Saturday, 16 March 2019

The Crash is Coming | What should you do?

The fog and the monster are on the way

There's been so much chat about the forthcoming financial meltdown it made me think of the fog and the sea monster in Ray Bradbury's The Fog Horn'.

Out there in the cold water, far from land, we waited every night for the coming of the fog, and it came, and we oiled the brass machinery and lit the fog light up in the stone tower. Feeling like two birds in the grey sky, McDunn and I sent the light touching out, red, then white, then red again, to eye the lonely ships. And if they did not see our light, then there was always our Voice, the great deep cry of our Fog Horn shuddering through the rags of mist to startle the gulls away like decks of scattered cards and make the waves turn high and foam. 

So what do you all think? Is the financial future as bleak for us all as it is for McDunn and his compadre, or is there simply too much paranoia self-replicating and reinforcing itself via social media algorithms?

Who the heck knows eh?

Ray Dalio, thought the next big crash was imminent here:

But recently, he has revised his prediction, lowering his odds of a US recession before the 2020 US presidential election to 35%:

Ray Dalio is a man who knows his stuff. You don't search too far on Youtube before you come across his historical analysis of the global economy. I like the man. His talks straight and despite his intellectual prowess, breaks down complex economics ideas for stupid people just like me.

We needs more public intellectuals like Dalio, ones who cut through the waffle and make investing and economics more accessible from people without a Masters degree in the field.

One thing is for sure, the US is ten years into a bull market that simply won't go on for much longer. Thus, it's just a matter of 'when' not 'if' the crash will come.

So, folks, we better get ourselves strapped in for a bumpy ride. The fog and the monster are on their way.

'Out there in the cold water, far from land, we waited every night for the coming of the fog, and it came.'

What does all this mean? Should we freak out, sell all our stocks, stock pile canned food and barricade ourselves in a safe room until the fog clears?

As a divided investor, I say no.

As divided investors, we have to put things into perspective. Yes, the fog is coming, we know this. But, most probably, when it comes, the majority of our defensive blue chips/REITs will continue to distribute their dividend harvests regardless.

So, instead of getting all ghoulish and twitchy, us divided investors should instead see the forthcoming fog and the monster as a natural byproduct of the evolution of the market. It's a bad flu that's long over due and one that will clear the system of unwanted and unneeded bacteria. Once banished, the financial system will be stronger and better for it.

Thus, you dividend investors out there should not be loosing your hair when you see the slow death march of the fog on the horizon... no no.

We have to belt up, hold on tight, be emotionally strong and repeat like a mantra...

'Everything is fine. I will not sell. This is normal. Let's scoop up come bargains.'

'Everything is fine. I will not sell. This is normal. Let's scoop up come bargains.'

Say is with me guys...

'Everything is fine. I will not sell. This is normal. Let's scoop up come bargains.'

'Everything is fine. I will not sell. This is normal. Let's scoop up come bargains.'

Breath deeply in between each sentence. Luxuriate in the moment. Everything is going to be just grand in the long run.

In Ray Bradbury's story, the fog and monster do indeed some and destroy in the lighthouse McDunn and his coworker live in. Their world is decimated. So, too, will the markets be in the not too distant future. However, in times like this we must let history be our teacher; we must let rationality rule over impulse; fear must not be let lose to run amok and people must think with clear precision.

The monster is on the way.

'We waited a moment. And then I began to hear it. First a great vacuumed sucking of air, and then the lament, the bewilderment, the loneliness of the great monster, folded over upon us, above us, so that the sickening reek of its body filled the air, a stone's thickness away from our cellar. The monster gasped and cried. The tower was gone. The light was gone. The thing that had called it across a million years was gone. And the monster was opening its mouth and sending out great sounds.'  

But both the fog and the beast will leave as quickly as they come. OK, we'll need to rebuild somewhat, just like the lighthouse needed to be rebuilt in the story. But, have not fear people, we will rise again.

'There was nothing to see. The ocean was calm, the sky blue. The only thing was a great algaic stink from the green matter that covered the fallen tower stones and the shore rocks. Flies buzzed about. The ocean washed empty on the shore.'

And, perhaps, we, too, can be a little more careful building our portfolios next time we're nearing the end of a bull market. Maybe we, too, like McDunn become a little more defensive in nature.

'The next year they built a new lighthouse, but by that time I had a job in the little town and a wife and a good small warm house that glowed yellow on autumn nights, the doors locked, the chimney puffing smoke. As for McDunn. he was master of the new lighthouse, built to his own specifications, out of steel-reinforced concrete. "Just in case," he said.'

So, there we have it folks. This is the end of another ramble. I hope you enjoyed it as much as I enjoyed typing it. For, as I've said before, writing this posted on Sunday mornings is a form of therapy for me. Up at dawn, with the multicolored sky outside and the sound of morning birds going about their business, I sip coffee and think. It's a reflective way to start the day. Now, with the post complete, I can march into the unknown with the confidence of an artist, knowing that I have contributed something of worth before breakfast.

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FIRE and my Discontents (part 1)