Gosh, I don't know, but risks are elevated in every direction right now. Global GDP is plummeting and there is no credible engine of growth anywhere in the world. So even without a cataclysmic Black Swan, we could still get a slow grind lower into stagflation. I don't think the Fed will stop printing as long as Obama is in power. Obama's staff have given them the green light to kill the dollar to prop up exports and provide the endless stimulus to fill the gaping hole in an economy overrun with debt.
Here are some potential Black Swans, though:
* Cyprus depositor looting spreading to the PIIGS, which triggers a pan-European bank run, potentially spreading to the US, drying up liquidity and giving us another 2008 scenario
* China's debt and and infrastructure bubble bursting...we're perilously close to that now...leading to an Asian Contagion that spreads around the world and causes a stock market crash everywhere
* Currency wars finally leading to loss of public confidence in those currencies and a rush to safeguard wealth in hard assets leading to a simultaneous increase in real estate prices (making the cost of living soar) and commodity price increases (driving input prices up for companies and destroying their profits), while the stock market and the bond bubbles burst
* Americans wake up to the fact that large deficits aren't going away any time soon and that the Fed will print money to finance those deficits endlessly, which leads to a loss in confidence in the USD and Americans shift assets out of USD based investments into other, safer alternatives
Those are just some of the possibles. Right now, I simply judge risks to far outweigh potential returns. So I'm invested very conservatively and hold large stock piles of cash. I will act as Joe Kennedy did. He was early in his move towards conservative investments and cash prior to the 1929 meltdown, but then he bought vigorously when it comes crashing down, which secured his and his descendants fortune. I'm close to retirement, so being safe is important. But more importantly, I have to be careful about when I buy for the long run. The prices need to be reasonable and reflective of underlying risks. Right now, that simply is not the case. There are a few cheap stocks out there, but they are very few and far in between. |
