Like Water Disappearing In A Black Hole

Yogi Berra once said, “The future ain’t what it used to be”. The same could be said for your retirement assets if you fail to act decisively. As I have written for some time, this is not a time to “hope for the best”. It is time to be safe.

According to this article from June of this year, 401(k) plan participants have lost about $1.4 trillion from their accounts since the end of 2021. Some experts believe that number is now over $2 trillion.

This year's stock slump is the most severe market downturn since March of 2020, when COVID-19 erupted in the U.S. Historically, 401(k) investments take about two years after a market decline of this size to regain their previous value. 

Housing Bubble Woes: Plunge in Buyer Traffic & Homebuilder Confidence a Lot Faster than During Housing Bust 1

The bubble in real estate is correcting, finally. The National Association of Home Builders index for traffic of prospective buyers dropped to 25, about where it was in mid-2007, well on the way down into Housing Bust 1. From 2008 through 2011, the index hovered around 10. Only this time, the descent is happening a lot faster than in 2005-2007:

Potential homeowners' interest is shown by traffic, but many of them lost interest due to the still exorbitant costs and the holy moly mortgage rates of around 7%. Homebuilders have responded by lowering their prices and providing incentives (including mortgage-rate buydowns, anything to avoid the stigma of a price reduction).

In October, builders of single-family homes reported lower overall confidence for the tenth consecutive month as "increasing interest rates, building material shortages, and elevated home prices continue to impair the housing market," according to a NAHB survey.

From April this year, when mortgage rates began to bite, until October, the index dropped by 39 points in six months (from 77 in April to 38 in October).

When Housing Bust 1 took off for homebuilders in October 2006 (index at 68), the index dropped in six months by 17 points. There was never any 6-month period during Housing Bust 1 when the index dropped anywhere near 39 points. The fastest drop was 24 points in the 6-month period that ended in September 2009. - Wolf Street

Challenges create opportunities.

“The wise investor recognizes that success is a process of continually seeking answers to new questions”, - John Templeton