How to Dodge the Debt Train
By: John Mauldin
GoldSeek.com
Sunday, 22 July 2018
Standing in front of a speeding train is rarely a good idea, but most investors are doing it right now. They survive only because the debt train is still way down the tracks. It is nonetheless coming, and you will want to move before then. But which way?
Over the last two months I made the case (summarized here) for a coming worldwide debt default/restructuring/financial engineering. Call it whatever you want but it won’t be good.
While I think we have a few years, I see little chance we can escape some kind of painful reckoning which I believe will culminate towards the middle to the end of 2020s. The opportunities to change course are behind us now. Yes, there are things many countries can do to put things back on track, but most are not politically possible in this fractured world. It will require a crisis to muster the political will to fix this.
While we can’t do anything about that—and the people who can do something are choosing not to—we can take steps to protect ourselves and maybe even profit from this approaching train crash. Many of you have asked for specific advice. I’m somewhat limited in what I can say, both for legal reasons and because we have readers in many different situations. Not everything is suitable for everyone. But I can give you some general ideas and rules to follow. Today, we will start with the smallest investors and then move on up.
Some of my Mauldin Economics colleagues also have ideas, which I hope you read in the special reports we’ve featured in the last few days. More on that below. But now, let’s consider how to dodge the train. I have four rules to follow, all of which would be good practice even if we weren’t in front of a speeding train.
Rule #1: Get Active
Remember when fund managers were Masters of the Universe? Few qualify these days, and not because they are any less talented. It is because the last decade’s generally rising markets favored passive “buy and hold” investment strategies. Why pay a manager when you can get great results for lower cost—nearly free for some index ETFs?
I’ve never been a buy and hold fan. I am aware of the Nobel laureates who say it’s the only way to succeed in the long run. They’re right about the numbers—but I think wrong about human nature. Any investment strategy works only as long as you stick with it. Telling people to throw their money in stocks and not worry when a bear market chops it in half does them no favors. Most will panic and sell at exactly the wrong time. Every advisor/broker has seen it happen.
The Rest…HERE
