What to Do With Your Money When Doom Awaits
What to Do With Your Money When Doom Awaits by Justin Spittler – Casey Research
Justin’s note: Regular readers know we’ve been preparing for a market crash here at the Dispatch. With the Dow down 8% since late February, you need to take a close look at your portfolio.
Today, I’m sharing a new essay from our friend Dan Denning, coauthor of The Bill Bonner Letter, to help you get started. Below, you’ll learn about his asset allocation strategy for today’s market—and how you can use it to reduce the damage when the next crisis hits…
By Dan Denning, coauthor, The Bill Bonner Letter
Diversification and asset allocation can help you reduce your risk as an investor.
For your kids and grandkids, a depression could be just the tonic they need. In a world where real wage growth is stagnant and the robots are taking all of our jobs, your best chance to build a fortune is to buy assets when they’re cheap. You can only get them at that price after a crash.
Do you think it’s a coincidence that famed investor and economist Ben Graham wrote his investment classic, Security Analysis, in 1934, just five years after the Great Crash of 1929?
The Dow Jones Industrial Average fell by 89% between September 1929 and July 1932, dropping from 386 to 41. Stocks and bonds weren’t just cheap… they were destitute and unloved.
If you have any skill at reading a balance sheet and doing a bit of math, you stand a good chance of being able to buy future earnings at a deep discount. Most investors find that emotionally hard to do.
For most investors, expectations are high when prices are high, and expectations are low when prices are low.
If you teach one thing to your kids and grandkids—or if you hope to come out of this market with your wealth intact—remember that it should be the opposite: Your expectation of future returns should be low when prices are high, and high when prices are low.
This is another way of saying, “Be fearful when others are greedy, and greedy when others are fearful.”
By now, you’re probably wondering what the plan is. So let’s get on with it. I’ll take you through my proposed Permanent Portfolio, asset class by asset class.
What I propose is below.