What is your PLAN for the next Depression ?

[Andrew_A]

I've heard lots about this Plunge Protection Team, PPT. I reckon it's an urban myth.

Just think how many millions of dollars it would take to shift the Aussie market say. It would take billions to shift the US. OK, you could shift the market for a day. Then it would take the same money again to hold it up the next day. What would be the point? You couldn't shift a market for very long no matter how many billions you used.

That's what I reckon. I know nothing about this though, just using my commonsence.

See ya's.

I'm much more inclined to believe it's a myth, certainly I haven't seen anyone credible and influential in the markets believe it's true, and I have seen it mentioned quite a few times on the net.

The lessons of the markets are that they can be pushed around by governments in the short term but they always win in the end and the payback can be severe. Soros's coup with the GBP is one of the better examples.

 

[handyandy]

I have been taking into account the possible scenario of a serious recession/ depression and also the the escalating cost of transport as a result of deminishing oil supplies/availability.

To this end 80% of my property portfolio is located within 3 blocks of a railway station. (So bring on nuclear power to provide electricity). Further these properties are also in the lower socio economic area to ensure that they stay rentable.

I will be rationlise some of my property holdings and am in the middle of upgrades to sell in a year or two.

As far as equities I will be liquidating a majority at some appropriate time. At worst I will lower my ROI over time but my priority is to preserve my capital.

An interesting book I have been reading is Harry S Dent "The Next Great Bubble" where he nominates the cycles we are following based on similar concepts as Peter Spann has touched on in his extensive and excelent post.

On pages 87 - 90 Dent espouses his predictions as to the 'future' cycle.

NOT A DIRECT QUOTE BUT BRIEF EXTRACTS

'The first great Deflationary Crash: Late 2009-Early 2010 into 2012/2014

Late 2009 -mid 2010 next great bubble to burst, look much like 2000-2002 crash only worse and steeper. This will usher a deeper and longerterm bear market and depression.

He particularly associates the precidential terms to ups and downs in the share market.

He nominates variuos dates as to when events could happen including the impact on bonds and real estate PArticularly realestate 2011- 2012 in high end urban, suburban and resort areas.

The ChoppyBear Market rally 2015 - 2019

This time very confusing. Market will rally in choppy manner based on more demographics.

The Second Great Crash 2020 - 2022

Final crash. This time will wipe out any gains in the 2015- 2019 period.


The Next Great long term Bull Market begins 2023 on

Its been an interesting read, if somewhat dry with a lot of stats and suggestions supported at invenitum.

As I have already mentioned I will certainly not ignore the possibilty of a recession/depression and hope that the strategies that I adopt will allow me to come out the other end in a much stronger financial state.

Part of my strategy will be to pick up a strong business towards the end of any major downturn.

Cheers

 

[yadreamin]

My Dad fought in France in the Great War, lived through the depression, became a sole Dad when his wife died in childberth, failed the medical for WW2, and used to say to me "I've lived through two world wars, a depression and two marriages, and you still think I'm naive!!" Funny thing was, he was. LOL

That generation had no confidence in the future and therefore could not commit to a mortgage. They are worthy of our understanding nonetheless.

RichardC, what your Dad went through would be enough to wipe out anyones confidence.
Thankfully we had a country full of people with Great Strength during those times

 

[kathryn d]

In a depression bunk beds would become popular as my tenants could double up in one IP and pay less rent each.

I was thinking the same thing Brenda.
Our 11 unit which effectively has 27 bedrooms, would undoubtably need to rented by the room.People wouldn't be able to afford rent with very little income.Week to week leases compared to monthly or yearly.
How would a person manage to buy cheap properties during this time if banks started charging 20% + interest?
Property values would drop and so may the equity you have built up in IP's.
When a mortgage comes up for renewal at the new high rates how does one manage?
I remember working with co workers and family during the early '80's and when mortgage rates went sky high (18% +) they were really scared. Only way to keep their homes was to add on time to reduce their payments to the point they could afford them.
Luckily we owned our house at the time.
This time I have refinanced my home to the limit and several other mortgages now on IP's. These are at low interest rates.

I can't base my financial decisions on what MAY happen.I just hope I will be able to think quick enough "outside the box" to be able to ride out the recession/depression WHEN the next big one happens.

 

[stretchy]

As far as equities I will be liquidating a majority at some appropriate time. At worst I will lower my ROI over time but my priority is to preserve my capital.

Cheers

I'm curious to know what conditions will signal this for you. Do you have a particular set of events to watch out for, or is it simply a "at year X sell 90%"?

 

[handyandy]

I'm curious to know what conditions will signal this for you. Do you have a particular set of events to watch out for, or is it simply a "at year X sell 90%"?

Really it will be hard as my intention is to liquidate when its booming. You know the old saying 'when the bell hop starts giving you stock tips, its time to get out'.

I used this same method with property purchases, not liquidating but in this case no further purchases.

The reason I say 'it will be hard' is because I will be going completely against the market sentiment.

Not very scientific but it has worked for me.

Cheers

 

[stretchy]

Fair enough. In the tech boom the bell hops were giving tips for years before it finally broke, so its a dangerous game your playing there.

If you choose to take that route, my suggestion would be to find some opposing opinions rather than relying solely on the words of Dent/Spann and Co. Its a fairly extreme view of the world and in my experience the truth is somewhere in between the doom-and-gloomers and the eternal optimists.

 

[The Y-man]

Well, you never know, the next great depression could be triggered by Handy offloading his portfolio.....

Cheers,

The Y-man

 

[Andrew_A]

A coherent opposing view to Dent (Dow 40k) /Spann (Dow 18k) could be provided by Martin Pring amongst others.

Good advice about seeking out contrary opinion and running what if scenarios over your investing plans.

Return of the Bear - Martin Pring, part 1
Return of the Bear - Part 2
Return of the Bear - Part 3

3 short videos (with a small add at the end)

Personally I listen to everyone and then make up my own mind. Presently I'm more inclined to believe the US is much closer to a recession than a booming Dow; though I have thought about how to take advantage of both scenarios.

Not to say that any of these 3 people (Dent, Spann, Pring) are correct or wrong, just that there are plenty of coherent and quite successful guru's you can find to voice opposing forecasts, which says it all I think.

 

[stretchy]

Pring is quite a well regarded technical guru, you cant go wrong there. For a long-term fundamental approach, I could also recommend John Mauldin who writes a weekly free email which is quite comprehensive.

http://www.2000wave.com/gateway.htm

He tends towards the "muddle-through" idea, where the world economy (and markets) basically go nowhere for the next 5-10 years or so. Kinda like the 70's. That does imply a few bears and a few bulls in between, but we end up where we started. If its true, then the next few years will be very difficult to make money in.