It was one thing when the world was in love with high tech shares in 2000 or with US banks, home-builders and construction materials in 2007. Those were extremely dangerous times to be sure and many oblivious and greedy “investors” deservedly learned brutal lessons of loss. But seniors and risk averse people still had a reasonable investment option back then. Interest rates at both of these prior market peaks were still within the normal range and savers could still earn 5% in guaranteed bank deposits and investment grade bonds without facing high risk of loss.
Today cash rates are less than 2% and even locking into 20 or 30 year government bonds will earn less than 2.7% interest. The madness of zero-interest rate central bank policies the past 5 years, has increasingly corralled gullible throngs into the arms of investment “advisers” who have sold them over-valued bank shares, sector ETFs and mutual funds at the most extreme valuations seen to date (see chart below of the Canadian bank index ETF).
Since these “conservative, dividend-paying” bank shares lost 50% in both of the last down cycles, the carnage this time threatens to be even deeper and more wide spread than in 2001-02 or 2008-09. Only this time, victims will be even more exposed, that much older and less able to recover or make ends meet.