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Inflection Point Investing LLC
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Inflection Point Investing LLC is a Registered Investment Advisory firm in New York City.
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Inflection Point Investing LLC
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  • What Happens If... 1 comment
    Sep 22, 2009 3:36 PM
    The financial world is full of uncertainties and it is often hard to know what is going to happen next. Over the past two years in particular there have been so many unlikely things that have happened, that having a plan for the unexpected is important. Every once in a while, I run a list of things that could go wrong and include even the most unlikely. The point is not to fully prepare for the unexpected but rather to at least be aware of things that can go wrong so that at least I have an idea of how to respond if that situation were to occur.

    Some examples may be useful. Below, I have placed some ‘what if’ pairs of scenarios that I have thought of, but I will leave it up to the reader to run with these scenarios and think about what would happen to the markets, the economy, and the reader's portfolios if these were to happen. Feel free to add to these scenarios, debate the various consequences or tell me that this exercise was not that useful. I have a thick skin and would understand if the latter were the case. For me I have found this extraordinarily useful for investing and trading strategies.   
     
    -          The U.S. Dollar Yen breaks 90?
    -          Or, the U.S. Dollar Yen reverses and goes to 115?
     
     
    -          The Fed stays accommodative?
    -          Or, if the Fed begins to tighten?
     
     
    -          Oil goes to $30?
    -          Or, if oil goes to $100?

     
    -          Gold goes to $1,500?
    -          Or, if gold goes to $500?

     
    -          If unemployment falls back to 7%?
    -          Or, unemployment goes to 13%?

     
    -          The dollar falls and stocks rise relationship continues?
    -          Or, the dollar falls and stocks rise relationship discontinues?

     
    -          10 Year Treasury Yields go to 2%?
    -          Or, 10 Year Treasury Yields go to 8%?

     
    -          A high tax health care system passes?
    -          Or, the health care system stays the same?

     
    -          The Fed continues its credit markets purchases?
    -          Or, decreases its credit market purchases?

     
    -          Cash for clunkers comes back in its original form or a variation?
    -          Or, cash for clunkers stays gone for good?

     
    -          There is peace in the middle east?
    -          Or, the middle east situation becomes more tense?

     
    -          Inflation to consumers comes back?
    -           Or disinflation (a decrease in the annual rise in prices, ie year 2 prices up 3%, year 3 prices up 2.8%, etc..) arises?
    -          Or deflation takes hold?

     
    -          Chinese GDP growth shoots past 20%?
    -          Or, if Chinese GDP declines? (yes an outlandish what if scenario, but you never know and at least it makes you think)

     
    -          US outstanding debt declines?
    -          Or, US debt is no longer bought by foreigners?

     
    -          Housing starts soar?
    -          Or, housing starts collapse back to the lowest levels of this down turn?



    Authored by Tom Henderson, Strategist at JBH Capital.

    There are no disclosures that I am aware of for this article.
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  • rikkiepikkie
    , contributor
    Comments (3) | Send Message
     
    it would be nice if you could give us a probability of the different scenarios coming true in your mind..
    23 Sep 2009, 04:30 AM Reply Like
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