It is a good question, why do we talk about things that are out of our control? It is often said (wisely) that an investor should concentrate on what she can control. We can control many important components such as our asset allocation (risk level), how much we invest, the fees we pay, the taxes we might pay and much more. But we can’t control inflation, or deflation, levels of economic growth, recessions or the movement of the stock and bond markets. So these days, why do we talk about inflation? These topics and more on the Sunday Reads.
With inflation ‘roaring’ these days, inflation talk and inflation fears are all the rage. It has been a long time since inflation and even stagflation has been on the table. That said, it is always a risk whether it is getting digital ink, or not.
Here is a wonderful post (OK he likes to call them memos), from Howard Marks of Oaktree Capital.
The thrust of the memo is that we should not invest based an any macro (economic) guesses, because we do not know what is to come. Economists and armchair economist such as myself 🙂 do not know the future.
We don’t know the future
But it is important to be aware, that is why I write on the topic of economics. That Oaktree post was re-posted on Seeking Alpha. I offered this comment …
We don’t know the future
That might be the most important truth.
I often write about the economic scenarios and possibilities and guesswork on MoneySense (a weekly column).
Here’s a recent post that will touch on inflation and more …www.moneysense.ca/…
And here’s why (as per the memo) we put it on the table. While we don’t know what will happen (or when) we should be aware of the things that could happen.
Most investors are …
a) not aware
b) not prepared
Most of us are not truly prepared for an event such as stagflation or rolling recessions, aka economic contraction. The aggressive (stock-heavy) investor would likely get slaughtered during a period of deflation. We either are not aware of potential outcomes or we choose to guess that those events cannot happen.
That’s why we put the ‘economic stuff’ on the table as the conversation leads to what could happen for, and to investor portfolios.
Be aware. Be prepared
Here is a wonderful checklist, that will help you get ready for retirement.
The big rocks of retirement. Issues you must address before retirement. That post takes a U.S. perspective ( and hence includes health care costs that are largely exclusive to Americans) the majority of the themes and concerns are universal.
At Cashflows and Portfolios, what is inflation and what are the best investments for rising inflation?
While I would not trust inflation to stocks, certain types of stocks can help the inflation fight as is pointed out in the post. They also looked to the Permanent Portfolio in that offering – thanks to the CAP gang for the link back to this site.
On MoneySense Jonathan Chevreau looks at how inflation might impact retirement plans.
And on Jon’s site (The Findependence Hub) Robb Engen offers a very needed post in reframing the RRSP advantage. The RRSP program often gets a bad rap that it often does not deserve. Learn how to use the RRSP, TFSA and taxable accounts to your best advantage.
On My Own Advisor the weekend reads. That’s a nice mix of posts and topics.
On GenYMoney a very good post on how dividends are taxed in Canada. There are some good links and tools in that post.
Speaking of dividends, this week I offered an update on our Canadian Wide Moat Portfolio, and the even better wider moat option. Lack of competition can be good for stocks and your portfolio.
On Tawcan, the 2021 goals and resolutions update. Bob is a must follow.
On Savvy New Canadians a very good primer on understanding ETFs vs mutual funds.
Related post: what is index investing?
Here’s a great topic on the Maple Money podcast – money lessons you can teach your kids. I am a big fan of parents and educators getting in early on that fiscal sanity and the financial basics. Can we sign up our federal and provincial finance ministers? Ha.
And on that topic or stimulus and back to that Oaktree post …
To have a healthier allocation of capital, I’d like to see a free market in money, and to me that means interest rates that are “naturally occurring.” Rates held artificially low distort the capital markets, penalizing savers, subsidizing borrowers, lifting asset prices and encouraging increased risk taking and the use of more leverage. Again, I’d prefer to see a Fed that’s reluctant to intervene other than when intervention is essential.
I don’t worry about any of the above
While I write about and think about economic events, and spend too much time looking at the pandemic and how they can affect things, I do not worry. Our portfolio has assets that will work in all economic conditions.
Once again, you might have a read of that Permanent Portfolio post or the new balanced portfolio idea. You might factor in those thoughts for your portfolio construction.
Thanks for reading. We’ll see you in the comment section.
Are you ready for anything?
And of course, don’t forget to check out my latest weekly on MoneySense …
Have a great long weekend. From beautiful P.E.I.
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