I, too, have been worried about the national debt since the Jimmy Carter era. Things got better for a while but, starting about 25 years ago, we’ve been off to the races. But I think betting on a Great Depression II is just that…a bet. My guess is that we’ll have something more like what we had in the 1960s and 1970s…inflation. Maybe worse. The stock owners MIGHT be the winners. During that era, there were no winners. Stocks got clobbered and bonds got clobbered. So I agree that something bad is likely to happen. Because none of the political groups care about debt. There’s no appetite for cutting spending OR raising taxes. But I think that it’s still a fool’s errand to predict how the future will play out and that a balanced portfolio (60/40 to 40/60) is still the best bet. Another possibility is that A.I. actually allows us to continue kicking the can until the Babyboomers are mostly gone.
Daryll,
As the late, great economist, Yogi Berra, once said. “It’s hard to make predictions, especially about the future.” But I’d disagree that it’s a fool’s errand to make forecasts and predictions and think the opposite is the case. To not make contingency plans is foolish, especially not making plans about what one intends to do if a worse case scenario should actually occur.
Right now, what is truly the worst case scenario? Nuclear war, obviously, which the war mongers talk so casually about as if there would be any winners. If one truly fears that scenario, then why not invest in stocks in the meanwhile?
The next worst case scenario is a sustained, global, economic crash rather than just a typical bear market that is confined to the Atlantic economies. I think that is so unlikely as to be not worth bothering about. The BRICS nations and their partners do worry about that, though. Hence, their increasing avoidance of Western financial entanglements. Whatever does happen with the world economy, they will survive if not prosper.
OTOH, Germany is already in recession, as is the UK. The US will follow shortly if we’re not already in one, as some would argue. So, do this. List all the ETFs that track single countries and ask where the US broad market ranked last year. (Spoiler alert: The US wasn’t a top-tier performer.) So, once again, keep buying stocks. Just minimize or avoid US market exposure and meanwhile, make sure to be debt-free and have an income-stream (or several) that is not tied to US stock market performance.
Yeah, the US is my home market, and it’s a market that has been kind to me in the many years since I bought my first stock at age ten and soon enough had doubled my money. But the US equities market is not now a favorably-priced market, nor is the US economy a well-managed economy. If it were, then gold wouldn’t be gaining to the extent it is, though the rise is silver is simply a supply/demand commodity story, not a reaction to the depreciation of the $US dollar, which is a consequence of unconstrained printing to facilitate deficit-spending.
In short, the rise in US stock prices since Greenspan bailed out LTCM isn’t based on genuine economic activity but on increasing financialization. That’s unsustainable. No matter how long it has continued so far, it will end, and when it does them who believed that time would never come won’t just be surprised, but severely damaged financially. That’s damage I could sustain for having built defenses against it. But I would prefer to avoid it by not following the Pied Pipers of AI, Bitcoin, Mag Seven, etc.
While I agree that the odds of something really bad happening are high, I stand by my historical observation that we don’t know how this will all play out. It could be what you say. It could be hyperinflation. It could be some combination. Or A.I. could be just the growth engine to allow us to muddle through until we are very old or dead. I won’t bet on any one scenario, but if you do, I wish you good luck.
This is pretty much where my head is at, too. It’s a key reason why I spent 2025 investing in efficiency via a plug-in hybrid vehicle and solar panels for my home. If costs continue to rise, our “cost basis subject to inflation” has been lowered. If there’s an extended recession, that combination actually has lower daily marginal costs of local transportation than the local public transportation system. (I do acknowledge the risk of repair being my burden, however.)
Beyond that, though, my core plan hasn’t really changed. Uncertainty has been a part of life since the beginning, and the market’s cycles are the price of admission for its long-term potential prospects.
Ultimately, it’s a balancing act. Too much safety, and you risk losing ground to inflation over time. Too little safety, and you risk a forced liquidation because the bills need to be paid no matter what the market is doing.
This past week, I invested my 2026 backdoor Roth IRA money as well as the dividends that had accumulated in my accounts. I don’t believe I caught the market bottom. I do believe that the anticipated annual dividends from that investment will help in my quest for a stream of dividends that increase faster than inflation.
When I first started investing, I had hoped to one day live off of dividends. Having repeatedly seen dividends get cut when times get particularly tough, I now hope to use my dividends as one of the tools that feeds my investment grade bond ladder. Maturing bonds from that bond ladder, in turn, should provide the core source of portfolio withdrawals for living expenses.
And even then, bonds are only as strong as the issuer. So I strive for diversification within the bond ladder, and I plan to keep an emergency fund even in retirement, in part to protect against an untimely default.
Is it an optimal strategy? Probably not. Is it “good enough?” Well, it passed its first test in 2025, as the bond ladder provided much of the funding for the solar panels.
All this is a long-winded way of saying that you do the best you can with the money and information you have available to you at the time you have them available to you. You hope to do well overall, and you strive to learn from mistakes made along the way. Perfection is the enemy of “good enough”, and a good enough plan that you can stick with beats a perfect plan that you don’t stick with (for whatever reason, even ones not entirely in your control).
Regards,
-Chuck
Chuck,
A thoughtful response. Thanks.
I agree that it is a horrible time to invest. Heck, it’s almost always a horrible time to invest, seems like the markets are almost always at or near the all-time high. Looking at the chart, it appears that “the market” has only declined enough to “get in” at a meaningfully lower price only 3 or 4 times over the last century. That means that over an average investing lifetime, you might only get one or two chances at it. And if that one chance happens to be near the end of your investing lifetime, well, you run out of compounding time and can’t benefit from it (the lower price opportunity) nearly enough.
Good post.
Personal Finance Club has a nice blog post about three hypothetical Baby Boomer investor profiles, and their journey over the past 40 years of investing during their accumulation (working years) in the most popular index fund. One invested on a periodic basis out of every paycheck no matter what the markets were doing, one invested only at “bottoms”, and one invested only at “tops”. The steady investor who utilized periodic investing ended up with the largest nest egg. The “attraction” of only investing at bottoms is indeed alluring, but the odds of being able to do that on a consistent basis over a 40 year accumulation period are not in anyone’s favor. The illustration of the steady investor over their accumulation period speaks volumes, even though we all have our own unique time period for our working careers (some started in the 1970’s, some in the 1980’s, some in the 1990’s, some in the 2000’s, some in the 2010’s, etc.). Yet the premise of staying the course (thanks Jack Bogle!), and turning your human capital into financial capital over a 4 decade working career is what prepares us for our retirement income.
BB
BB,
I totally disagree that today’s pre-retirees should plow gobs of money into Wall Street’s standard package for them of so much in US lg caps, so much in emerging markets, etc. and keep doing so year after year despite the often ignored fact of the depreciation of the $US dollar and the negative impact that will have on prices and standards of living.
What many of us who are now retired had the sheer dumb luck to benefit from was a Fed/Treasury cartel that was hell-bent on inflating financial asset prices by printing money. So it wasn’t our investing, however discipled or haphazard it might have been, that created our present paper wealth, but the sheer dumb luck of having favorable winds at our back such that even throwing darts would have made a person money.
Additionally, and very typically, we had an employer who provided a defined benefits pension, plus the option to participate in a 401k plan. If he/she took advantage of the latter, plus did the sensible thing of paying off the mortgage before retiring, he/she now has an income-stream --from SSI, pension(s), and investments-- that is 3x to 5x times his/her current expenses.
So, yes, looking back, it is all very easy to say to the current generation, “The future will be like the past. So, do what I did, and you, too, will become financial secure in your retirement years.”
What was the national debt during our working years compared to where it is today? What was the strength of our industry economy compared to where it was today? What was the extent of US foreign follies compared to what they are today? What was the strength of the BRICS nations and their partners compared to what it is today?
Then was then, and now is now. Those are two very different economic landscapes where the so-called “middle-class” isn’t very middle any more, for not having made wage gains since the mid 70’s and a tiny, economic top-tier continues to enrich itself.
So, should today’s pre-retirees give up and spend, spend, spend? Not hardly. Just the opposite is true. But it won’t be their accumulation of paper wealth decades ago that makes their retirement years affordable, because inflation will have wiped out most of its purchasing-power. Instead, they need to adjust their wished-for, hoped-for lifestyles in retirement toward something that echoes that of their grand parents, and they need to realize that the myth of ‘accumulate and distribute’ won’t work for them.
Instead, they should plan that their job in retirement will be that of the money manager their working years didn’t allow time for. In short, I think things like the 4% Withdrawal Rate are nonsense, and I’ve tripled my money since retiring, not spent it down, all the while fully realizing that wealth is just a phantom that could fade in a couple of days should markets crash as they have done in this country many times before.
“Won’t happen? Can’t happen?” Don’t kid yourself. Why in the past couple of weeks has the Fed printed $40 billion to bail out the banks that were short silver? Why is there now on the books a law that says that bank deposits are assets of the bank, not depositors? Hard times are coming. Maybe not soon, but inevitably so, and them who “invest regularly”, rather than tactically, will be unpleasantly surprised when their borrowed, uncritiqued plan doesn’t work out so well.
Again, most of what you say, maybe all of it, is true regarding the current state of affairs and trend. But you do not know how it will play out. In Weimar Germany, stocks were the relative winners. In the USA in the 1930s, bonds were the winners. In the USA in the 1960s, both were losers. You don’t know how this will play out and taking any strong position one way or the other is gambling.
Not helpful if you’re not suggesting where to invest. Hold cash? Bonds? Foreign stocks? Gold?
Daryll,
You’re misquoting history. Stocks didn’t do well in Weimar Germany. Hard assets did. Them who borrowed in the rapidly depreciating currency and bought hard assets became fabulously rich. Yes, in the US in the '30s, bonds were winners. But them whom you urge to “invest regularly” aren’t thinking tactically, and they won’t be taking advantage of the opportunities created by financial stress. Instead, they will be doing the equivalent of fighting the last war, and they will wonder why their plan isn’t working
Yes, for sure, no one can know for absolute certainty how the future will play out. But there are no if’s or maybe’s about the fact that the US is “cruising for a bruising” with its money printing and its deficit spending, never mind its endless, pointless wars of choice. Besides, what’s the downside for me of being prepared for a crash? If it doesn’t happen in my remaining lifetime, then my heirs just have more money to spend. If the crash that I do know for certainty can happen, does happen, then my modest, multiply-funded, beer-and-bait lifestyle continues uninterrupted, and I get to have a bit of fun exploring the opportunities that will arise. Thus, I’d call being prepared for the worse a ‘win/win’ situation.
I think that trying to build much wealth during one’s working years, so that one could retire on that wealth some day, is nonsense. I don’t know about you, but apart from a brief period teaching college --the lower-division rhetoric series if you’re wondering-- I made my living on the water front, doing project work that often involved 12 hour days, 7 days a week. And those are hours and adventures I’d never wish didn’t happen. But they are also hours when zero investing happened. When you’re doing 12-hour days, any free time is devoted to just getting ready for the next day and the one after that. That, actually, is the situation of most working Americans. Even if they have a “normal” work week, they’ve got a commute, plus a spouse and kids they want to spend time with, plus the normal maintenance chores that comes from being a homeowner and a member of a church or community.
What America’s workers typically have is little money to invest, little time to invest, and zero knowledge of how to invest. Hence, they are urged to do mindless, brainless things like invest passively and regularly regardless of how over-valued financial assets have become and how disconnected from fundamentals or economic realities thy are. But.. and here’s where we agree .. they have to engage markets as best they can, or else they will never acquire the experience and market savvy they will need when they do finally have time to do some serious investing. That’s the Catch-22. Investing can’t be done in a meaningful or responsible way in mere minutes on an occasional weekend. Nor are financial “advisers” to be trusted. They just talk their book and they won’t be there in the 30 to 40 years hence when their plan has failed to achieve what it promised to achieve.
,
What I do predict, which isn’t much of a prediction, because we are already seeing it play out, is massive old-age poverty in the US. Why? Not because they failed to invest for retirement in their working years, but because they failed to learn how to invest when they did retire and had the time to give investing the time and effort it needs.
As I said earlier, I retired with enough money to retire on by the conventional metrics of that time, and then I went to work 30 hours week, putting money to work, making mistakes, having some successes, and learning the investing game by doing exploring and experimenting, and learning that still continues. For sure, that’s not a path I’d wish on anyone else, because investing can be an awful thing to do to oneself. E.g., why put oneself into situations of constantly having to make decisions under conditions of uncertainty? But I was fortunately enough to grow up in a family that took money management seriously. As soon as each of kids could write our on name two rites of passage happened. One, we could get a library card and check out our own books, Two, our parents helped us open a passbook savings account. Later, as we grew older, we were given preferred shares at our birthdays of stock in the company our Dad worked for and whose quarterly dividends we could bank or spend as we chose. As kids, we’d follow the price of our stock in the small town newspaper. That America, where even blue collars such as my parents, expressed their pride in being Americans by owning shares of American companies, is a thing of the past and is the dinner table conversations between parents and kids on how make financial decisions.
That early exposure to investing didn’t stick with my brother or with my sisters, who ignore markets or depend on advisers. But it stuck with me which is why I object when I see patently bad investing advice being given. Hard times are coming for lots of very obvious reasons, and mindless, passive investing is part of the problem, not a workable solution.
I’ll stay diversified. Good luck to you.
Dow is down 400+ today. Opportunity to buy the dip. Many down a few percent but tech stocks holding up pretty well. . . . Or will the down trend continue?
And yet the MSCI EAFE gained over 30% last year.
And yet the S&P 500 was up nearly 18% - higher than the historical average.
What’s not to like about any that?
You do like to rant, don’t you?
This thread is amazing. Reread this quote from the OP. This is Timing the Market. You can give reasons and excuses - but it does not change the Market Timing aspect. Kind of like the Pig and Lipstick thing.