“The legend lives on from the Chippewa on down of the big lake they call Gitchee Gumee…” so begins the eponymous ballad by Gordon Lightfoot about the Edmund Fitzgerald.
This painting hangs in my office and is a stark reminder to not take things for granted and given today’s uncertain economic times, is a clarion call to hunker down. After years of zero interest rates and the wind at your back, hurricane-force winds are hitting head on and now is the time to hang on for dear life AND your Cash.
Cash is no longer trash, it’s actually a safe harbor for your portfolio and will provide tremendous opportunities in short order as equities sink. Cash will provide much needed ballast and liquidity, while old fashioned Certificates of Deposit (CD’s, remember them?) and Treasury Bills, Notes and Bonds (Exempt from State & Local Taxes) will anchor your portfolio for the short and intermediate future.
Interest rates are going north and more importantly, will stay higher and perhaps “normalize”, meaning no more manipulation by central banks. That’s until the pain becomes too great to ignore and once again, central banks will lower interest rates. Problem is, the world is awash in debt, trying to keep the world economic “House of Cards” from collapsing. Watch for “debt service” to become part of the financial lexicon going forward. It’s easy to finance trillions of debt at 0%, but now as the law of large numbers is kicking in, watch out.
Remember in 2007-2009 the ‘PIGS’..? Well, the sequel is just getting started as Italy has popped up. Heck, maybe the new acronym should be ‘EPIGS’, including England and their inter-connected financial/pension mess.
Think it can’t happen here..? Think again. There are plenty of “financial-driven liabilities” out there called public sector pension plans. Add this into the witch’s (world) financial cauldron and things are getting spooky. Fast.
As the rest of 2022 unfolds and 2023 emerges, how will you be, in REO Speedwagon’s song title, “Riding The Storm Out”…? Your investment portfolios may be taking on water now and chances are pretty good, it will get worse, before it gets better. So do you plow ahead as in “The Perfect Storm” or maybe find your “Golden Pond” and slow down..? Only your financial peace of mind is at stake.