Or, to quote Peter Lynch: "Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves."
That said, I think 2025 is too early for the AI bubble to pop. Even Burry was buying CDS in 2005 [1] so if you're seeing something your convinced is a crack right now it's going to take a few years to actually fracture.
- 2000 -- Followed by a crash
- 2007 -- Followed by a crash
- 2011 -- (ish) USG added a bunch of money into the system
- 2015 -- Counter example?
- 2018 -- Counter example?
- 2021 -- Large crash, USG added a bunch of money into the system
- 2025q1 -- Tariff crash
- 2025q3 -- Too early to tell
There Is No Alternative
- Gold? Dead asset
- Cash? Good luck with inflation
- Bitcoin? My ass…
So what else can you do as a rational investor than to invest most of your cash into an S&P500 or World fund?
Every time the market takes a crap, I buy. I rarely sell. Keep enough cash or near cash assets in a no penalty account(s) to cover unexpected costs so aren't forced to sell.
A luxurious set up for sure (which took about a decade to get set up) but it's repeatable and fairly stable.
Now, if you have real wealth (like $10s of millions of liquid assets) then look to setting up a MFO or SFO and focus on tax efficiency, etc. That's a whole different set of strategies.
So US Treasury securities instead of cash right?
And then every time there is a dip, sell the treasuries and buy ETFs?
Urban residential real estate is also a safe haven assuming you still are allowed to invest there. Demand is not going to shrink any time soon (as most Western governments are running rural areas to the ground for them being too expensive to bring on modern standards and expectations in infrastructure), and supply is so scarce that even large developments and re-zoning will hardly make a dent in demand.
https://www.bogleheads.org/wiki/Alternative_indices
Dividend weighted indexes are the classic option, and fundamental weighted index are a newer one.
Perhaps we should be buying up Yuan…
Buying the yuan on the other hand is directly taking a stance against CCP state controlled currency policy. A less advisable and knowable bet.
I mean it’s a dead asset class since it doesn’t fund any economic activity. It’s just a store of wealth
We might as well just enjoy the ride knowing at least when it hits the bottom, we'll all of us be in the same tough spot.
But at the end of the day the only way to profit from an investment is taking some risk. It all comes down to pricing that risk.
What? Gold is at a record high, and with inflation it will only go higher.
https://www.macrotrends.net/1333/historical-gold-prices-100-...
In nominal terms perhaps, but in inflation adjust terms it's roughly what it hit in 1980:
* https://www.investopedia.com/gold-price-history-highs-and-lo...
https://graphics.thomsonreuters.com/11/07/CMD_GLDNFLT0711_VF...
And there have been long (10y) stretches where it's remained flat: it takes a lot of patience to HODL through something like that. Even if equities (e.g., holding an index fund) are flat at least you get some yield.
With a pure commodity play like gold (or BTC) your only way of returns in price appreciation.
Inflation.
And what’s happening now?
Gold was high in 1980 specifically and dropped after 1980 even when inflation was still high.
Gold also had a peak in 2012: was there inflation then?
> And what’s happening now?
Nothing. Inflation peaked in February 2023 and has been dropping ever since:
* https://fred.stlouisfed.org/series/CORESTICKM159SFRBATL
Gold didn't start going up until September 2023 and has been rising. Gold and inflation are currently inversely related.
So I'd say it's the same as having cash under your pillow.
I give my cash to you, and, as exchange, I will own a (usually small) share of your company.
Then you’ll hopefully be successful and my shares will raise.
Good for you. Good for me. Good for society since you created jobs.
https://fred.stlouisfed.org/series/FEDFUNDS
But they can't do this for much longer, inflation is the first sign, which is why Trump is raising tariffs.
You can see Bond prices going up. Trumps tarrifs are aimed and lowering T Bill rates:
Trump is raising tariffs because he thinks they are a good idea and has since the 1980s:
> “The fact is, you don’t have free trade. We think of it as free trade, but you right now don’t have free trade,” Trump said in a 1987 episode of Larry King Live that’s excerpted in Trump’s Trade War. “A lot of people are tired of watching the other countries ripping off the United States. This is a great country.”
* https://www.pbs.org/wgbh/frontline/article/trumps-tariff-str...
Trump's mindset is a 1980s NYC real estate guy (zero-sum, one-off games), which when applied to global trade, is basically mercantilist:
* https://en.wikipedia.org/wiki/Mercantilism
Meanwhile, in the real world, commerce is often non-zero-sum (both parties get something of value, i.e., "win-win"), and you play multiple rounds with each trading partner and reputation matters (rather than one-off, where burning your bridges could be an actual strategy).
I question this bit. (That may be why he's raising tariffs; I question whether it will work.)
When tariffs go up, prices go up (delusions that "other countries will pay" notwithstanding). That shows up in inflation statistics, which in turn will (probably) show up in T Bill rates, but as a higher rate, not a lower one.
Except... tariffs might be a one-off increase. They may not compound the way "regular" inflation does. So maybe it will work in the medium term?
Seeing as how Trump appointed the author into his political circle though could be evidence this is the ultimate goal.
The paper is quite lengthy, however, in the beginning Stephen explains this idea of the Triffin Dilemma. A country that acts as the worlds reserve currency and thus creates enormous demand for their currency for things outside of goods are at a disadvantage that exasperate their trade deficit. This is implicit for a countries currency where most global trade is settled in their dollars, not to mention the benefits of holding the world reserve currency as a value store or investment.
I've wondered since the tarifs were announced how much impact they can actually have, but besides that point what is a reserve currency country to do? Give up their reserve currency status? There are significant downsides to that as well...
[1] https://www.hudsonbaycapital.com/documents/FG/hudsonbay/rese...
Global equity index ETF have reliably yielded 5% returns over 12-15 year periods for ~75 years.
And when do you get back in?
Sitting in cash, waiting for the dip, is a losing strategy (even if you knew when the dip will occur, which you don't):
* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
Simply put in a little from every pay cheque.
If you think things are too wild, invest in an ("all-in-one") asset allocation fund that is not 100% stocks (e.g., fixed 80/20, 60/40):
* https://investor.vanguard.com/investment-products/mutual-fun...
* https://www.ishares.com/us/products/239729/ishares-aggressiv...
* https://investor.vanguard.com/investment-products/mutual-fun...
* https://www.vanguardinvestor.co.uk/investments/vanguard-life...
* https://www.vanguard.ca/en/product/etf/asset-allocation/9579...
* https://www.blackrock.com/ca/investors/en/products/239447/is...
or a target date fund (which increases bonds as you approach your retirement date).
Completely (retirement and 'regular' brokerage)? What criteria (if any) will you use to get out of cash and start buying again?
When it does happen, he will be "right" even though the opportunity cost for holding this belief is huge.
Soooo, yes there will always be future recessions, annnnd "professional experts" are saying it's coming sooner rather than later based upon the amount of over-inflated investments in less-well-run companies as they chase the profitability of the more-well-run companies.
But “this time it’s different” because… AGI…?
Just yesterday, the guy who was found liable in court for financial fraud demanded an FRB (Lisa Cook) resign after being accused of mortgage fraud. Do you suppose somebody in the WH is digging up dirt?
And of course, weekly rants, accusations of fraud, and musings of firing JPo.
Perhaps investments in undeveloped real estate....
You’re more precisely short rates.
I know people stressing 24/7 about their money, diversifying their crypto shitcoins into pokemon card collections, buying watches or old apple computers in the hope they'll be able to sell them for more to the next sucker, buying and selling defense company stocks secretly hoping more poor souls will get annihilated in Ukraine or Gaza because it's good for their $$$. They're loaded like never before but I've never seen them so tired and miserable, I bet they don't even know why they want more money, hairless apes seem to like when numbers are getting bigger
And on top of that if shit truly hits the fan the vast majority of these will be completely useless.
So we’re back to 2007 now.
If everyone you know stressing about money would actually be fine if they stopped stressing they are all very privileged. That's not reality for most people. This is not a silly game, and it's frankly ridiculous for your advice to be "find plot of land, build a house."
Most people shouldn’t be managing their investments. The difference in return even if correct on smaller sums is often less than one’s labour is worth. If, on the other hand, it’s material to you whether your portfolio goes up or down by single digits, real estate is and should be part of that mix.
I'm just sharing my experience, I know a bunch of relatively poor people (household with 2 min wage) who have kids and are paying their mortgage. I also know a shit ton of tech workers making $$$ who spend more than the combined income of the former households on pokemon cards and crypto coins every single month
> If everyone you know stressing about money would actually be fine if they stopped stressing they are all very privileged.
Well yes, that's my point, stop buying bullshit and start building a future, it's way less stressful to spend all of your money on a plan rather than spending it on future hypothetical gains that might or might not materialise depending on variables you don't even know about.
I'm assuming you are talking longer term.
A permanent allocation to gold is one option. These days it can also be done via overlays so that equity exposure can stay the same.
TIPS work as inflation protection. Move some bond exposure to TIPS.
CTA/trend following is a great addition to a portfolio when it comes to protecting against stagflationary scenarios. Again, this is fairly easy to access via ETFs these days.
How about international diversification? This is something even super conservative voices like Bogle would recommend. Again, easy to access via ETFs.
Another good idea if hedging is on the mind is stepping away from the market cap weighted indexes to some degree. Add some small-cap value for example.
There are other options as well that can be done on a portfolio level, but it can get more advanced from there.
The most important thing is to have a consistent framework that one can stick with for decades. Especially when it comes to having a truly diversified portfolio, it tends to be that unfortunately some people have a hard time handling it. If you are truly diversified you should always have assets in a portfolio that are performing poorly, and performance may be bad for entire decade-long market cycle or two. Ex: if trend is performing badly during a strong equity boom, it was protecting against lines that didn't happen to play out, but that doesn't mean that the realized situation nullifies the holistic diversification benefits.
Also, it gets more difficult if part of the equation is matching or exceeding S&P returns on an absolute basis. S&P has high returns but sees high drawdowns up to 50%, well more diversified approaches maybe less volatile and see more mild drawdowns. Because of that, usually most people would be better off with some mild leverage if they take a more diversified approach that switches out equity for less volatile assets like gold. Ex: 60/30/20/20/10 (equity/bonds/CTA/Gold/TIPS).
And it's also worth noting that there has been strong divergence between the ADR Chinese market and the onshore Chinese market that westerners don't generally have access to, so tread lightly there as well because there is no guarantee the ADR paper trades as it "should".
For example, I was invested in China Mobile, but it was delisted from western exchanges after an executive order from the US added it to a blacklist due to Chinese military connections (which Chinese SOEs tend to have...)
I also wouldn't recommend investing in Chinese banks in particular without understanding their credit landscape and the regional/central balance of power related topics. Know what you own and all that. I often have China positions on in the portfolios I manage, but imo it's mandatory to keep track of the communist party meetings and statements and such. It's not a free market, so investing decisions are anchored off of the chinese communist party political machinations to a large degree. When China decides on a new initiative like reigning in the tech space and making an example of the tech magnates (which literally erased some hot public growth sectors to near zero overnight), or engineering the controlled explosion of the housing bubble, you can't be ignorant of the active narratives. Especially difficult is that non-Chinese language news and analysis is often radically off the mark from intra-Chinese messaging.
If you want a fire and forget it approach, this may be one of the few examples of a market where conservative active management with a focus on giving Chinese exposure to western participants may be prudent, as they can sidestep the long and esoteric list of known risks. But even then it's tough if one is in a jurisdiction exposed to, say, US blacklists which can wipe out an investment overnight and wreak havoc in a portfolio.