Crazy Financial Times — Another Lehman Event?, Ep #53

It’s been a tumultuous week, with China Evergrande Group possibly going default on $300 BILLION of bonds. Is this going to be another Lehman event like the talking heads are saying?

We also have the Delta variant rising around the world and impacting the decisions nations are making regarding their societies and economies… and in the U.S., the government wants to raise money by taxing you. There’s a lot going on and it has investors spooked. What should you do with your investments, if anything? And how should you handle the risks involved in a time like this? Don’t miss this episode, we’re gong to provide you our insights for handing the risks times like this bring.

You will want to hear this episode if you are interested in...

• A leveraged Chinese Real Estate Company is not going to be of much concern to us [1:25]
• Stay on the boat even in downturns could be ahead, here’s why...[6:20]
• The Tipping Point: Risk — How are you set up to handle risk? [9:05]
• Hidden Facts of Finance [19:40]

Evergrande is huge in China but in the U.S. you don’t need to be concerned

100% of our clients never heard of this “Evergrande” outfit… that’s because we have no interest in ever getting involved in leveraged Chinese Real Estate companies. We’d be going from the Penthouse to the Basement if we did, and it’s just not what we do for our clients. The hype we’re seeing in the media is overblown and the correction that’s been forecast doesn’t appear to be happening as of this episode. Even if it did come about, corrections are almost always temporary. They are typically followed by a huge record high. Remember, it’s not rocket science, there are trillions of dollars out there driving the market higher. The real power is in having a diversified portfolio.

This week on the tipping point: RISK and Risk Management

One of the items we deal with day after day for our 2000 clients is risk. There are many types of risk to consider, including market risk. When markets go up and up and up… and honestly, that’s when you have the most amount of risk. But that’s not typically how people think about it. And on the converse, when the market is down is when you have the least amount of risk. So if everything in your portfolio is going up, that’s a bad sign. 1999 to 2000 is a great example, when the tech bubble was going up and up and up, and then the correction came hard. It took people 15 years to break even after that, so keep clear on your diversification objectives. 

Another huge risk to consider is interest rate risk. It hasn’t been a huge risk lately because interest rates have been low, and when interest rates go up, bond funds go down. Even though bonds are touted as the most stable part of your portfolio, they can fluctuate in a time like this as much as 60%. That’s not stable at all. Listen to hear about the risk inflation and lifetime expectancy bring into the mix and more! 

This week’s hidden facts of finance

The American public debt is ¼ larger than the economy and it’s grown substantially. Fed assets have grown 11-fold as well.

Corrections happen once every 17 months typically, but the only way to win is to be in. Don’t wait for the correction.

AMC Theaters attendance topped pre-pandemic numbers for the corresponding days in 2019. Definitely, the economy is reopening and it’s just getting started.

Listen to hear more of the hidden facts of finance that you commonly don’t hear and oftentimes, will shock you.

Resources & People Mentioned

See if you qualify for On Spotifya complimentary financial review from the Paynes

• See the hype about the On SpotifyEvergrande default

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