HiddenLevers.com – Scenario Analysis For Investors

I’d like to announce¬† a new project that I’ve been working on called HiddenLevers.

What happens to your portfolio if interest rates rise to 10%? What about if oil prices spike up to $150 per barrel? Do know what impact health care reform could have on your portfolio?

HiddenLevers.com will help you answer those questions and more, by making Scenario Analysis easy for investors. By connecting big-picture economic factors (levers) with stocks and industries, HiddenLevers helps investors to understand how different economic scenarios can impact their investments.

You can use HiddenLevers to:

Try HiddenLevers out – we think it will add another valuable angle to your investment planning and research! HiddenLevers is currently in beta mode, so don’t hesitate to leave feedback to help improve it.

Crash of 2008: Three Potential Scenarios

The Financial Panic and subsequent stock market Crash of 2008 are now a boldface reality. So where do markets go from here? Here are three scenarios that we might confront:

1. Good: The market enjoyed a relatively quick recovery after the 1987 crash, surpassing the 1987 peak by mid-1990. Could we be so lucky this time?

2. Bad: The Dow peaked near 1000 in 1966, and then went on a rollercoaster ride, never permanently crossing 1000 until 1983! That’s an effectively flat market for 17 years.

3. Ugly: Japan’s phenomenal postwar growth and an associated bubble peaked with the Nikkei index above 37,000 in 1989. The Nikkei subsequently crashed, and is now trading at the same levels as in 1983, 25 years ago! If this sounds impossible, consider that Japan’s bubble was fueled by reckless lending and a real estate bubble, and that Japan resorted to fiscal stimulus and banking system intervention not dissimilar to the global approach today.

While no one can be certain, I think the middle scenario is not unlikely. Given that the current bear market is now dated to have begun 8 years ago, with the dot com bust, we may still have another decade to go.

Doesn’t Everyone Want Financial Independence?

When something aggravates you at work, wouldn’t you like to be able to walk into your boss’s office and quit with no ramifications? That is the dream of financial independence – when a person has saved enough that he can meet all the needs of daily living through investment income alone. A whole industry has sprung up around the idea, with authors, talk-show hosts, and the like extolling the virtues of living on invested money. But is this really an achievable goal for most people?
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