- It’s never a good idea to invest as if the world is about to come to an end. You’d have been wrong every time so far.
- The best approach is to prepare for bull and bear markets simultaneously. Take risks (i.e., stocks), but take precautions (i.e., cash) as well.
- When considering which risks to take, know that your ability to perform an analysis is compromised by the expectation that the Fed will always step in to rescue the markets.
The Fed’s interventionist policies are the primary source of our current “everything rally,” and it is this same factor that will eventually upend it.
This podcast (7:50) argues that discounted cash flows and other tools of fundamental analysis are compromised when the so-called risk-free rate of money has been openly distorted for so long, and makes the case as to why other factors are worthy of consideration. It also suggests that investors always be prepared for risk-off scenarios.
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