Even Low Risk Can Be High Risk In Uncertain Times

Nowadays, many people are looking for easy answers. They want a pill, a device, an easy routine — something that can help them solve their problems with a minimum of effort.

The same holds true when it comes to personal finances and investing. No small number of individuals and families want a low-risk, high return approach that doesn’t require much effort or take too much time.

Unfortunately, even in the best of circumstances, such approaches don’t exist. Something can always go wrong, no matter how protected people think they are.

And in a dangerous environment like we have now, even decisions that might seem to involve little risk can prove very costly if a full range of potential threats is not taken into account.

For some insights on this particular issue, consider the question raised in a post at Jesse’s Café Américain blog, entitled “Where Was the Safe Place for Savings from 1929-1933?”

The answer is that there was NO single safe place for your savings, not even ‘cash’ dollars throughout the three years that marked the stock market crash of 1929-1932. The individual had to use their minds and keep their eyes on the markets to steer through that most perilous of financial times.

Many believe they understand the coming debt deflation and know where THE safe place will be to put their savings. History suggests they may be consumed for their faith in theory rather attention to market reality.

And this was a relatively straightforward case of unwinding and deflation. What twists and turns does this brave new world of derivatives and fiat reserve currencies have in store for us as it unwinds? And what new policy errors unforeseen and consequences unexpected await because of the Fed’s continual experimenting in the markets?

We’ll be talking more about this in the days ahead.

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