Economic Survival: How to Stay Positive During Economic Turmoil
We have seen a week where investment markets are down over 20%, followed by a single day rally where the market is up 11%. Let me be blunt: this type of volatility will continue for some time. As I have spoken with many of my clients in recent weeks, the feelings they have shared with me have ranged from utter despair to euphoria. Unfortunately, this whirlwind of emotions has begun to affect other aspects of their lives. Please don’t let this happen to you.
I think it’s time we got back to basics and I want to have a very special conversation with you. Hour after hour, we are bombarded with a whirlwind of conflicting information. I worry that media hype makes you focus on the sensational and miss the important. The press continues to spin information about the financial world that will make you worry, struggle and panic about the financial markets and the US economy. In his opinion, the market is on a path of destruction that is beyond the ability of nature or man to save, one that will surely spell the end of our financial system as we know it. Why would intelligent human beings torture you like this? Because emotional hype makes news and news makes money. All sense and sensibility vanishes when your top financial advisers are news reporters capitalizing on your fears. You need someone you can trust to help you sort through the news and keep you focused on what’s really important in times like these. I would be referred to as your tax and financial professional if I did not offer you the value of my personal and professional experience and perspective in times like these.
I want to assure you that nothing that is happening today is unprecedented, although it may be happening on a larger scale, and none of it is unnatural. What is happening today is the way the system has to clean up excesses. And it will lead to a healthy renewal of the global financial system in ways today’s doomsayers cannot even imagine. We’ve seen it happen before, and we’ve seen it come back stronger than ever.
As you listen to the daily news reports, here are a few points I want you to keep firmly in mind:
1. Not all interviewees in the news are experts.
2. The big problem we are experiencing today is NOT a lack of liquidity. According to recent data from the Federal Reserve, American households hold almost $12 trillion in cash. This is enough to pay off all home mortgages in the United States.
3. What we have before us is a crisis of confidence.
4. We have been here before and we come back stronger.
In the midst of uncertainty, it is always valuable to reflect on what is really important. In times like these, we need to go back to basics and dig deeper into the important values we hold dear.
It’s really all about the people in our lives. I remember in October 1987, after the biggest market crash in one day, I saw Louis Rukeyser at Wall Street Week. He said, “It’s just your money, not your life. Everyone who loved you a week ago still loves you tonight, and that’s far more important than the numbers on a brokerage statement. The birds still sing, the crocuses will.” They bloom, babies gurgle, and puppies snuggle in your lap and fall asleep happily, even when the stock market temporarily goes haywire. ‘”
As I reflect on the current market, along with his wise perspective, I know he got it right. It really is about values: American values. As a people, we are brave, independent, resourceful, and have seen (and survived) dramatic times before. As individuals, you have all been prudent savers and investors. This is an excellent opportunity to refocus on the basics that got you here and teach them to the next generation:
1. Spend less than we earn
2. Save for a rainy day
3. Make good investment decisions today
4. Use asset allocation to balance and diversify our investments
We all know that there are no guarantees in life. Even with the uncertainty in this current market, many things in our world remain stable, loving, and alive. With all the crises I have survived in my life, I have learned to wake up each morning and be grateful for the new day: I wake up each day, counting my blessings. That feeling of gratitude has given me the strength and encouragement to achieve great things in the face of difficulty. You can do the same.
Remember, hindsight is always 20/20. When we look back on this moment in six months or a year, or 10 years, we want to make sure that we can say that:
1. We kept our heads and made smart decisions in the face of conflicting information.
2. We take care of what is most important, cultivating love and trust with our friends and family.
3. We stayed focused on the tried and true principles that got us here and sustain us through times like these.
4. We take this opportunity to teach our children and grandchildren great financial lessons.
With that said, I want to reiterate that we are truly living in historic times. I believe America’s best days are always ahead. And we will wait patiently for more rational markets. Just because the world is going crazy in this current mania, doesn’t mean we have to participate in it.
So in times like these, we need to tap into the common sense and courage that has seen Americans through many, many other times of uncertainty and dramatic change. This is the time to dig deep and re-evaluate what is truly important to us and stay focused on what we know works and not allow this temporary event to infect what is most important to you.