Greetings!
It’s supposed to be 55 degrees on this February Friday. Hallelujah! In the course of a long winter, a spring-like day will return smiles to our faces and convertibles to the roads. There’s really nothing like it for us Ohioans. As far as predicting the weather, you know these days will appear; it’s just a matter of when.
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 days when 55 degrees would interrupt the 20-degree days would prove very 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 James Dale Davidson 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 James’ predictions, he has 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 (https://en.wikipedia.org/wiki/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 power of innovation in our economy. Was oil supposed to go down to a fraction of its previous value? No, because energy is a scarce resource. Then some smart people discovered fracking and shale oil. Suddenly, the seemingly-inevitable trend in oil prices is shattered, while we all stand and gasp in amazement. I can only imagine that human ingenuity will remain a factor and impact many of the forces that Mr. Davidson’s video does so well at bringing to light.
All that said, having a safety net in place, delivering consistent retirement income, allows for long-term risk taking. Also, there is great wisdom in owning some gold for insurance purposes against a currency crisis. How much gold should you own? The answer lies in how bad you think the collapse will be. But with all insurance, hope that you never reap the benefits of that insurance policy. Translate: hope that your gold investment is not a good one. How much food should you store as insurance against the possibility of our food delivery system grinding to a halt? Again, your guess is as good as anybody else’s.
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.
As always, let me know what concerns you may have. 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 weather.
I hope you’ll have an opportunity to enjoy the small amount of warmth that today offers. I predict winter isn’t quite ready to loosen its grip completely, but spring will come eventually.
All the best,
Adam Cufr, RICP®
