“The bailouts have transferred a lot of private-sector debt to the public sector. But that’s just moving the problem around. The debt leaves a terrible drag on the economy as people try to save. And it is putting some countries’ financial stability in question. Inflation may yet come in due course. But Van Hoisington, a veteran bond manager from Austin, Texas, recently warned that the more imminent danger might be deflation — falling wages and falling prices. This is what has hammered Japan all these years. It’s what turned the Crash of 1929 into the Great Depression. Deflation makes debts bigger in real, purchasing-power terms. Where does that leave the regular investor? Take a hard look at what you own, and what sort of downturn you think you could handle. Too many investors — and too many financial advisers — are still running with the bull-market playbook: Take on risk; stay fully invested; buy the dips; equities always outperform. Maybe it will work again — if we have another bull market. Are you really willing to bet your stack on that happening now?”
Trend following is the best tonic for uncertainty, but to pull that off you can’t be looking over your shoulder constantly worried about what your neighbor is doing with his or her portfolio. Here’s some insight: most likely your neighbor has no clue.