Hi Al,
The Central Banks have created a major global stretching for yield that has affected everything (Sovereign debt, Corporate Bonds, Junk Bonds, Real Estate, Stocks, ...). When the elastic snaps back (don't know when & don't know how) it has the potential to be colossal.
Do you have plan for this possible long tail event? What if RE is down 50% and stock are down even more and the Cdn $ is crushed? Will you be OK? Will you be able to take advantage of the amazing bargains that will be offered up? Do you have some sort of insurance policy against this scenario?
Well, I am not convinced. As you know, We, whom were on this board, went through one of these a few years back and came out stronger. Do you have a plan Phoenix?
I for one have been buying dividend payers in an assortment of industries. It is interesting to note that in 2008/2009 the majority of companies did not cut their dividends - they didn't raise them, but they didn't cut either. The major income hits were among US financials. At the same time I have been exiting most of my leveraged bets (Leaps), slowly.
I cant speak to CDn. Real Estate. It is certainly frothy but has never dropped by 50% - see above evidence.
I try to get my head around the scenario you propose. With central bank ammunition used up, the outcome is nothing short of worldwide disaster. Nothing will be safe, certainly not cash. This time around no one will be buying stocks because we would be in a deflationary spiral. I guess that is why the fed. is unwilling to shrink its balance sheet or raise interest rates in any hurry. I also think the Fed. and worldwide governents want to inflate their way out of debt.
Like Y2k, there is enough people worrying about it to make it a non-event. This wasn't the case in 2007, when no one seemed worried about anything. I had SPY puts by summer 2008, that I sold out way, way too early. I am not seeing that as necessary right now.
