Please do make any financial decisions based on the contents of this blog. My blogs are designed to be thought-provoking and introspective, not financial advice. Please do not act on any document unless it is titled “Statement of Advice.”
In the rare event that I attend industry conferences, I cannot help but notice how tired, overweight and stressed-out the other financial planners are.
The ones who are managing the most amount of money tend to be the most tired and the most stressed (I won’t repeat the overweight comment!)
After about 30 seconds of talking with them, I understand why.
Most of their clients are in a growth or high growth strategy, and are shit scared about the market crashing. Worse, the products and strategies they are invested in are either index-based (just follow the market) or are in a static or low-variance asset allocation, meaning they cannot change from aggressive to defensive without needing a new Statement of Advice, which will then need to be individually implemented, which takes about 3-6 months. In other words, when markets turn, they are screwed.
It’s as if these financial advisers have just given up, and have accepted when the crash comes, they’ll be copping it on the chin as they endure another round of the boom-bust cycle. As for all the poor bastards who have the rotten luck of retiring at the bottom of the crash, they will likely not have enough money to live comfortably through retirement.
It gets worse. Some of the financial planners say that the stock market will not crash for another 8-10 years and some are even saying that the stock market will never crash again! These guys have some very bizarre theories which are unsupported by any market or economic fundamentals nor historical technical analysis, and usually have a lot to do with bitcoin and AI. “This time will be different,” they say, usually with a nervous twitch and a display of over-optimism which is so contrived it is clearly a strategy to cope with their own delusions.
Then, I have a look at our humble little Tuna Salad Wrap, and think to myself, “man I’m glad I’ve got this!”
Last month we saw our first major “wobble” in both domestic and international stock markets. Curious, I always check the performance of our Tuna Salad Wrap, to see that our strategy of capital preservation during downturns is working, and to make sure we’re getting a solid piece of the upside action too.
This is our last 3 months’ performance versus the Morningstar Growth Benchmark.
The thing I love about this chart is that although we are getting the vast majority of the upside of the market (despite having almost no exposure to equities), we are copping very little downside.
This means, theoretically (and in no way guaranteed), should equity markets crash, we will fare very well by comparison.
But, even if I’m wrong, and equity markets just keep going up forever, like some of these sleep-deprived advisers are hoping for, we won’t have to suffer from market FOMO, and we’ll (theoretically) continue to enjoy most of the upside.
To be completely honest, I do believe that a MAJOR share market correction is imminent, and you only need to read my last few blogs to see why. As economic conditions continue to deteriorate, I’m only growing stronger in this conviction.
In response to last month’s wobble, I had our investment committee Quilla stress-test our Tuna Salad Wrap through their proprietary software Fincast to see how it would perform through a range of dire scenarios and I specifically requested “worst case scenario.” Here are the annualised results:
Scenario Expected Return (%)The VCo Tuna Salad Wrap Global depression -5.54 Global Financial Crisis -4.72 Extreme inflation risk -3.87 Bubble burst -3.80 Pandemic -3.74 Aus Deflation – not productivity driven -2.87 Credit/ monetary contraction -2.62 Recession -2.62 Higher risk premiums -2.22 Structural shift – lower values for equities -1.94 Stagflation -1.43 Significant fall in Australian growth (ROW weak) -1.36 Military conflict -1.19
The reason I sleep so well at night, is because myself and my valued clients get to enjoy much of the upside of the markets, whilst also knowing that should we experience another Great Depression, Global Financial Crisis, Dotcom Bust or other “black swan” event, our capital reduction will be a mere wobble, compared to our sleep-deprived peers.
And remember, if you are invested in the Tuna Salad Wrap, this is only temporary. After the crash (or, at a critically low point), we have a documented plan to move you in to the more aggressive Reuben Sandwich which has a high equities exposure, so we’ll get to enjoy the delicious rebound. And believe me, the next rebound will be HUGE!
Please note the above is by no means a guarantee! Do not make an investment decision based on the contents of this blog. You should only make decisions based on complying Statements of Advice.
Please do make any financial decisions based on the contents of this blog. My blogs are designed to be thought-provoking and introspective, not financial advice. Please do not act on any document unless it is titled “Statement of Advice.”