The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website

Chapter 3

Are We Living in a Permanent Financial Crisis?

Before investors can even begin to think about how to structure their investment portfolios, they need to think hard about the kind of world those portfolios will be invested in:¹

• Is it 1930, at the beginning of the Great Depression, when even the best-designed portfolios would produce dismal results for more than a decade and where investors in certain countries (Germany) would lose everything?
• Is it 1950, when the postwar economic boom was about to take off and almost any U.S.-centric portfolio would do well?
• Is it 1975, just after the worst bear market since the Depression, when stocks were screaming bargains?
• Is it 1982, when Ronald Reagan and Paul Volker had just broken the back of stagflation, setting the stage for the greatest bull market since the nineteenth century?
• Is it 1999, when stocks were at their priciest point in American history and were about to collapse?
• Is it 2006, when housing prices had peaked and leverage, preposterous exuberance, and the collapse of ethical behavior in the financial world² were the gathering storm ahead of the worst financial crisis since the 1930s?
• Is it 2009, when the bear market had depressed prices to their most attractive levels since the mid-1970s?
• Or is it today (early 2012 as this is being written), when a gradual economic recovery is bedeviled by unprecedented levels of public and private debt in the developed world?

Because it's today, let's consider the kind of world ...