Having a conversation this week with him - all I’m planning to do is point out that almost no planning is going to work in the type of scenario he envisages, short of a well-defended and fully functional farm.
Ok good. Use a few good examples some others have provided here to illustrate how an extreme move is not likely to provide the result he is looking for under such an extreme event he thinks is going to happen.
Hopefully you can convince the client to follow your advise or seek another firm who can help him.
If a zombie apocalypse breaks out though, this client is going to be so pissed he listened to you. 
If a zombie apocalypse breaks out though, this client is going to be so pissed he listened to you.
If a zombie apocalypse breaks out though, this client is going to be so pissed he listened to you.
Anyone else a fan of Marc Faber’s portfolio mix?
25% bonds/equities
25% cash
25% real estate
25% gold
Take it for what it’s worth. Faber thinks the Dow should be at 3K.
Dat 1/n tho
Had the chat with the client. His view (which seems hard to pin down exactly) is that we’re headed for another Great Depression, born out of ‘…this deflation in Europe thing…’.
It’s hard to have a rational discussion with someone who holds an uneducated and irrational view. Anyway, he most liked the sound of government bonds (despite the obvious default risk). His plan is to invest in government bonds until the depression hits and the stock market falls 60% - then sell the bonds and plough the money into equities at the bottom. Now you all know how to make millions too! It’s that easy!
May not be entirely irrational - just this morning an intern showed me an aritcle by a chinese ratings agency which basically says the odds of a crash significantly worse than 2007/08 are not that low. Primarily goes on to blames QE
Maybe, but his view is that we’re going to have a great depression within 3 years or so. Given the frequency of occurences of great depressions, that seems to be a pretty big call.
It’s a big call for sure and I agree with you, but actually if a depression has to happen - it will happen in the next 5 yrs or not happen at all. Sustained contraction of economies and a potential grexit may force ECB to fold, meaning Japan folds coz everyone’s selling EUr buying JPY, meaning mroe contraction in Japan and when Japan folds,…well…!
All this central bank stuff is having really weird obvious impacts, like Nestle negative yield. I have a feeling risks are building in less obvious ways. I’ve been trying to keep open eyes to what it may be, but haven’t found it yet. But China falling off a cliff could be really big event, but not so sure what impact it would have on other equity markets.
COGS up?
pretty sure a lil bit of recency bias as well though. i’d drop him as a client. panicky clients are the worst to deal with anyways. i dont deal with clients but from conversations with ppl that do. this tends to be the case.
a 40-60% decline doesn’t require a 1930s or 2008 type situation. many 40-60% declines have occured over the past 150 years. the client could be right even without some doomsday, 25% unemployment type situation. that said, it’s bold bet and you give up 5-8% per year to make that bet.
I can’t seem to fathom a 25% unemployment in the US or Britain in the absence of a 1930/2008 type scenario? Not sure I buy this. Didn’t we have ~20% unemployment in 1929/30?
i stated that you don’t need to see 25% unemployment to see a market crash in the effect of a 40-60% decline. market crashes are typical of markets and occured often pre-1980 and have occured a few times since. fyi, the U6 unemployment rate was about 17% in 2009, 15% in 1976 and 1992, 20% in 1982 and as high as 37% in 1932. U6 measures misery and economic strain better than U3.
Aah, yes you’re right - Never studied unemployment that far back - will overlay some charts on b’brg tomrw.
Unemployment isn’t measured the same way today as decades ago. If it was, the unemployment rate today would be higher.