Investing in troubled times.

Investing in troubled times could have alternately been titled “Investing during Stagflation” or “Investing in times of Market Volatility”. What do you do when you find that the investing world is not a safe place to park your money in 401ks and sit it and forget it? How can you be sure that when you are putting your hard earned money into stocks or alternate investments, that you are not buying at the beginning phase of a long-term bear market? We are going to address these concerns and more.

There are no certainties, only probabilities.

A talented hockey player does not go to where the puck is, but where it is going. Even while writing my book, Inflation Trades, I have had to rewrite much of it because I predicted an inflation crisis, when I wrote “The Coming Greater Depression”. But now we are not dealing with predictions, they are hindsights. But how bad can it get? What are intelligent investors to do to preserve and grow their wealth? After seeing some success with my personal stock portfolio, my girlfriend had asked me to manage her daughter’s and her own investments. I replied to her I could help but it depends on how long they are willing to invest because there are no guarantees that short-term investors will see growth in the next 24 months, much less 6 months.

The Coming Greater Depression.

The Everything Bubble.

In the western world, we have just seen the longest period of easy money ended. Low interest rates have pushed people into speculative investments. These low interest rates have also caused an asset price bubble. Artificially inflating the price of assets and now that the FED is trying to put out the fire of inflation, it is causing a market down turn cycle. The “Everything Bubble” means that everything is inflated.

Stock Market Crash could be the end of the “Everything Bubble”.

When margin calls for investors come who have invested in sectors that are losing money, they have to sell to cover their losses and this causes all stocks to go into a down turn usually. As sound investment that may have a lot of growth potential in the coming months and years could still see massive losses on paper because of market volatility. What is is in the “Everything Bubble”? Real Estate, Stocks, Bonds, Cryptocurrencies. And even hard assets like Gold may see a short-term decline in value temporarily when the air comes out of the “Everything Bubble”.

The Shift.

A shift is coming, and dare I say, it is here that consumers who are hard pressed are now forced to buy what they need and less or none of what they want. This is what we see in economic hard times. But don’t we see more money with inflation chasing fewer goods and services? Yes, but with rising prices there is more money chasing even more expensive necessities like food, housing, medical care and transportation and energy. This means it may force the average consumer to buy a used car or downsize their homes or spend a greater percentage of their income energy heating their homes and paying for gasoline for their cars.

Shift Sectors.

Ask yourself, are consumers upgrading their computers and iPhones right now? Are they spending more on leisure and travel? Someday there will be a time, unless the world ends entirely, when these sectors like tech and retail become undervalued and a value buy investment. But you must do your homework to find out if we are at the end of the market downturn in these sectors or in the middle or still at the beginning.

Two types of investors.

I see two types of investors that can profit right now, but both strategies are different. First, you have long-term investors who can pick up bargains and build strong portfolios of undervalued investments that have real value and strong long-term growth. But this type of investor should be concerned with long-term profits and be willing to take losses for the next few years while they build a strong portfolio. Because in my opinion, we have entered a period of a bear market, many factors can cause these good investments to lose face value temporarily. Temporarily could mean months or years.

Long-Term Investors.

Long-term investors should consider macro factors, such as the long-term markets of products and the need consumers have for those products. Is this company making money? Not is the stock price going up or down. Is this company a sound company? By sound, I mean can it survive stagflation, and high interest rates?

Dividend Paying Stocks.

Does this company pay a dividend? Dividend paying companies may not be the flashiest investments for new investors. Dividend paying companies have matured and are making steady profits and paying out 2-10% in dividends to their share price. Examples but not recommendations are: Exxon Mobile, Coca-Cola, Kroger, and Campbell Soup. Long-term investors should also look at companies globally. Companies that will do well during a period of a falling dollar.

Short-Term Traders and Speculators.

Second, short-term minded traders and speculators can make money by being hands on and making very precision trades. There are no certainties, only probabilities. How do you time the market? The short answer is you can’t. But in the stock market, all reactions are over reactions. Short-term traders and speculators may pick up short rebounds in price by buying at a low water market and selling to get quick 4-7% jumps in the price. But these are quick trades that have to be analyzed by following the candle charts. Following trends, a day trader or swing trader can make profits.

Investing in troubled times is not for the faint of heart.

With no cookie cutter investment advice to give, there are sectors to look at and probabilities. Part of the goal of investing during times of high inflation is to not lose the value of your money. These are definitely troubled times for the average American, Canadian, Brit or Australian or Indian, but opportunities do exist. It’s helpful to note that during the great depression of the late 20s and 30s, a lot of people lost money but some people became very rich. The laws that govern money do not stop working during these troubled times. The rich get richer because their money is making more money for them and the poor get poorer because they are not proactive but reactive.

One myth debunked.

A lot of people think wealthy people take a lot of risk. But in my experience, super wealthy people behave oppositely. Wealthy people protect their money, they do not lose their money gambling on risky investments. Instead, they plan and make calculated risk and often hedge their investments. When looking to invest, ask yourself what will happen if the economy goes into a spiral, or if a war breaks out, what will happen if my personal income is lost temporarily? Can you with stand market volatility?

Cash is trash, or is it?

Keeping some dry powder to buy during market crashes is a smart idea in most cases. But how much of your portfolio should be in cash? Why cash if inflation is eating the purchasing power? If inflation hypothetically is 10% in a real-world scenario, but the stock market has a 40-60% correction, even in if you lose 10% of your purchasing power while you wait for the fire sale you still make a great return on your investment. But these are not certainties, only possibilities.

Read more on navigating Inflation Investing in my blog Cash is King or is it?

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