Short Takes: Leverage Losses, Financial Advice, and more

Speculation that we’re in a bubble is growing.  I don’t know how to identify bubbles while they’re happening, so the most I can say right now is that the prices of stocks, bonds, and real estate are high.  But let’s suppose for the moment that all three assets are in a bubble.  What are we to do with this information?  Maybe one or more of these assets will crash.  But what if they keep rising for quite a while longer before this crash happens?  What if the economy booms and we grow our way out of the bubble without a crash?  There’s no guarantee that selling assets and waiting for a crash will work out well.  Because I don’t know what’s going to happen, I’m sticking with my investment plan.  The only change I’ve made is to lower my expectations of future investment returns.  So, I haven’t changed the way I invest, but I haven't grown my spending as much as my portfolio’s growth dictates in case future returns disappoint.

I managed only one post in the past two weeks:

The “Explore” Part of a Portfolio

Here are some short takes and some weekend reading:

John Robertson tells a deeply personal story about personal loss and financial loss due to leverage.  When it comes to investing with borrowed money, everyone is a genius until suddenly they’re not.

Ben Felix (video) explains what is and is not good financial advice.  He says that investing is largely a solved problem, but goes on to explain the ways that people need help.  He makes an excellent case that most people could benefit from an advisor who does a good job providing this help.  I have little doubt that he is able to do a good job in his practice.  However, after listening to many financial advisors of different types, including those who work with high net worth clients, I have my doubts that most of these advisors perform Ben’s list of tasks well.

Jason Heath answers a question about making spousal RRSP contributions in your 70s.