It’s exactly during the good times where we need to be more disciplined in our finances, because we never know when the bad times will return.

With the S&P 500 correcting by 10% in 2016, US leading indicators have turned downwards, unemployment figures have stopped improving, and people are wondering whether Europe will be like the US, but much worse. China is down 40% since its crazy 150% rise, and a slowdown is here.

If you’re American living in America, look at the bright side of things: the US dollar is strengthening, and the 10-year yield has declined to ~2.1%, which is leading to lower rates yet again!  The 10 year yield and all its glory really is the most beautiful figure to watch.  It can tell the story of everything and anything.

The USD will always be a global safe haven currency, no matter how hard we try and mess things up. It’s good to see that we aren’t the only basket cases as investors sell the Euro faster than they can say tapas!  What’s going on now is that money is shifting towards US assets, namely the property market. Combine an asset shift with cheap debt, and rental yields above the current risk-free rate of return (3.1%), you realize why smart money is moving into the US property market again. Only a minority will agree with the attractiveness of the US property market, and therein lies the opportunity.

During bad times, it’s always good to re-evaluate your finances. I’m not convinced the bad times are back and am actually quite sanguine about the economy with the unemployment level at a tight ~5.3%. All the same, here are some suggestions just in case things get ugly for longer.

TOP 5 THINGS TO DO WHEN THE BAD TIMES ARE BACK AGAIN

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Do you know what the market capitalization was of Microsoft when they went public on March 13, 1986? A mere $500 million (~$1 billion in today’s dollars). If you had bought just 100 shares of Microsoft at the $21 offering and rode it all the way up to its peak in 1999, you would have cashed out for $1.4 million. Of course the stock came tumbling down and then back up. But you’d still have around $1 million bucks today. Not bad.

I remember working on the syndicate with my US colleagues during Google’s IPO back in 2004. We took the company public at a $23 billion market cap. Meanwhile, Facebook went public in 2012 at a $100 billion market cap. See a trend here? Companies are going public later and later in the game, meaning the public is getting less and less of the upside benefit!

The people who are getting rich are 1) Private institutional investors such as the hedge funds, venture capital funds, venture debt funds, and private equity funds, 2) Accredited investors who are able to invest in such private funds, and 3) The employees qualified enough to get jobs at these hot startups. Everybody else is shut out!

We could be in another financial bubble, but nobody really knows when a correction will take place. You might not even care if your investments decline by 20% or more over a year time frame if you are looking to invest over the next several decades. But alas, none of us will live forever, and nobody really likes to experience downside volatility. Sooner or later, we’ll have to deploy our capital for life, leisure, and charity. Not everybody wants to leave a financial legacy to raise spoiled kids!

One of the strategies I’ve taken to protect against downside risk is to buy various structured notes based on different indices like the S&P 500, Euro Stoxx 50, and the Russell 2000, or buy single stock structured notes of specific companies. Not only do I regularly rebalance my portfolios, I also consistently dollar cost average every month. You’ll be surprised how big a fortune you can create after just 10 years by methodically applying these two financial practices.

Structured notes are derivative products that usually provide hedged returns. In this post, I’d like to explain to you another recent structured note I bought to help illustrate how structured notes work. I buy all my structured notes through a Citi Wealth Management account. My other investment portfolios include: a Rollover IRA, a SEP IRA, a Self-Employed 401k, and a Motif Investing portfolio. 

Updated for 2017 and beyond. 

Of course we are in a bubble! When you’ve got people with no professional financial experience giving investment advice, you better believe we’re in a bubble. Online investing advice by non-finance professionals is the modern day version of shoe shine boys giving stock tips prior to the crash of 1929. Always understand the background of those who give investment advice before considering their counsel.

Even after 20 years of investing and working in the finance industry, I always feel uncomfortable giving any sort of investment advice because I’ve had way too many losses partly thanks to multiple boom and bust cycles. Furthermore, everybody’s risk tolerance and money making abilities are different. The best thing we can do is have an appropriate asset allocation to ride out the waves.

The good thing about bubbles is that the greater fool game can last for much longer than expected because we humans are GREEDY, GREEDY, GREEDY!

The largest criers of the word “BUBBLE!” are those who have the least amount at stake. Perhaps they sold their real estate, stocks, or businesses before 2012 and are now kicking themselves. Maybe they are still graduate students with a lot of student loans to repay. Or maybe they are retirees or early retirees who can no longer take full advantage of a heated economy. Whatever the case may be, when the largest complainers of a bubble start getting back in, you know danger is imminent.

Let’s at least all agree that we’re in the second half of a bull market and the bubble will eventually burst. Maybe we’ll only correct by 15%-20%, unlike 2009’s 50% ass-kicking. But eventually, that year or three of pain will come!