Where to put money in financial market crisis?

[Crypto Crude]

Discussion...
Say next year we have stockmarkets meltdown...where do you put your money?...
Financial market crisis bigger than 2008, housing market crashes, commodities crash, crypto crashes, banks could crash... so where are you putting your money?
:cool:cc

[TeslaGod]

Buy tsla before its too late!!

13286

[Swala]

Under the bed!

[Aaron]

Under the bed!

Agreed, if you knew it was all going to crash, cash would be best and you can buy up some bargains at half price when they go on sale.

If you thought that they will destroy the value of a dollar before letting asset prices correct then, it gets tricky. Maybe gold?? just putting it out there.

Getting nervous CC? Seems odd from someone so definite about things. I would have thought crypto currencies were your go to investment. Lots of value there I would have thought.

[FTG]

First things first.

Before making any significant & defensive investment decisions, one would want to have a good understanding on what key factors precipitated the crash in the first place.....

Keeping in mind that how things appear at first glance may not be actuality.

The good news is that, unless it is a true Black Swan event, there will be various signs & indicators that the astute will see. Providing sufficient time for them to position financial affairs accordingly.


Cash MAY be an option (especially if the crash is a rapid deflationary type event), but of course that may not be the situation. However, generally speaking, more 'tangible' assets will prevail over fiat currency during tougher times. Moreover, if the crash is coupled with a loss of confidence in the monetary system (USD for example), then "which" cash/currency you have becomes very important . Especially if a "bail-in" scenario, for which now the legislature & mechanisms are in place, is activated by the Poli's & central banks!

Learning from history, in previous "crashes" ('29, '87, '00, 09 etc), it is clear that life still goes on. It doesn't grind to a total halt. People still need 'to trade in various services & products. In fact some sectors of the economy & some select industries can go on to boom.

An interesting factoid that illustrates the point. In the USA, far more millionaires were created in the 1930's than were in the roaring 20's.

[Aaron]

Maybe cash is not best after considering the Open Bank Resolution. Your money in the bank gets frozen and only released as the bank allows.

https://www.nzherald.co.nz/business/stress-testing-shows-most-banks-would-struggle-to-pay-out-deposits-in-a-severe-scenario-lasting-over-six-months/RFTVN4J4NB4FLJKS4DXWYBJEQA/

I suppose a diversified portfolio remains the best answer.

FTG as I am not very astute what would be a couple of main indicators things were going to go South. I appreciate they are not a guarantee of disaster but might indicate disaster.

[SBQ]

Maybe cash is not best after considering the Open Bank Resolution. Your money in the bank gets frozen and only released as the bank allows.

https://www.nzherald.co.nz/business/stress-testing-shows-most-banks-would-struggle-to-pay-out-deposits-in-a-severe-scenario-lasting-over-six-months/RFTVN4J4NB4FLJKS4DXWYBJEQA/

I suppose a diversified portfolio remains the best answer.

FTG as I am not very astute what would be a couple of main indicators things were going to go South. I appreciate they are not a guarantee of disaster but might indicate disaster.

I'll have to agree with FTG's view. History is a good basis and throughout the GFC that started in 2008, NZ banks operated unscathed (mostly because of strong Australian backing and our geographical remoteness to the financial markets that conned investment firms abroad.

Banking stress tests is important considering NZ has no depository insurance common in places like Canada and the US. So cash amounts are at risk. The issue of a 'bank run' are scenarios from the old days in developed nations. Nowadays when we see a bank run, we see it happen in poor developing nations where their gov'ts have reek havoc in their economy (ie, hyperinflation). I can assure you NZ is not and will not be in that camp. We are a far more productive nation and our assets are far more diversified.

My neighbour has cold feet about cash he's left in the bank account for the past 6 or 7 years. Coming from a sale of a home he had long ago, at the time, I thought it was a mistake of him selling it. Imagine how much house prices in NZ have come up over the past 7 years? (well over double?). His fear was waking up one day and realise the $ in his bank account is only worth half. He could not say exactly the cause of action ; if it was due to some major economic impact, massive devaluation of the NZ currency?, i'm not sure. But the fact is, he feels owning a bit of dirt with a house on it is a far safer bet.

Let me post this graph: https://static.seekingalpha.com/uploads/2017/3/21/saupload_history_of_market_corrections2-hires.png

Earlier in the year I showed him that chart titled "Human Innovation Always Trumps Fear" and the direction of the squiggly line trends up. However, his wife is not convinced so investments in equities were not their thing.

Oh, we've had a financial market crisis in the 3rd week of March 2020. So in 20 months time are we due for another? I would say a -10% correction would not be out of the norm, but to believe stock prices will go back to March 2020 lows is extremely unlikely.

[Crypto Crude]

First things first.

Before making any significant & defensive investment decisions, one would want to have a good understanding on what key factors precipitated the crash in the first place......

I think Evergrande is the trigger... Chinese construction company with 300 billion of debt (equal to 2% of China gdp) and its not going away... Basically what's happening is house prices are so far out of whack in China, valuations on spreadsheets are too high and not reflecting actual values... I would suspect that many of the large Chinese companies will be in the same boat... these debts are held by local banks and businesses which could in turn go under starting a house of cards... production of goods and services that we buy from China will halt
.. aswell as already supply issues mainly transport...aswell as covid related contagion... debt levels worldwide are far too high and very close to never being able to pay back... the US is so close to max debt ceiling beyond belief...'real' inflation is very high and there's a huge movement in America against working mainly because standard wages don't even cover basic standard of living (look at antiwork group on reddit) phenomenal discussion and movement against working !!
People losing jobs because of forced vaccinations will have them selling assets to get through aswell and many other covid related factors I won't get into... also covid related business (just like earthquake repair, natural disaster repair etc) does not add real GDP its like a fake growth...
I'm sure that it's all coming down next year... the Global financial crisis of 2008 was very similar in nature... 4th quarter of 2007 we got some corrections and triggers as it unwound in 2008...
I think this crash could be twice as big as GFC crash...
This is the great reset remember...

:cool:cc

[Snoopy]

Discussion...
Say next year we have stockmarkets meltdown...where do you put your money?...
Financial market crisis bigger than 2008, housing market crashes, commodities crash, crypto crashes, banks could crash... so where are you putting your money?
:cool:cc


I will be investing in companies that produce stuff that everyone needs, financial crisis or no financial crisis: food, power , NOT shelter as I think house prices are too high, and telecommunications. Companies in these sectors were all quite expensive a year or so ago, but the prices have come off a bit.

Still not keen on the retirement sector, as I think most of the local forum heroes who have done well at this have realised that, despite their essential nature, these retirement village companies are really just extended property plays in earnings growth terms. Having this attitude over the years has cost me a few fortunes I otherwise might have had. But whatever doesn't keep you awake at night is probably as good a measuring stick as any as to where you should put your money in troubled times.

Of all my investments right now, I am feeling probably the most nervous about my share investments in banks and finance companies. Don't get me wrong, I am not expecting any NZ/Oz based banks to fail. But I have had it said to me more than once that banks are a good place to have your money when interest rates rise, as interest rate margins lift (there is a bit of 'being fearful when others are greedy' for me in here too) . I have always been more concerned with 'net profit margins', of which 'net interest margins' are only one ingredient. And there seem to be an awful lot of niche 'fintech' players nibbling away at what used to be profitable niche markets for our (or at least the Ozzie's) 'big banks'.

SNOOPY

[Crypto Crude]

Snoopy,
To be investing in companies (listed companies I presume) through a very likely financial market meltdown is a cabbage patch kid move... in bear markets no companies are spared no matter what they do or how important they are.... small companies, big companies they all get smoked....
You need a huge reality check....
Buying companies and hedging with a short sell now that's smarter...
Next year from mid year on will not be a time to scalp profits... it will be a time to maintain as much wealth as possible and really pump it back on after the crash.....

I'm considering where to store money... I'm thinking perhaps just a cheap house which won't lose much money in a bear market and spread some money around and wait for the bear market... its coming...
100%... and this will be a real nasty one... of a generation
:cool:cc

[TeslaGod]

CC

It seems your black swan / market crash /end of the world dooms day event came early for you with your -40 to -100% crypto pick losses this year.

Or you just don't have a clue what your doing.

[justakiwi]

This comment just shows your lack of understanding of investing in shares. There will be crashes. Some worse than others, but the markets always eventually recover. Not all companies will survive a major crash, but most will. Wise investors will pick companies that will recover and survive. Wise investors also don't panic sell, and ensure they are prepared to ride out a crash, even if it takes several years. Snoopy's approach is not a "cabbage patch move" - it is a very wise strategy.

Why are you worried? According to you crypto is the only investment worth considering. The one that will make you a billionaire and give you security for life. Having second thoughts are we?



To be investing in companies (listed companies I presume) through a very likely financial market meltdown is a cabbage patch kid move... in bear markets no companies are spared no matter what they do or how important they are.... small companies, big companies they all get smoked....
You need a huge reality check....

[Snoopy]

Snoopy,
To be investing in companies (listed companies I presume) through a very likely financial market meltdown is a cabbage patch kid move... in bear markets no companies are spared no matter what they do or how important they are.... small companies, big companies they all get smoked....
You need a huge reality check....


CC in one sense you are right, but it all depends on time frames. If we have the mother of all market crashes what do you think people will do? Cancel their internet connection? Cut off their power account? Stop buying food and live off rats and sparrows with grass salad caught and harvested on their own property? If you don't think any of that will happen, then

1/ Cash will still flow through to those companies operating in those 'utility type' industries.
2/ That means that cash will be available to pay dividends.
3/ A dividend means the underlying share will be providing an investment yield.
4/ An investment yield means the underlying share price will have a 'floor value'.
5/ If interest rates are lowered (which is what happens in times of a sharemarket crisis), then this means the 'floor price' for these 'utility type' shares will be high.

This sounds like a good 'capital preservation' strategy to me. Of course none of this prevents a 'shock price reaction', which is I think the kind of thing you fear. For example, in the initial Covid-19 shock, the CEN share price of $7 plunged to under $5. SPK plunged from $4.80 to under $3.80 and RBD plunged from $12 to under $7. But how long did these plunges last?

OTOH if you were a shareholder in Tesla, trading on a PE ratio in the hundreds, what need is there for the public to suddenly rush out and buy a new car? With no dividend in sight, you might see a more permanent 'down rating' in the Tesla share price. A far different situation to the three companies that I described above.



Buying companies and hedging with a short sell now that's smarter...
Next year from mid year on will not be a time to scalp profits... it will be a time to maintain as much wealth as possible and really pump it back on after the crash.....


The problem with hedging is that it forces you to time the crash. That works until it doesn't, and when it doesn't work (as eventually it won't no matter how smart you think you are) at that point your dollars are done.

I managed to have a few nibbles after the early 2020 Covid-19 meltdown that have done very well, but nothing 'life changing'. The problem is at the time of a crash like that, the survival of some companies comes into question. Buying of certain companies is more akin to 'night at the casino' gambling. I remember having real fears that SCT (for example), dependent on big projects controlled by possum in the headlights managers of their customers, would go bust. I couldn't sell out - not enough market liquidity - so what to do? In the end SCT's sound balance sheet was enough to pull them through until the investment project tap turned on again. This investment has since proven ultra successful for me. But no way could I have piled cash (which I did have at the time) into the bottom plunging share price trough ( a mere 80c!) of this one at 'crash time'.



I'm considering where to store money... I'm thinking perhaps just a cheap house which won't lose much money in a bear market and spread some money around and wait for the bear market... its coming...
100%... and this will be a real nasty one... of a generation
:cool:cc


I wouldn't say you are wrong with that 'cheap house' strategy. But houses aren't listed on the sharemarket. Try selling that cheap house at the bottom of a real market crash and there will be no buyers, or at least no buyers at a price you would consider selling at. Your cheap house could lose half its value if sold on a panicked market. But such a loss will quickly bounce back when sanity prevails over panic. And of course you would not need to sell your cheap house at the bottom of the market , so you will be O.K.. Exactly the same logic applies to the 'essential goods' shares that I am talking about. In the case of the shares you have a squiggly line chart to follow down in the 'shock crash'. In the case of the house, the price isn't quoted on the market each day so you don't. That doesn't mean a house price crash isn't happening though. You will ignore it. I will ignore the price squiggles on my utility type shares. We will both come out O.K..

SNOOPY

[SBQ]

No offense but you guys are stupid, and to illustrate how silly this topic is, i'll post a bunch of references from great investors of all time: (because it seems that my previous post did not ring a bell at all one bit - re graph of the Dow Jones from 1986 to 2016).

Peter Lynch:

https://www.youtube.com/watch?v=m4IVGyDzjA8

Jack Bogle (RIP):

https://www.youtube.com/watch?v=hMjC_TX1Dc0

and finally...

https://i.imgur.com/6qFASSx.jpg

Will putting money in houses do better than future stock market returns? In the short term no one knows with certainty, but in the long term equity markets have always done better. But what the topic of this thread is discussing is rather simple: trying to time the market and trying to pick the asset class (or a particular stock) to hedge against or avoid an future uncertainty like a total market crash.

Crypto Crude thinks there will be the mother of all stock market crashes to come next year. I say based on what analysis? If it's as good as how you trade cryptocurrencies, I would only take it as a gamble or speculation. To me, QE has push prices up throughout global markets. THAT money gets trickled through companies and ends up as profits for which it benefits the shareholders. Once Covid becomes under control, the markets will continue on higher. Too hard to believe? Again look at my previous post with the historic chart - WWI, WWII, etc.

[Crypto Crude]

Many of you probably forgot what happened in the 2008 GFC... everything got absolutely slaughtered...blue chips... the works!... smoked like a rabbit in headlights...In late 2007 I was completely out of the stockmarket....I found a 'special' company so good I thought it was hedged against a bearmarket lol.... so I went back all in... it got smoked lol... I made it all back but lost a year and a whole bunch of profits had I bought after the crash...
..... sure all assets did recover and have since put in major new all time highs... but, bear markets are when the greatest transfer of wealth happens....
I'd say the writing is on the wall for next year... ... we have had our first warning signs fired with evergrande... and next year it will gain momentum... we never fixed the problems of 2008... central banks just threw money at the problem but never sorted the underlying issue...and now we have a much bigger problem... debts are so much higher...people are still geared up in investments... only time will tell but you will see... im confident this is going to be 2-3 times worse than the GFC....this market reset should have happened years ago... but central banks injected money and printed more and more currency than ever before...
Next year is the year it all stops... the US is at maximum debt ceiling I'm even of the opinion that US debt is so high its impossible to pay back...
Most if not all countries are currently at all time high debts... even China has significant debt...
There is a massive cooler coming so no SBQ, Your the big idiot...
I'm just interested on where people think is a good place to put money for impending crash....
I'm not talking about the retrace.. I'm buying at heavy discount...
:cool:cc

[RGR367]

You're the crypto rude man so just put everything that's crypt and would be nice if there's krypton on it for upward movement too :cool:

[FTG]

Many of you probably forgot what happened in the 2008 GFC... everything got absolutely slaughtered...blue chips... the works!... smoked like a rabbit in headlights...In late 2007 I was completely out of the stockmarket....I found a 'special' company so good I thought it was hedged against a bearmarket lol.... so I went back all in... it got smoked lol... I made it all back but lost a year and a whole bunch of profits had I bought after the crash...
..... sure all assets did recover and have since put in major new all time highs... but, bear markets are when the greatest transfer of wealth happens....
I'd say the writing is on the wall for next year... ... we have had our first warning signs fired with evergrande... and next year it will gain momentum... we never fixed the problems of 2008... central banks just threw money at the problem but never sorted the underlying issue...and now we have a much bigger problem... debts are so much higher...people are still geared up in investments... only time will tell but you will see... im confident this is going to be 2-3 times worse than the GFC....this market reset should have happened years ago... but central banks injected money and printed more and more currency than ever before...
Next year is the year it all stops... the US is at maximum debt ceiling I'm even of the opinion that US debt is so high its impossible to pay back...
Most if not all countries are currently at all time high debts... even China has significant debt...
There is a massive cooler coming so no SBQ, Your the big idiot...
I'm just interested on where people think is a good place to put money for impending crash....
I'm not talking about the retrace.. I'm buying at heavy discount...
:cool:cc


CC, when you read the responses to the question you pose, it seems to me there is a common theme, which perhaps you should consider a little more deeply? Folk are suggesting a nuanced approach is best, rather than just predetermining (prior to any potential crash), a mono-strategy approach.
One thing we can learn from history, is that no “crash” is the same. As per a well-used cliché,
“market trends don’t repeat, but they do rhyme”.

Each crash has its own unique set of characteristics (let’s say personality traits). Hence, how one best adapts & strategically contends with a crash situation will partly depend on what one perceives the market personality at the time. One example of doing this is by assessing the likely duration of a crash/new bearish trend.


Is it a Flash Crash (which are more common now that Algo’s use is ubiquitous across markets)?
Or is it a “Black Swan” type event like 9-11 or Covid (March 2020)?
Or is it a broad-based economic breakdown which can go on for years, and sometimes even decades? The 1990 Nikkei crash (>40% loss within first 12 mths), which only very recently surpassed (in nominal terms) the 1990 ATH is a classic example. Another example, which also illustrates stark differences in market responses to the same event is the ’87 crash. In the US, the DOW printed its low on the day of the crash (Black Monday). It has never printed a lower low on the tape since! Meanwhile in NZ, the October event was just the “beginning”. Going on to make new lows for many years after.


However, in saying all that, it seems that you are asking the question from the viewpoint of a significant deflationary/de-leveraging event occurring. I suspect a few may sympathise with your view. If it does come to pass, I would suggest that the duration of such an event would be significant. A crash (or crashes!) may occur at different stages of the journey, and not necessarily at the beginning by the way.
Regardless of why & when a crash next comes, it's good to keep two further little sayings in the back of your mind...

“The bigger, longer & harder the party……the bigger, longer & harder the hangover”.

"Just because something is inevitable, it doesn't mean that is imminent".

So, one answer to your question, "where to put your money in that sort of financial crisis?" is very clear in my mind.
Wherever there isn’t debt!

During true deflationary periods most asset classes are re-priced to lower nominal levels. Leaving Debt nominally where it was prior. Having access to sustainable cashflow & liquidity become the number 1 priority for investment survival & prosperity.

And yes as you say, perhaps the GFC gave us just a little heads-up to how things could look.:cool:

[Crypto Crude]

Evergrande has defaulted now... and bad inflation figures coming out of the US...
Watch this space...
:cool:cc

[Crypto Crude]

Inflation 6.8% in America...
The highest since 1982 !...

:cool:cc

[TeslaGod]

Crypto Crude can't pick a winning alt coin

Can't read a company financial statement

So has decided to become this forum's Michael Burry and be NZ biggest bear.

[SBQ]

Evergrande has defaulted now... and bad inflation figures coming out of the US...
Watch this space...
:cool:cc

(DJIA 35970.99 09+216.3 +0.6%) (S&P 500 4712.02 09+44.57 +0.95%) (NASDAQ 15630.6 09+113.23 +0.73%) (NASD 100 16331.98 09+182.41 +1.13%) (RUSS 2K 2211.81 04-8.4 -0.38%)

So Crytpo Crude, please elaborate how the market is going to collapse? Maybe investors realize there's no better place to put their $ than into owning businesses.

BTW, China's domestic real estate market is entirely separate to the world due to China's currency controls going in and out of the country.

[Panda-NZ-]

Walmart, MCD, trustpower, CHD.

[Panda-NZ-]

Hmm.. the above options (excl trustpower) are particuarly good since USD will drop in a recession.

[Biscuit]

In my opinion, what you want is a diversity of investments. Since none of us know exactly what is ahead next year, it could be anything from growth as usual to war and Armageddon. My position:

A broad selection of NZX growth and dividend stocks; overseas managed funds; New Zealand investment property; my own house and small farm for home food production; home power generation; water storage and access to natural fresh water; a selection of guns and ammunition.

I feel I am well positioned which ever way it goes.

[justakiwi]

Please tell me this was sarcasm/a tongue in cheek comment.


......a selection of guns and ammunition.

I feel I am well positioned which ever way it goes.

[Biscuit]

Please tell me this was sarcasm/a tongue in cheek comment.

You may be disappointed to hear that is not a tongue in cheek comment. Don't take it the wrong way, the guns are for possums, hares, rabbits and sheep. However, if there was ever a complete breakdown in society, access to effective weapons would be essential for survival: watch any reputable zombie film to see what it could be like.

[justakiwi]

Good to know. I have no issue with using firearms for that purpose.

As for a zombie apocalypse - seriously one of my worst nightmares ;)
Not sure I'd even want to survive that.


You may be disappointed to hear that is not a tongue in cheek comment. Don't take it the wrong way, the guns are for possums, hares, rabbits and sheep. However, if there was ever a complete breakdown in society, access to effective weapons would be essential for survival: watch any reputable zombie film to see what it could be like.

[Biscuit]

.......As for a zombie apocalypse - seriously one of my worst nightmares ;)
Not sure I'd even want to survive that.

Maybe we didn't survive it?:scared:

[Panda-NZ-]

Good to know. I have no issue with using firearms for that purpose.

As for a zombie apocalypse - seriously one of my worst nightmares ;)
Not sure I'd even want to survive that.

Yeah what's the point. Having realism would be survivors dying left and right from formerly preventible illness.

It's a shame they don't get into the lack of antibiotics in a zombie film.

[justakiwi]

Yep, sometimes it sure feels that way huh?


Maybe we didn't survive it?:scared: