Lots of chatter lately about the impending collapse of markets and general financial issues world wide. This post is not about if we think it is happening, but what should we be doing if we think that way. This is more about ideas and opportunities.
Concept as I understand it is a market sell off to raise cash and then a general market run down as the rats get off the ship. Then perhaps the govt prints more money to stimulate the economy and lower interest rates to further stimulate the economy. All cycles that have happened repeatedly before, but I have not always paid attention.
So thinking about this as a grain farmer.
It seems that commodity prices drop first in the recession/depression, so do we think that we are currently in the low commodity price part of the recession or are we thinking the low prices are ahead of us? I use "we" meaning the group reading and responding. Normal recessions seem to have money move from the dropping stock markets into commodities. Obviously if the lows are here, then waiting with grain sales will provide equal to higher opportunities and avoid pricing fall grain sales. If the lows are ahead, then sales sooner will still be higher than what is coming.
So if we have any money in the stock market, perhaps it should move to a new home. But what new home? Most RRSP's are exposed to the stock market and some mutual funds can only invest in stocks. Again, this whole post is about if we believe there is a correction coming, what to do, to save some of our wealth, not to say there is no correction coming. And hopefully there is a strategy that deals easily with both scenarios.
I would assume that in a normal recession that the finished goods price gets hurt first and then prices drop along the chain back to the first supplier. So assuming that food costs are high and that is slowing the orders and prices for grains, can we assume that the inputs for grain (fertilizer, chemical, machinery, etc) will soon be dropping in price?
Hopefully my thinking is correct here in thinking that any cash on hand or commodities expected to increase in value will be better sitting put for a while as they might buy more once a recession starts. Now if it is cash, is a GIC the investment, or is the bond market something to look at? I have no idea how risky the bond market is?
Then once the recession is deep and the gov't starts printing money or doing the quantative easing we want to have our money out of GIC's or cash and invested in hard goods that we need or back in other investments such as the stock market (because prices will have been run down). Does this sound like a good strategy? After the printing presses ran for covid, this massive inflation on everything, finally made my brain think that perhaps gov't printing presses have more to do with economic recovery than I realized. But maybe I am wrong.
The rich seem to have this market up/down thing figured out and have strategies in place to deal with it as the cycles repeat often. Poorer managers like me seem to just have more/less money in my pocket and have never really thought that the decisions I make could heavily influence that.
Now some lived through the bad times of 1980's and early 1990's and have been predicting the same thing for 45 years and by being ultra conservative have hurt their finances greatly. I don't really want doomsday type answers and discussion as much a what to do best for the normal recessions that seem to happen every 6-8 years lately.
Sorry, this is so long, but I have 10 years left in my career and would like to take advantage of markets by trying to be proactive.
Concept as I understand it is a market sell off to raise cash and then a general market run down as the rats get off the ship. Then perhaps the govt prints more money to stimulate the economy and lower interest rates to further stimulate the economy. All cycles that have happened repeatedly before, but I have not always paid attention.
So thinking about this as a grain farmer.
It seems that commodity prices drop first in the recession/depression, so do we think that we are currently in the low commodity price part of the recession or are we thinking the low prices are ahead of us? I use "we" meaning the group reading and responding. Normal recessions seem to have money move from the dropping stock markets into commodities. Obviously if the lows are here, then waiting with grain sales will provide equal to higher opportunities and avoid pricing fall grain sales. If the lows are ahead, then sales sooner will still be higher than what is coming.
So if we have any money in the stock market, perhaps it should move to a new home. But what new home? Most RRSP's are exposed to the stock market and some mutual funds can only invest in stocks. Again, this whole post is about if we believe there is a correction coming, what to do, to save some of our wealth, not to say there is no correction coming. And hopefully there is a strategy that deals easily with both scenarios.
I would assume that in a normal recession that the finished goods price gets hurt first and then prices drop along the chain back to the first supplier. So assuming that food costs are high and that is slowing the orders and prices for grains, can we assume that the inputs for grain (fertilizer, chemical, machinery, etc) will soon be dropping in price?
Hopefully my thinking is correct here in thinking that any cash on hand or commodities expected to increase in value will be better sitting put for a while as they might buy more once a recession starts. Now if it is cash, is a GIC the investment, or is the bond market something to look at? I have no idea how risky the bond market is?
Then once the recession is deep and the gov't starts printing money or doing the quantative easing we want to have our money out of GIC's or cash and invested in hard goods that we need or back in other investments such as the stock market (because prices will have been run down). Does this sound like a good strategy? After the printing presses ran for covid, this massive inflation on everything, finally made my brain think that perhaps gov't printing presses have more to do with economic recovery than I realized. But maybe I am wrong.
The rich seem to have this market up/down thing figured out and have strategies in place to deal with it as the cycles repeat often. Poorer managers like me seem to just have more/less money in my pocket and have never really thought that the decisions I make could heavily influence that.
Now some lived through the bad times of 1980's and early 1990's and have been predicting the same thing for 45 years and by being ultra conservative have hurt their finances greatly. I don't really want doomsday type answers and discussion as much a what to do best for the normal recessions that seem to happen every 6-8 years lately.
Sorry, this is so long, but I have 10 years left in my career and would like to take advantage of markets by trying to be proactive.
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