PREDICTION: 70% Likelihood of Stock Market “Correction” | SDITalk #286

November 28, 2017  --  Episode #286

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Summary

An incredibly well-respected financial company is predicting a 70% probability that the stock market will experience a bit of a meltdown.  How will you prepare the conventional side of your portfolio?  I’m Bryan Ellis.  This is episode #286.

 

Transcript

Hello, Self-Directed Investor Nation!  Welcome to the broadcast of record for savvy alternative asset investors like you where in each episode, I help you to find, understand and profit from exceptional alternative investment opportunities.

This is Episode #286, and today is a particularly excellent ascent into financial brilliance, my friends.  Because today, we talk about – and maybe even roundly mock – the new report from Vanguard suggesting that there’s now a 70% chance of a major stock market correction.

Hehehehe.  I’m kidding about the mockery part… I think that Vanguard is one of the “good guys” in the conventional investing world, to the extent that “Wall Street” and “good guys” can be used in the same sentence with a straight face.

But I, your host who lacks NOT in opinions, confidence or the ability to confidently express opinions, have some thoughts on the bigger issue at hand.

So join in today’s show, folks.  You can call with questions toll-free at 833-SDI-TALK.  You can email your questions and comments to feedback@SDITalk.com.  And you can, and should, visit today’s show page at SDITalk.com/286, SDITalk.com/286 where you can see not only the video version of this show, but also a transcript and most importantly… the comments area where you can join the conversation about today’s show topic.

Ok, so Vanguard group – the huge low-cost indexed mutual fund giant – recently released their annual economic outlook report.  What did it say?

Well… apparently, the folks at Vanguard think the odds of a stock market correction are at 70% now.

A bit of an aside:  I know the official reason why ugly stock market drops are called “corrections”.  The unofficial reason, of course, is to have a nice name to use whenever stocks totally crap out so the Wall Street people can stand and smile and say “hang in there”… because you wouldn’t want to exit after a “correction”, would you?  Yeah, it’s a PR thing.  And it’s stupid.  Let’s call a spade a spade, shall we?  What Vanguard is predicting is a 70% probability that the stock market will dump all over your portfolio.  Let’s not be unclear, ok?  This concludes today’s edition of dismantling politically correct speech with Bryan Ellis.

Ok.  Glad to have that out of my system.  So Vanguard thinks there’s a 70% chance of a market meltdown of some degree.

So here’s the question, my friends:  Do you believe them?  If you do, how are you going to protect the Wall Street-type assets in your portfolio?

First, on the “believing” issue:  I think Vanguard is probably giving us their legit belief about the future.  Having said that, you’ve got to look at their accuracy from the past.  And frankly, in the past 5 years, they’ve been off… WAY off.  As in, they predicted no higher equity growth than 9% for any of those years, and were about 50% off – or much more – compared to the S&P500 for 4 of those 5 years.  So, at least recently, their track record isn’t great.

There’s also the fact that we’ve all observed with our own eyes the breakdown of statistical analysis in recent years.  You have to look no further than the Presidential election of 2016, in which EVERY poll showed a CLEAR and DECISIVE victory for Hillary Clinton… not to mention the analysis from famed statistician Nate Silver that Clinton had a 71% chance of winning.  And yet, we have President Trump, and an economy that’s roaring back to life, to boot.

So we know that predictions based on statistical analysis are not reliable, but let’s do an exercise, shall we?  Let’s assume that Vanguard is right, and that sometime relatively soon, the stock market is going to take a big old plunge.

What are you going to do?  Will you stick to the investing version of blind faith and “ride out” the storm… or will you prepare ahead of time, and maybe even profit from it?

So here are a few options you have at this point:

  1. Do nothing. That’s what it means to “buy and hold” and it’s what Wall Street wants you to do
  2. Hedge Your Bets. You could essentially buy “insurance” for your stocks in the form of options or even futures in some cases which will help you to minimize any downside pain.  Of course, that insurance doesn’t come cheaply and introduces additional risk of its own of which you really must be wary.
  3. Go To Cash. This means you sell out some or all of your stock portfolio and hold it in cash until such time as you see the next great investment opportunity come along.
  4. Change Directions. Maybe, just maybe, for those of you who are still mired firmly in the grasp of Wall Street assets, and the incredible – but admittedly entertaining – volatility associated therewith, maybe it’s time to look into moving a portion of your portfolio into assets that actually MAKE SENSE to you… assets over which you can EXERT INFLUENCE, and maybe even control?  Assets which require your blind, absolute faith in people at companies you’ve never met and which you are wholly unable to influence?

Yes, my friends, maybe it’s a good time to jump into… oh, I don’t know… let’s say, real estate.  We all understand rental property from a conceptual point of view.  And you’ve got to admit, it’s hard to find anybody who is a long-term real estate investor who will tell you anything other than it’s a great way to build wealth.

But in your case, right now, folks, it may be far more than a great way to build wealth.  It may just be a great way to protect your portfolio, save your bacon and maintain the hope and expectation of the ideal retirement to which you’re looking forward.

Want to know more?  Drop me an email to feedback@SDITalk.com and I’ll be happy to provide you with some more information about precisely how to transition some of your portfolio from Wall Street to Main Street.

My friends, invest wisely today and live well forever!

 

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Bryan Ellis

I am host of Self Directed Investor Talk, which I’m told is America’s #1 podcast and for affluent self-directed investors. I’m also something of an expert in self-directed IRA’s, solo 401k’s and 1031 exchanges. You can find more of my writing in some cool places like TheStreet.com, Entrepreneur.com, ThinkRealty and even Forbes (that was always one of my goals!). I live in metro Atlanta, Georgia with my wife and business partner Carole Ellis(she’s a real business partner… not just because she’s my wife… I’d want to work with her if I wasn’t married to her… and I’d want to marry her, too). I also have 4 children ranging in age from 2 to 20 (yes, you read that correctly).

It’s my goal to be the name everybody thinks of when they think of Self-Directed IRA’s and Solo 401(k)’s.