What caught my eye this week.

Another miserable week in the markets. Thanks in part to shocking updates from US retail giants Target and Walmart, the all-important S&P 500 index briefly joined the growthier Nasdaq in bear market territory on Friday, having dropped 20% from its all-time high before a mild end-of-day rally.

Meanwhile inflation in the UK hit 9% and the Bank of England won both plaudits and wooden spoons for candidly admitting there’s not a lot it can (constructively) do about it.

Getting on for a year into this regime change, and some readers continue to insist there’s nothing to see here. Nor in the bond market, which has endured its biggest, sharpest sell-off for decades, if not ever.

I’m not sure why the denial, apart from the currency weakness that I talked about last week clouding the picture. I think we can agree markets rose an awful lot in 2020 or that super low interest rates spurred some ‘questionable’ antics without downplaying the reality check that’s now taking place.

Veteran commentator Josh Brown describes it as:

one of the most treacherous environments I have ever seen, and I traded during the dot com meltdown, 9/11, Enron and Tyco and WorldCom and Lehman and LTCM and Madoff and the debt ceiling downgrade and the Asian currency crisis and the European debt crisis and Gangnam Style and the pandemic lockdowns and Zika and Ebola and SARS and Bird Flu and Hoof and Mouth and all sorts of other shit.

Not just traded for myself but answered to others about their money, in real-time, during all of it. Those environments were tough. This one’s impossible.

I even spotted the once famously bearish hedge fund manager Hugh Hendry making waves on Twitter, like some wintry White Walker reappearing from legend in Game of Thrones.

Hendry was appropriately uber-gloomy. The last time he got a mention on Monevator it marked the bottom of the financial crisis crash. But I’m not confident of a repeat, omen-wise.

(For one thing: has anyone seen the especially portentous Nouriel Roubini?)

Once upon a time

In that last big bear market I wrote a lot about how and why I bought stocks in downturns.

Eventually, those investments turn out to be among the best you will ever make.

But it can be hard to see cheaper prices as your opportunity to profit when your portfolio is shedding ballast faster than the Met issuing fines in Downing Street.

So I thought I’d point newer investors to a comment I uncovered while digging for this week’s Archive-ator link below.

Doing so, I came across 2008-era-me offering unsolicited advice as usual, only this time on someone else’s blog: Accumulating Money.

At the time, January 2008, that blogger’s household net worth was just shy of $72,000.

Accumulating Money knew buying at lower prices should be good, long-term.

But they also recognized they faced a challenge after a ‘brutal start’ to 2008.

The Goldilocks scenario

I was there in 2008 and it was indeed tough going. The year got a lot worse before things started getting better, too.

But we have an advantage, sitting here in 2022. We know how the story ended.

In fact, it turns out we can skip to the most recent net worth update from Accumulating Money, March 2022, where we learn their number is now…

…$1.5 million!

Yep, despite the gloom in 2008 and a lot of terrible headlines in-between, A.M. has multiplied their wealth more than 20-fold. And that’s despite the market mauling their retirement accounts in recent months.

To be honest I’m not surprised by this figure. It more or less tracks my own trajectory over the past 15 years.

But I thought perhaps those who haven’t yet lived through a few stock market storms might be reassured, by seeing what’s come before.

Are you sitting comfortably?

Of course every market downturn is different. To me this one looks more challenging for the likes of Monevator readers, at least with hindsight, thanks to its higher inflation and rising interest rates.

I expect both to start coming down, but that’s partly because I expect demand destruction and at least a mild recession. (As do a few of those sellers of Target and Walmart shares I’d wager.)

On the other hand, if inflation and rates do keep on rising indefinitely… well.

Either way, we know the playbook. Try to earn more. Live below your means. Save as much as you can without derailing your life.

Then invest in equities for the long-term, probably through low-cost global index funds.

Just promise to come back in 15 years to tell us how it went!

Take these time-tested steps towards financial freedom and I believe your tale will also have a happy ending.

From Monevator

What credit card should I get? Everything you need to know about the different types of credit card – Monevator

The rising cost of living: how to maintain your quality of life – Monevator

From the archive-ator: The secret to investing when markets are falling – Monevator

News

Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Inflation hits a 40-year high of 9%, says ONS – BBC

Bank of England governor issues ‘apocalyptic’ warning on food prices – BBC

UK consumer confidence at lowest level since 1974 – Guardian

Bank of America clients hoard cash at highest level for two decades – Yahoo Finance

New statistics show levelling up isn’t happening in the UK – Bloomberg via Twitter

Analysis: why does the UK have the highest inflation rate in the G7? – Guardian

Lessons from 2022’s tech stock sell-off – Morningstar

Products and services

What should you do with your money with inflation at 9%? – Which

UK banks pull mortgage deals as borrowers rush to lock-in rates [Paywall] – FT

How to get the best deal for home insurance, with premiums at record lows – Which

Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor

Bank switching Q&A – Be Clever With Your Cash

Top cash ISAs: up to 1.15% easy access or 2.2% fixed – MoneySavingExpert

1980s homes for sales, in pictures – Guardian

Comment and opinion

What should accompany stocks: cash or bonds? [US but relevant] – Morningstar

Low returns ahead: the harsh reality facing investors [Podcast] – T.E.B.I.

Things you see in every bear market – A Wealth of Common Sense

Four horsemen – Humble Dollar

Don’t panic on sequence of returns [Note: US market data/returns] – Morningstar

Doubling down – Banker on FIRE

What are real yields and why do they matter? – Morningstar

Q&A with Brian Feroldi, author of Why Does The Stock Market Go Up? – Abnormal Returns

Should Gen Xers keep or toss the word retire? – Next Avenue

The moment is now – Indeedably

Three years of FIRE – Stop ironing shirts

How high fee funds add up to trillion-dollar opportunity costs for investors [Research] – SSRN

All change mini-special

Markets are always in turmoil – A Teachable Moment

The rise after the fall – Collaborative Fund

Easy money is over and the VC world needs to adapt – Protocol

Where are we in the cycle? – The Irrelevant Investor

Fear and loathing in the markets again – Simple Living in Somerset

How to bear it – Humble Dollar

Naughty corner: Active antics

What are the odds of making a good investment? – Behavioural Investment

The gamma of levered ETFs – Party at the Moontower

Small caps, stock picking, and index trackers [Podcast] – Maynard Paton

Crypto schadenfraude mini-special

“I lost money in crypto so you don’t have to!” – Get Rich Slowly

The crypto crash feels amazing – The Atlantic

The problem with investing in Bitcoin miners – Paul Butler

What kind of financial asset is Bitcoin? – Noahpinion

Ric Edelman: what you need to know about Bitcoin [Okay, this one is bullish] – Think Advisor

Kindle book bargains

The Great Mental Models Volume 2: Physics, Chemistry, Biology by Shane Parrish – £0.99 on Kindle

Two Hundred Years of Muddling Through: The surprising story of Britain’s economy from boom to bust and back again by Duncan Weldon – £0.99 on Kindle

Human Frontiers: The Future of Big Ideas in an Age of Small Thinking by Michael Bhaskar – £0.99 on Kindle

Why You?: 101 Interview Questions You’ll Never Fear Again by James Reed – £0.99 on Kindle

Environmental factors

How climate change is making Australia more unliveable – BBC

Why African demography should matter to the world – Adam Tooze

Off our beat

The Kafkaesque housing scam that’s tearing through London – Vice

Welcome to the age of the ultra-realistic ‘art robot’ – Dazed Digital

It’s 10pm do you know where your cat is? – Hakai

The 79-year old world champion powerlifter – Guardian

Trying too hard – Morgan Housel

How to stop procrastinating and tackle that big project – Harvard Business Review

Who owns Einstein? The battle for the world’s most famous face – Guardian 

And finally…

“There’s no better tool for building wealth than the stock market.”
– Brian Feroldi, Why Does The Stock Market Go Up?

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It all works out if you give it enough time, plus the rest of the week’s great reads…
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