What an age we live in! We live in age of extremes. A time where various trends and forces are pulling apart the fragile political, economic and social structures that have developed over the past 40 years. I titled this post Investing in Uncertain Times, but it’s really about managing our personal finances for an uncertain future.
Many investors today know only 2 major trends in their lifetimes: declining interest rates and the corresponding rise in asset prices. In the last year and a half these trends have turned upside down and our portfolios are in trouble.
Record government spending and central bank shenanigans have caused the greatest inflation spike in 50 years. We live in a world where US budget deficits are now measured in trillions of dollars! Yet people go about their business like this is all perfectly normal. It’s not! And sky high inflation and currency debasem*nt are the result.
As expected, the government response to fight inflation and the cost of living crisis is to borrow and spend more. But this only exacerbates the inflation problem. It kinda makes me wonder how bad things have to get before some sane government policy will prevail…if ever.
As of Q2 2023, global debt is over $307 trillion according to the World Economic Forum. The official US debt at the time of writing now stands at nearly $33.7 trillion! Around the world, government and their citizenry alike are drowning in debt that is proving more and more difficult to finance in a rising interest rate environment.
Real estate sales the world over have stalled out and prices are beginning to come down. Here in Canada, people are struggling under high interest rates to pay the mortgage and the HELOCs and all the other debt used to finance day to day life.
On the investment side, the vast majority of people are stuck in some form of the 60/40 portfolio where they own 60% stocks and 40% bonds. This portfolio has worked remarkably well since 1982, but no more.
Bonds have dropped over 30% and the lates sell off in long bonds ETFs like TLT is over 50%. Most stocks have come off the highs and it’s only the Magnificent 7 (Microsoft, Apple, NVIDIA etc), that’s holding up the S&P 500 index. The other 493 stocks are barely treading water or down substantially.
Against this dire setup how is anyone to manage their finances?
I think we need to focus more on what we can control like our saving and spending habits. Asset prices will continue to fluctuate wildly so I’m focusing more on growing my passive income and net worth.
From my own experience I can say that although we live in uncertain times, I’ve found that with every dollar I save, with every bit of debt I pay down, with every ounce of gold I stack, with every passive income stream I buy, my financial future becomes more and more certain. So my best advice is to tune out the noise and get to work building a better financial future for yourself.
Cheers!
Save, Invest, Build Wealth and Prosper
In case you’re wondering here’s where we park our money and some financial services that we use (please note these are affiliate links where we receive small compensation for signups and sales):
For our precious metals and coin capsules, we use Silver Gold Bull because they price match and offer fast, insured, delivery.
We also own some crypto currencies like Bitcoin and Ether through Shakepay. If you’re interested in buying some here is our referral link to Shakepay and get $10 to try it out. We buy Bitcoin on Shakepay and transfer it to a Ledger cold storage wallet to keep our crypto secure.
For our Daily banking we use Tangerine because they offer incredible products and no-fee banking.
For investing we use a combination of TD Waterhouse (for legacy investments) and Questrade because it offers incredible value with low cost stock purchases and free ETF purchases. If you haven’t done so already, check out my Questrade Review to see why it’s the best deal around. Get $50 in Free Trades when you signup for Questrade through this link.
Please note: this page contains affiliate links. As an affiliate, this blog receives a commission for each sign up for Tangerine, Shakepay, Borrowell, Questrade, Amazon, Silver Gold Bull and Bluehost.
