WARNING: I’m About To Cause A Recession And Stock Market Crash

WARNING: I'm About To Cause A Recession And Stock Market CrashIt’s that time of year again…

The time when I re-balance my portfolio of index funds.

There’s nothing fancy about this re-balancing process.

It’s not about stock picking (After a decade on Wall Street and several years off, it has become abundantly clear to me that casual stock-picking is a loser’s game).

It’s also not about market timing: I’m not making the changes because I’m expecting some huge short-term market moves (except for the one I describe below).

What it is about is balancing the portfolio to achieve the right balance of risk and expected return — for me, given my risk-tolerance, age, and other specific circumstances.

On this “expected return,” I should say up front that I’m not expecting much, at least not at these price levels.

  • Stocks are priced to produce relatively lousy returns over the next decade (~5% or so annually, far below the long-term average of ~10%).
  • Bonds are priced to produce almost nothing (and could be quite negative if inflation takes hold).
  • And cash isn’t earning much of anything, at least today.

So, all-in, I expect the next decade will be another crappy one for basic investment returns.

But, still, I don’t want to hide completely in cash and bonds and get wiped out by accelerating inflation if the economy ever recovers. And I also don’t want to bet the farm on stocks and get creamed if valuations regress to their long-term means (about 25% below today’s levels).

Read More: http://www.businessinsider.com/warning-im-about-to-cause-a-recession-and-stock-market-crash-2012-1

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Sydra Farooqui
Sydra is our content manager. She also is in charge of Search Engine Optimization of posts and pages. She is generally the person behind curtains who visualizes and implements the Social Media Strategy of the website. Sydra is one performance-driven, insightful individual, who is an important asset of our team. She holds a Bachelors of Business Administration from IU (Iqra University), one of the top universities.