the economy contracts - degrowth - somebody has to lose wealth. You can insure against that, move it to someone else, but like any kind of risk transfer that also costs money. I also note there are very few things you can buy a 25 year supply of and store conveniently in your house (apart from "housing" itself as a good!), but solar panels almost count as this and are a good hedge against inflation.

wombat-man 5y ago

Well target date funds can cushion the impact of market drops while still giving you most of the benefits of a rising market. I use vfifx but pick a year that coincides with when you may want to exit. I also have a larger buffer of cash these days, and have a scheduled purchase of the target date funds weekly. There's no magic safety net. You could try to bet against the market through the options market, but timing is everything.

prirun 5y ago
Be careful using target date funds in a non-retirement account subject to taxes: https://www.mymoneyblog.com/vanguard-target-retirement-funds-nav-drop-cap-gains-distribution.html https://www.mymoneyblog.com/vanguard-target-retirement-funds...
- wombat-man 5y ago
  Interesting. Kinda seems like a one time event but not ideal. Thanks for pointing this out, I'm going to have to do some thinking about this.
  - prirun 5y ago
    I moved some bonds to Wellington Fund early in 2021 and got hit with it in December. I wasn't expecting a big capital gain w/o selling and am also re-thinking whether I want to be in this for 2022.

throw0101a 5y ago

> If I have inflation fears Ben Felix of the Rational Reminder podcast looked at different asset types as possible inflation hedges and came to the conclusion that there really aren't any: * https://rationalreminder.ca/podcast/150 https://rationalreminder.ca/podcast/150 > I'm genuinely asking. It seems like I'm being forced to make bets more so than 10 years ago. You're no worse off than any other human being that has ever lived. The fact that we have better understanding of economics simply allows us to actually know about the problems that people in the past went through blindly. Generally speaking, humans have never had it so good as we do now: > ou can't make people happy by law. If you said to a bunch of average people two hundred years ago "Would you be happy in a world where medical care is widely available, houses are clean, the world's music and sights and foods can be brought into your home at small cost, travelling even 100 miles is easy, childbirth is generally not fatal to mother or child, you don't have to die of dental abcesses and you don't have to do what the squire tells you" they'd think you were talking about the New Jerusalem and say 'yes'. * Terry Pratchett, http://groups.google.com/group/alt.fan.pratchett/msg/ee9e9fb9a4d23837 http://groups.google.com/group/alt.fan.pratchett/msg/ee9e9fb... You probably have a warm and comfortable place to live that doesn't take much effort/energy to keep going. You have easy access to food and aren't subsistence farming or worrying about starvation. You have clean water and sanitation. You have the access to the best medicine that humanity has ever known. Take a step back and reflect on the blessings you have compared to your (great-(great-)grand-parents. For money, personal finance isn't that complicated: spend less than you make and save a little each month for retirement: * https://en.wikipedia.org/wiki/The_Index_Card https://en.wikipedia.org/wiki/The_Index_Card It'll work out if you don't go crazy/stupid with your paycheque.

mbar84 5y ago

Buy at least some bitcoin, especially at these prices (36K USD/BTC). Not financial advice...

logifail 5y ago

> If I have inflation fears, and I think we are in a stock bubble, where should I put my money Pay off your mortgage faster than required, if you have one? If interest rates might go up significantly, I figure every $/£/€ you don't owe is a good one.