When is the next Market Crash?

Do note the date of this original post, just before the incredible EXPLOSION of 2008. Is it the parallels interesting, eh? Market Crash? Implosion?

Darn, good question. The TSX index is at record highs, the economy is almost overheating, and we have low unemployment: So, how long will this last? Stats Canada’s view on the Leading Indicators said:

The stock market set another record high. Metals completed a year of strong growth, while energy issues again were lacklustre. These trends were reflected in export earnings, where metals have jumped by one-third in the past year while energy fell 20%, pulling its ranking down from our leading export group to only the fourth largest export.

Stats Canada View in 2007

This was written before the heavy reliance on Foreign Markets too. Specifically, in China, what happens if their leaders decide, time for a restructuring?

There is an excellent question to ask yourself: Am I ready if this all goes south? Remember, the only folks who aren’t going to be eradicated are the ones planning for it now. How do you prepare for a stock market crash? It’s not like getting your car ready for winter (e.g. put blankets in the trunk, a snow shovel, a survival kit, etc.), but in some ways, it is:

• Limit your exposure to stocks in your retirement savings. The closer you are to retirement the less risk you should be taking (very important to remember that one). Someone like me, should start looking at disposing of equities and start looking at slow growth safer investments. If you think you will be destroyed by a stock market “correction”, then you are at risk.
• Reduce debt, because with a drop, there will likely be some other economic nasties (yes I said inflation again), and if interest rates rise, we are all in deep trouble, at least those of us with a debt load.
• Don’t listen to all the doom and gloomers out there either. I am not saying cash in all of your savings and put it in your mattress (however, if someone is reading this 10 years from now, and that WAS what you should have done, you read it here first 🙂 ). I am saying plan for the worst and hope for the best.
• For God’s sake don’t go out and start short-selling on my say so either. Don’t buy into hedge funds either, that is just a fool’s game. If you must, buy a lottery ticket if you want to risk, with little chance of payback (I said 1 lottery ticket).

Be ready, and if you lose some money, so be it. That is what Risk means.