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Degustation (noun) – Degustation (dee-gus-TAY-shun) is the act of tasting or savoring, especially with care or relish. As used by Liane Moriarty in Nine Perfect Strangers: “There would be no alcohol, sugar, caffeine, gluten, or dairy – but as she’d just had the degustation menu at the Four Seasons, she was stuffed full of alcohol, sugar, caffeine, gluten, and dairy, and the thought of giving them up didn’t seem that big a deal.”

“Every day, you reinvent yourself. You’re always in motion. But you decide every day: forward or backward.” – James Altucher

“Shtisel” (Netflix): An engaging and heartwarming series about the lives of a Haredi family living in Jerusalem’s Geula neighborhood. The show was created by two writers with Haredi roots. It gives you an inside view of what it might be like to live within a religiously ultra-Orthodox community where there are rules against so many things we take for granted, including appearing in public without all the required clothing and watching TV. It was produced several years ago and gained a surprising wide viewership (including some ultra-Orthodox viewers who aren’t supposed to watch TV) and won a number of awards. I noticed it a month ago on Netflix and relished the first two seasons. I hope there is a third.

The Stock Market Is Getting Dicey -Here’s What I’m Doing About It

Sunday, February 17, 2019

Delray Beach, FL.-The US stock market gave investors a good scare late last year, with the DOW dropping from a high of 26,562 on September 24 to a low of 22,445 on December 18. The newspapers were full of good reasons. On the top of the list were rising interest rates and the fear of a trade war with China.

But by the end of the year, it had climbed to 23,327, ending the year with a loss of 5.63%.

Thousands of investors abandoned stocks during that last quarter. Dominick and I did not. Our investment philosophy is long-term, big-cap, and value-based, so we look at price drops as buying opportunities. And we took advantage of the drop to buy some additional shares (of PG, IBM, BUD, MSFT, GOOG, AMZN, AAPL, MMM, ORCL) with the cash I’d accumulated from dividends in 2018.

Of course, ending the year with a loss never feels good. And that was especially true for us since my portfolio had made a ton of money in 2017 and good profits consistently since setting it up in 2012 (even in 2015, when the DOW closed down 2.23%).

This year, the DOW is up about 9%, as is the Legacy Portfolio. So you’d think I’d be feeling good about staying in the market. But I don’t feel good. I feel nervous.

There are lots of reasons to be concerned about not just another dip but a crash. And not just an ordinary crash but one that could last for a long time.

One reason: Half of all investment-grade debt is “teetering on the edge of becoming junk,” a colleague pointed out recently. “And more of these risky loans are being owned by mutual funds than ever before.”

Worst of all, he said, “They’re being held mostly by your average mom and pop investor. When these risky companies become unable to pay their debt obligations, it will send shockwaves throughout the debt market, then the stock market. And it will be disastrous for most individual investors.”

And then, of course, there’s that ever-growing elephant in the room: the national debt. In 2,000, it stood at $5.6 trillion. Today, it’s estimated to be $22.7 trillion.

But those aren’t the scariest numbers. The scariest numbers are ratios – the debt as a percentage of our country’s gross domestic product. (Think of it in terms of personal debt compared to personal income.) In 2000, that $5.6 trillion in debt represented 55% of our GDP. Today’s $22.7 trillion represents 108% of our GDP.

And it’s not expected to get better.

Younger investors today tend to be optimistic because they haven’t had the benefit of living through a period of high inflation. And their only experience with a serious recession was in 2009, which has been followed by this long bull market.

Young investors may, therefore, keep investing.

Older investors may take the opposite course. They may get out of the market in part or in whole and wait for good weather.

I’m nervous because I feel like we are in for a drop and possibly a sustained drop. But I’m not going to change my investing strategy because it was designed for the long-term and because I can wait it out.

I can wait it out because (1) I never fully retired (i.e., gave up my active income), (2) I have multiple passive streams of income from different asset classes, and (3) my stock portfolio represents only about 20% of my net worth. So if the DOW drops by, say, 50% for 10 years, I’ll be okay.

I’m not saying this to boast, but to explain that the only way you can possibly avoid being devastated by a stock market crash and a long recovery is to take a comprehensive approach to wealth building – one that includes multiple streams of income, stores of wealth in at least a half-dozen asset classes, and “plan B” strategies for limiting losses.

Peripeteia (noun) – Peripeteia (per-uh-pih-TAYE-uh) is a literary term that refers to a turning point in the plot; an unexpected reversal of fortune. Example: the sudden change in Oedipus Rex’s situation when he realizes that he killed his father and married his mother.

The Debt-to-GDP Ratio, Historically

Until 1935, the ratio of debt to GDP was in the teens and 20s. That climbed into the 40s as FDR struggled to battle depression and prepare for WWI. It spiked during the war at 119% and broke below 90% in 1950. Then it gradually dropped into the low 50s and high 40s during the first half of the 1960s. It dropped into the 30s in the late 1960s and 1970s, and stayed in that range till 1985. After that, it gradually climbed as high as 65% in 1995, then went back down to 55% in 2000.

“If you must play, decide upon three things at the start: the rules of the game, the stakes, and the quitting time.” – Chinese Proverb