When I was laid off earlier this year, I announced to most of my friends and family members that I would probably just retire from the corporate grind. I recently told a few family members that I got a job offer and I would be going back to work, at least, for another year and they questioned me as to why.
I thought about that ‘why’ for a while and I finally answered that it was a hedge against uncertainty. The best way I could summarize it was to say that employment (paying job) is a hedge against the uncertainty of a crashing stock market. It is a hedge against bonds defaulting. It is a hedge against renters of your rental properties not paying rent. It is a hedge against your emergency and cash savings being depleted.
In a perfect world, my investments should keep me running along until I die but we live in an imperfect world. We live in a world in which there was a great depression, numerous recessions, a dot com crash, a global financial system crash, a pandemic crash. Yes, the world recovered from all of those things but it took one thing in short supply: time.
Ultimately, I concluded that employment is a hedge against the uncertainty of time. I’m not a spring chicken any more and the threat of sequence of returns suggests I’m better off banking one more year of income (at least) and putting it away. My investment portfolio is designed to hedge itself so my options trades hedge against my stock portfolio. My bonds hedge against stocks, real estate against bonds, gold against inflation, bitcoin against US dollar, etc but there are no guarantees. The ultimate hedge against all of those things is employment.
I have deep foreboding that something very wrong is going to happen to the economy next year or shortly thereafter. This year has been the first time I’ve had co-workers and friends from decades ago call me up or reach out on Linkedin to ask if I was hiring. If everyone is losing their jobs then it won’t be long before the stock market catches up and the losses pile in.
Share The Wealth
What are your thoughts? Are you worried about this economy yet? The old joke says it’s a recession when your neighbor loses his/her job but it’s a depression when you lose yours.