Always the same
These aren’t rocket science.
I wanted to write the second part about pessimists this morning, but after being forwarded an article from the Financial Post last night, it’ll have to wait.
Disclaimer: this is a critique of the content of the article and not the author. No straw manning here.
The first four paragraphs of the piece are a survey of the current geopolitical situation. You know what keywords are coming: President Trump, tariffs, Middle Eastern war, inflation, global trade, the Strait of Hormuz, and Liberation Day.
And you probably know exactly how the rest of prose reads given those keywords.
Paragraph five is where things shift from geopolitical survey to investment guidance. Here it is.
The question for investors is clear. Even though capital markets were slow to recognize the fact that Iran has become a dominant political player in the Middle East, how will they adjust their portfolios now that the world order has clearly been realigned?
And what are those adjustments? To buy investment products, of course!
First, you need an oil or commodity ETF because “the price of oil is likely to be extremely high for the foreseeable future.” Not just high—extremely high!
Second, because “inflation will likely spike higher, and with a vengeance,” investors should consider hard assets like “precious metals, resources and infrastructure. [And] depending on [their] time horizon, investment real estate (REITs) might also merit some consideration.” Rocks and real estate are always the answer when faced with vengeful inflation.
And third, because of a potential severe bout of stagflation, “investors can consider alternative investment products that are not correlated to the stock or bond markets,” like market neutral products, long/short products, liquid alternatives, or other speciality products like music royalties. All you need to combat stagflation is a cut of T. Swift’s Spotify revenue.
Rocks, real estate, royalties, and complicated investment products. Now that is how to combat an unknowable future!
I’m sure you can tell by my tone that I consider this type of content the height of absurdity.
This isn’t on purpose, but I’m proud that the three tenets of HWM counter this kind of stuff. They’re on the landing page for crying out loud (see above).
For the ten thousandth time: nobody can predict the future. Nobody knows what the price of oil will be tomorrow let alone five years from now let alone ten years from now. And nobody knows when the next bout of inflation will rear its ugly head. The same goes for stagflation, that beautiful word originally coined by a British parliamentarian to warn of “the worst of both worlds—not just inflation on the one side or stagnation on the other, but both of them together.”
And no investment product can protect you from an unknowable future. Simple is tough but best. It’s tough because you have to endure uncertainty. Not predict it. Endure it.
And proactive beats reactive. This Financial Post article is a reaction to things that have already happened. Don’t make reactionary changes to your financial plan or your investments because of some geopolitical event. Make changes because your circumstances have changed.
No fancy products, no pessimism about the future, no royalties from T. Swift. Just a boring and appropriately diversified portfolio that’s aligned with your cash flow needs and risk tolerance. No gazing at the stars thinking you know-it-all. You don’t.