The Big Drop is all about preparing your portfolio with a looming financial crisis. First, it convinces you in mathematical, historical, and allegorical terms that it would be surprising NOT to have a crisis. Then, it talks about why investing today (2016) is harder than it has ever been: deflation is the driving force, but inflation is soon to come. Both forces are investigated thoroughly.
Where I found it:
I felt that this book had even stronger evidence of a coming crisis than either Crash Proof 2.0 or even Road to Ruin (Jim Rickard’s later book) had. It also gave more clear advice on setting up your portfolio. Jim Rickards explains the thoughts and methods behind a "barbell" strategy that is loaded up on the ends as a protection against inflation AND deflation, with cash in the middle ready to pivot positions as needed. So if you put 35% of your investments in hedge funds, private ventures, angel funds, and the like for your deflation hedge, leave 30% cash (and treasury bills) in the middle, you have 35% to diversify into an inflation hedge with precious metals, undeveloped land, and fine art (museum quality only). Both Crash Proof and Road to Ruin spend just a few pages on an possible personal solution.
In about 2.5 years, Jim Rickards wrote 4 books. This one is not the star. It seemed very rushed as if he was just trying to finish it so he could move on to “A New Case for Gold” before the crisis hit and gold prices break out. I found grammar, spelling, and even math typos. If you look at his website, it is sometimes even omitted.
It is also outdated. Yes, it is only 3 years old, but situations have been developing rapidly since it was published. For example, there is a section about the massive oil price drops seen in 2015, but oil prices are now on the rise. All of the principles are true, but you’ll have to hit up Google for current data.
That being said, this book is the best I’ve seen thus far in terms of understanding and setting up a portfolio for today’s dynamic situation.
I recommend it to someone who has already been introduced to Jim Rickards and knows he is brilliant but is looking for more guidance and insight. Otherwise, it won’t have nearly as much authority with the errors. It also should only be read by someone who is willing to fact check as some of the arguments have changed in the last few years.
Look up his videos on Youtube (James Rickards Project) with the key words you are interested in. There are quite a few informative interviews.
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