Lost Decades

They’re not mythical. They happen.

And no I am not suggesting a lost decade is coming soon to equities or any other major asset-class, but I want take a step back and provide some perspective because I think we’ve collectively forgotten that negative returns can and will happen.

Gold, for example, spent a few decades producing negative returns. Decades. Commodities are just getting to positive return territory over the past decade.

We seem to be in a time of mass speculation. It has seeped into the culture. Investing has become “easy” and bad habits have been rewarded. People are buying bananas taped to a wall for $6m for heavenssakes [article]. We’ve gone mad.

Because I got started shortly before the shit hit the fan in 2008, I am sensitive to people getting in over their heads and succumbing to massive financial losses. That time had such an impact on me that I began managing money for a living to help people avoid another one of these disasters.

At the bottom in 2009, the S&P 500 10-year annualized return was -8.5%. Today it’s +11%. People couldn’t imagine good times in 2009. People can’t imagine bad times now.

Bad periods happen. There’s no way to predict where or when they’ll hit. No one rings a bell as they say, but this doesn’t mean you pretend they don’t exist or that they won’t happen anymore. They do exist. A storm will roll your way eventually.

What will you do when it does? Do you know?