Imagine for a moment that you’re tasked with instructing others how to select a wardrobe.
Given the regularity of the seasons, you could do pretty well suggesting a mix of warm clothes for winter and cool clothes for summer. However, naming the exact day when a 70-degree day interrupts the 40-degree days of early spring would prove to be much more difficult.
If you spend much time on the internet, you may have received an invitation to watch any number of doom-and-gloom economic videos. The latest video to resurface features a so-called economic expert predicting inevitable economic collapse, due to numerous ‘cracks in the foundation’ of our economy. There are many well-presented data points that will scare the life out of you as an investor. The punch line at the end of the 50+ minute video is to subscribe to his investment newsletter. No solutions are provided in the video to actually protect yourself from the inevitable collapse he describes, just a pitch to invest in his newsletter that may or may not provide you with the solutions you seek. I find this a bit disingenuous and equal parts brilliant marketing.
Now, as for this expert’s predictions, he’s been right (and wrong) before and will be right (and wrong) again…at some point. Consider this: you too can build a paid subscription investing service and book-writing business on just one simple premise: the market is going to decline. It will decline more than 20% and you’d be best to get out and protect yourself now. Since the market does these things over and over and over, you’ll eventually be right and those seeking affirmation of their fears will flock to you and call you a sage. It’s called confirmation bias. Attach some great credentials to your predictions and you’ll have a money-making machine.
On a similar note, I once asked a large money manager (billions under management) what he thought of gold’s role as an investment. He said, and I paraphrase, “Gold only becomes a viable investment in a catastrophic collapse scenario and that is beyond the scope of what we can and should plan for as a money manager.” I thought that was a fair response. While I’m tempted to think of catastrophic scenarios that might upend everything we know economically, I’m continually surprised by the resiliency of our economy. Was oil supposed to go down to a fraction of its previous value as it did a couple of years ago? No, because energy is a scarce resource. Then some smart people discovered fracking and shale oil and then a pandemic hit. Suddenly, the seemingly-inevitable trend in oil prices was shattered, while we all stand and gasp in amazement. Did the expert in the video also predict this?
When we build a retirement plan, we have to plan for all weather conditions, all seasons. When the stock market drops, your guaranteed income plan delivers consistently high levels of income, without hesitation. When the stock market rises during seasons of prosperity, you’ll benefit from growth through rises in valuations – allowing you to fight the forces of inflation. When life deals you an unfair hand and your health suffers, your long term care strategy will provide you with much-deserved dignity and access to the care you need.
Doom-and-gloom soothsayers will always have a place in our world. They provide valuable insights and reminders to seek reasonable and prudent protection during the winter seasons that always come. But when spring breaks and the sun comes out, you’ll wish you’d built a wardrobe that allows you to take in the sun and enjoy the warmth.
You have the ability to build an all-season retirement plan; it just takes some perspective and planning. Recessions come and they go, as with winter and summer. Plan, then adapt, and you’ll do your very best to prosper in spite of the stormy weather that’s inevitable. It doesn’t take a prophet to predict that, but with prudent planning, we don’t need one to.