For the last 3 years I have thought we are in the most difficult investing climate I can think of (maybe the great depression was worse). As I say above, I don’t know how to invest today. I am thinking for me

1) I am fairly l knowledgeable about investing in stocks and the stock market and booms and busts
2) I can understand and accept the risks I will take

that the bet answer is

1) save a lot (to cover future risks)
2) take substantial risks to capture gains while they are available due to politicians and the Fed continuing risky policies enabling too-big-too-fail system (massive intervention, bubble inducing in size)

This is a risky strategy but I think the best one for people that are knowledgable and can accept risk and can actually invest in the face of risk (there is the psychology of being able to sleep… but there is also a need to be able to make good decisions when taking large risks which sometimes throws people – they make bad decisions when pressured).

For those without this ability and background

1) save a bunch (you have to compensate for much lower expected returns, decent chance the people we trust screw up the economy so badly we are thrown out of work, etc.)
2) invest in things that will survive a very bad economy – this general advice then has to be operationalized (which is trickier). My guess on how to operationalize is companies that have very strong cash flow positions and likely to remain profitable (even if at a lower profit level) even in bad times.
3) take some risks (but fairly small) to profit in bubble times to balance out the busts that are being created. This part is even harder than 2 to pull off. But basically I don’t think going completely risk averse will work, you lose too much over the long term.

I have greatly increased the level of risk in my investment (allocating much more to risky investment) in the last 6 months based on the thoughts above. My idea is to make substantial profits while the bubble is being induced. Then I will try to limit my losses at the end of the bubble. I have done this in the past and it is possible (not to eliminate losses but to limit the size of them). You must be willing to accept the losses and cut them before they grow to big. if you do it carelessly you can lose all your speculative gains and then more as the bubble collapses.

I have trouble accepting losses but have gotten better and have learned to focus on that when speculating – when I am investing I can worry less about cutting losses, instead focusing on whether it is still a good long term investment and if so, sticking with it.

The government is obviously inflating the securities markets, but it has to give way at some point. So finding an investment that will survive the next meltdown is non-obvious to me.