What If There Is Depression…

I just finished reading the book The New Great Depression By James Rickards.

It is a simple-to-understand book but we always categorize James as the guy whom always prophesizes the ‘End-of-The-World’ kind of scenario. Nevertheless, let’s recap on some key points as mentioned by him as well as prevailing market sentiment:

  • What will happen to USD – we all know that the US is incurring too much deficit with record-breaking stimulus programme being launched to avert a pandemic-induced crisis. Can the dollar printing machine continue without any further disruption? The Fed can continue to ‘save’ the market as long as USD maintains its status as global reserve currency. Will we see a future great devaluation in the Dollar, thereby leading to massive jump in inflation?
  • Recovery will be slow – like it or not, it will be slow. It will not be a V-shape. This is not a financial or economic crisis. This is pandemic-induced health crisis. Jobs will be lost permanently. Positive or negative structural changes will happen at all levels of human ecosystem.
  • Global or societal relations are disintegrating – anti-Asian sentiments, nationalism, failure of global pacts, etc.

In the end, James sees US as having a new great depression in form of a stagflation (a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high) – e.g Japan’s lost decade. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment. More importantly, will we experience global armed conflicts (e.g world war 3)?

Personally, I feel that one’s portfolio has to be diversified, truly diversified across different asset classes to deal with whatever that may come. The focus of my current asset allocation is as follows:

  1. Global portfolio- US, Singapore, HK and Malaysia (focus will be on the Asian markets – believe that future growth will still be coming from Asia)
  2. Equity / Options- (i) Value / yield-centric investments in Asia; (ii) US – trading via options / momentum small cap stocks (with selective long term exposure via ETFs and small stakes in large cap stocks)
  3. Fixed income – looking at minimum yield >3% (geographic focus: Singapore / Malaysia)
  4. Real estate – in form of SG logistics / industrial REITS and Malaysia commercial REITs
  5. Gold / Silver – IAU, SLV, collective investment schemes, etc
  6. Crypto – small exposure in major coins
  7. Cash (building the reserve to tap the market when the opportunity arises)
  8. Alternative assets – e.g P2P financing, etc.

Disclaimer: This is not an investment recommendation or trading advice. Please refer to the general disclaimer of this blog. If in doubt – please consult with your licensed financial planner or adviser.

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