The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

One More Time ?

12/18/2018

During the global financial crisis of 2007/8, the assessed value of my home starting dropping.  Two years later, it had dropped 29%.  Did I cry?  Did I sell my home?  Did I curse my realtor?  Of course not!  I just waited for it to recover.

The S&P 500 has now dropped 11% and is still dropping.  This year will probably be the first losing year since 2008.  Should I cry?  Should I sell out?  Should I curse my advisor?  Of course not!  Just wait for it to recover.

How many 10% corrections and how many 20% bear markets have you already seen?  They come and they go.

If you fear recessions, consider doing nothing or raising another 10% of cash at most.  Very few people can predict the tops and bottoms.  I have no fear of normal recessions or even bear markets.

However, if you fear another financial crisis, as I do, consider raising cash to 50% . . . at some point.  The trick is to do it suddenly, when you become convinced this is not an ordinary recession but not before.  So, how will you know?

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