Time To Put Mindfulness Back In Financial Planning

Summary

• What we know for sure is that global growth and many businesses and governments are taking a big, unexpected revenue hit in 2020.
• Make no mistake, a 'V' recovery in asset prices is not historically typical in these conditions.
• It is time to put mindfulness back in financial planning. It's not, yet, too late.

No one knows how long and wide the coronavirus goes. In a best-case scenario, it's contained over the next few months.

What we know for sure, however, is that global growth and many businesses and governments are taking a big, unexpected revenue hit in 2020. This will be hard to absorb because debt levels are so high, and cash levels so low.

At the same time, the most grotesquely overvalued asset markets in a century have left zero margin of error for a business cycle downturn of any kind. That was always reckless and destined for the usual capital punishment.

The aggravating feature this time is that a decade of trend-following flows into price-indiscriminate funds and strategies, enabled by once-in-a-generation central bank largesse, has left an unprecedented $20 trillion in global capital now piled onto the mean reversion train as it goes over the rails. This is likely to spawn its own pandemic-style panic in global markets as present holders - levered speculators along with mom and pops - increasingly seek to exit in the weeks and months ahead.

Make no mistake, a 'V' recovery in asset prices is not historically typical in these conditions. A downcycle that lasts 12 to 24 months, lops off half of the market values, and takes many years to recover recent highs, should be within base case expectations today. It is time to put mindfulness back in financial planning. It's not, yet, too late.

Disclosure: No positions.

Original post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Comments

[Diesel]

<<< A downcycle that lasts 12 to 24 months, lops off half of the market values, and takes many years to recover recent highs, should be within base case expectations today. >>>

That happens in an economy with normal cycles. We haven't had normal cycles in 11 years.

[glinsight]

I agree with your views on this. While covid19 is likely a very big deal on its own, it's here at a time when markets are stretched and world economies slowing already.
What I don't understand: What is the relevance to "mindfulness" here?

[lucymax]

Words of wisdom spoken to the (deliberately) deaf.

Now it is a race between effective devaluation of the dollar and crash of asset values. Hard to bet on this one.

I tend to bet on the devaluation of the dollar (aka printing by any other name). It does not require congressional action. Just a phone call to the Fed.

As a child of the 70ies and having seen the wreckage caused by inflation on middle class families I hate to think about the impact on our society. The seniors will pay the first (and heaviest) price but the younger generations will be impacted in ways they cannot imagine today.

[frogmaier]

wisom spoken to the MANY deaf!!!