Prophets of Prosperity

 

If you were uncertain where the economy is heading and what to do with your investments, Barron’s has settled that for you.  Reporter Carleton English, writing last week under the headline “Nothing Can Take the Stock Market Off Its Record Run”, cited several recent incidents of bad news (U.S. landfall of a category 4 hurricane, dismal August jobs report, COVID hospitalizations rising) and pointed out that the markets shook them off with barely a pause and barreled on to record highs.  He goes on to project the run to continue into the foreseeable future.

So “nothing” can rattle the stock market now?   He’s got some chutzpah.  The crazy thing about economic recessions is that they come from unexpected directions.  Did anyone see the oil embargo coming in the 1970’s?  Did anyone foresee the “dot com” bust in 2000-2001?  How about the sub-prime lending crisis that led to the Great Recession in 2008?  Or the pandemic in 2020?  Actually, there were voices in the wilderness warning about all those things before they happened, but it’s not until they actually occur that everyone else sits up and pays attention.  But by then, the majority of people has lost a lot of money in the stock market. 

And that’s when Congress and regulators step in.  They institute safeguards against poor lending practices.  They start pouring crude oil into the strategic reserve.  They beef up spending on research and development for vaccines and vaccine technology.  As someone has said, we are great at fixing the cause for the last recession, but it usually does little or no good in preventing the next one.  Yet it’s precisely because of the prophets of prosperity like Mr. English that we become overconfident and set ourselves up for the next downturn.  Irrational exuberance, I think it has been called.

But there ARE other voices.  I’ve believed for a while now that the markets are overheated and primed for a big drop.   A well-known economist has parked the majority of his money in cash equivalents.  I’ve done the same.  I’ve definitely missed out on some growth of my nest egg over the last year, but not altogether.  I’ve got some money aggressively invested and it has paid off.  But I don’t want everything at risk.  My thinking is much like a teacher I read about a couple of years ago.  She had invested well and built a modestly sizable retirement account over the years.  When she retired, instead of keeping her money in the stock market where she worried about it constantly, she figured she had enough to live on for the rest of her life and put it into insured bank accounts (savings, CD’s, etc.).  I wouldn’t go that far, and I certainly wouldn’t recommend it to others because inflation can eat away the value of that account or she may unexpectedly outlive the balance in her accounts.  But I can understand her reasoning.

So use common sense.  Don’t believe all the hype about the markets going ever upward.  The experts don’t know everything.  As Yogi Berra once said, “It’s hard to make predictions, especially about the future.”

Until next time,

Roger

“For you know very well that the day of the Lord will come like a thief in the night.  While people are saying ‘Peace and safety’, destruction will come on them suddenly, as labor pains on a pregnant woman, and they will not escape.”  I Thessalonians 5:2,3 32 NIV*

*Scripture quotations taken from the Holy Bible, New International Version® NIV® Copyright © 1973,   1978, 1984, 2011 by Biblica, Inc.™  Used by permission.  All rights reserved worldwide.