Thursday, 27 June 2013

This Is the Way the World Ends

By W. Bradford McMillan, CFA, CAIA

Two of my colleagues and I were discussing the end of the world, a conversation prompted by some of my recent posts, as well as a call from an adviser seeking help with a client who has a nine-figure net worth and fully expects the world to end. In discussing what to do, we realized we hadn’t actually defined the problem: What does the end of the world mean? The last time we seriously had this discussion, in 2008–2009, we thought we knew what the end of the world would look like, but in talking it over, we realized we didn’t. So, in that vein, here’s my attempt to define various “end of the world” scenarios and what to do about them.

Threat Level 1 — The United States Today: Economic Uncertainty and Looming Hazards

Conditions: Where we were in the United States a couple of years ago, and arguably, still are today (i.e., high levels of unemployment, unsustainable government spending, large portions of the population unable to support themselves, but with social, financial, and real infrastructure intact). This is more of a warning state than an actual state of emergency.

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