There were a couple of very dark posts at Barry Ritholtz' site yesterday that you can read here and here. One is about the potential havoc from ARM resets and the other about economic disparity in the US between the haves and have nots.
Add to that the water post I put up the other day, the potential fallout from the Iranian Oil Bourse and anything else you want to throw in.
I believe in trying to assess risks that exist but not dwell on them, emotionally. An economic end to the world argument has existed my entire adult life and I have no doubt much longer than that.
The world has never ended before and I doubt it will anytime soon so while it is worthwhile to understand threats they do not need to permeate your life or your portfolio.
From the beginning of this site's life I have written about portfolio counter strategies. The general idea is protection when things distort. Owning gold or defense industry stocks are a couple of examples.
The way I think, I want to try to mitigate portfolio risks and personal finance risks. While I don't think a widespread housing market crash can happen, anyone that is overleveraged can get hurt at anytime. I know people with mortgages that don't amortze. I also know people that don't have a few months of expenses set aside, you know, from the first paragraph of every personal finance article ever written?
If you like where you live and have a mortgage you can easily afford, a housing market crash is not going to hurt you a whole lot. The bank doesn't want your house if you are making payments.
Hopefully the point here is to not let miserably depressing subjects bring you down and disrupt your portfolio. Selling two or three stocks and adding an inverse index can reduce a healthy chunk of your net long exposure. And if the market then runs up 25% right after you do those trades you'll still capture a big part of the move.
Please, keep an even temperament.
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3 comments:
But if you can't keep pointing out the sky is falling there are going to be a lot of people in tv, newspapers, and politicians with nothing to say.
Ditto--both the comment and Roger's piece.
Over the past few yrs., I got calls at night---almost every night---selling ARMS and no-interest mortgages. The banks and finance companies PUSHED them on "us". Either managements were idiots or they have a plan.
Personally, I don't think they had a plan. I think greed got the best of them. The fallout could be bad, but the fed is aware. This is why the Fed is in a pickle: They can not AFFORD to raise rates to stem inflation or to shore up the dollar.
I don't see an end of the world. Not even an economic collapse. It will work out somehow. But if may be tough.
g
thanks george,
lmao at the politician comment!
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