So What If You Beleive An Economic Crisis Is Looming

So What If You Believe An Economic Crisis Is Looming!

                                            by: Brendan Magee

I was watching a commercial promoting a "Crash-Proof Retirement" seminar. The commercial showed the seminar director asking attendees at a previous seminar for a show of hands asking,  How many in the audience believed an economic crisis, the kind that we saw in 2008 was looming on the horizon? I'm not sure I got the question word for word, but I got the gist of the question. 

The presenter pointed out that just about everyone in the audience had their hands up. So there was a lot of angst in the room about the economy and what that meant for money they had in the stock market.  

The point of the seminar was that the stock market was way to volatile for anyone, especially a senior citizen in retirement, to have their money in the stock market. What the presenter nor anyone in the audience failed to realize was their answer to that question doesn't matter one bit. The current level of the market takes into consideration everything that is knowable and predictable. It is only unknowable and unpredictable information that moves the market. There is information and data factored into the stock market that neither the presenter, the audience, me, you, etc. have a clue about.

So the premise of the seminar , is to not be too risky with your retirement nest egg, and senior citizens, middle aged people or a thirty something year old wants to be too risky with their money. Unfortunately, by merely asking the audience this question the presenter has put himself and the audience in the shoes of a gambler and speculator. They are in the position of trying to predict the future. No one can consistently do that. When you engage in that kind of behavior you will undoubtedly come out on the short end of the stick.

Since the presenter brings up 2008, let's go back there. In 2008 U.S. Large Company stock were down 36%. That was painful. Everyone was hitting the panic button. Capitalism as we knew it was on the verge of collapse if you believed the media. Take all your money out of the market and cut your losses was the advice Jim Cramer was giving. 

Now if investors followed that advice look at what they missed out on since 2009 until today:

U.S. Large Company Stocks up 110.81%

U.S. Large Company Value Stocks up 196.62%

U.S. Micro Cap Stocks up 193.33%

International Value Stocks up 93.08%

International Small Value Stocks up 134.30%

Fixed Income by contrast is up 9.62%.

By far, in early 2009 one could have made a more believable case that an economic crisis was at hand. The point is this, do not base your investment decisions based on what you feel or believe is looming no matter how much data you have to support your beliefs. 

Your information and beliefs have already been factored into current stock market prices. Only unknowable and unpredictable information will move the market. If you do engage, based on those beliefs, you will be operating under the same set of circumstances as the guy or gal going into the casino, the race track or buying lottery tickets. You are gambling and speculating, and you will lose. 

You are operating under the delusion that you know how six billion people around the world will react to news and events that have not even happened yet. Not the side to be on. 

Please know that when investing in stocks or any securities there is a risk of loss and that the returns used in this blog are in no way guaranteed. Please consult your professional before making any investment decisions. Past performance is not a guarantee in any way of future performance. 

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments go to www.Coachgee.com or call 610-446-4322