There is a very good Paul Farrell article that you should read dated December 31. It is a combination of his very dour outlook for the next couple of years combined with what he thinks investors should do in the face what he says is the bear/recession of 2008-2010. He thinks it will be as bad as 2000-2002.
He spells out in detail why he thinks all of the excesses of the last few years leave the country in very bad shape with bad things to follow.
The article has a tone, but I may be wrong about this, that seems to devote thought to why we are where he thinks we are. This is of course natural but why may not be the best use of time. Are you going to be able to solve these problems?
I would rather devote time to how to manage around the problem. I think it makes sense to understand the problems, assess what impact they might have, figure out a strategy to navigate through and think about a counter strategy in case your conclusion turns out to be wrong.
There are a lot of very troubling things in front of us right now but that is often the case. And while I believe a bear market has already started I think it will be a normal bear market which is more like 25-30% down as opposed to a repeat of 2000-2002 which was when the S&P 500 cut in half. A market doesn't usually cut in half twice so close together. We'll deal with it if it comes but I do think it is unlikely, if that is what he means.
During the last bear market there other countries that bottomed well before our market (after much smaller drops) and other markets that continued to exist in their own world--both types I have written about many times previously. That will happen again during this bear market (as it will if this is worse than a normal bear). I don't know if it will be the same countries or not but it makes sense, as I have been saying for a long time, to learn about other countries and invest in them. The world will still function even if the US turns into Japan or has some other bad outcome and even there is a global reaction for some period of time.
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7 comments:
Paul's articles are always funny after you read the first 25 or so of them.
section 1: complain and/or exaggerate
section 2a: talk about "doing what you love"
section 2b: talk about staying in your index funds
LOL... Sounds like a more sophisticated Suze Orman!
Talking about countries that may bottom before the US - Ireland's stock market went down over 25% in 2007. Maybe a pick for a rebound in 2008?
i mentioned Ireland the other day. I am inclined to think that most of the selling is done but am less clear on when a rebound starts.
Roger, you are right about how easy and common it is for experts to obsess about the past - maybe because that is in their comfort zone. Much more difficult to do as YOU say - use the info to develop a successful plan.
Roger,
As a loyal reader, and infrquent poster, let me say, that, while its unlikely I'll ever get to the islands, should I ever stop in Prescott, I owe you the libation of your choice, :)
Jan
lol, thank you
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