It’s always fun to arrive at the office early in the morning and see that a client has already emailed with questions about the market. One day last week, the email went like this:
“I’m worried today about the stock futures…and the selloff that’s happening now around the world… I know you’ve prepared us for volatility, but this morning worldly selloff is huge. PERHAPS IT IS TIME TO SELL?!”
I quickly clicked to CNBC to see what the client was referring to. The first headline declared, “Dow futures drop 500 points amid global economic recovery concerns, bond yields slide.” We jumped on a call with the client, reviewing the news and talking about how his portfolio is set up with a long‐term plan in mind and which can maneuver through market volatility. We also suggested that he stay away from financial media until mid‐day, when everyone’s coffee will have already taken effect.
These episodes are reminders that fear sells. As Max Rosner, founder of Our World in Data, wrote, “Newspapers could have had the headline ‘Number of people in extreme poverty fell by 137,000 since yesterday’ every day in the last 25 years.” The reason they don’t, is because positive headlines don’t sell.
A case in point would be Robert Kiyosaki, who published the famed book, ‘Rich Dad, Poor Dad.’ On June 28, he Tweeted: ‘The best time to prepare for a crash is before the crash. The biggest crash in world history is coming. The good news is the best time to get rich is during a crash. Bad news is the next crash will be a long one. Get more gold, silver, and Bitcoin while you can. Take care.’
If you weren’t intimately familiar with Kiyosaki‘s name you would come away quite scared. A quick Google search shows that he is a serial entrepreneur who sold more than 32 million copies of his flagship book. But if you dig a bit deeper you would see that he has been predicting “the largest crash” in history for many years now. For example, check out this 2015 Seeking Alpha article titled, “Robert Kiyosaki: Biggest Stock Market Crash In History Coming In 2016.”
Kiyosaki doesn’t limit himself to interviews and blogposts. He wrote a whole book on his doomsday approach! Titled, ‘Rich Dad’s Prophecy,’ the book makes a case for the biggest crash in history. Originally published in 2002, it was republished many times with title changes detailing why the ‘biggest stock market crash in history’ is still coming. Here is a review on Amazon:
I am sure he and his followers would still claim that the crash is coming, and that we are just a bit early. But one thing is for sure: Being that he reprints every couple of years, whenever a crash comes, he will have predicted it right before.
Few things are easier than fearmongering and scaring people into buying a newsletter or book about how the world is going to end. All writers know that if you promote yourself with click‐bait fear tactics, you will get people to click and sign up easily. By the time three years have passed, with the major crash predictions keeping followers out of three years of market gains, another thousand signups will have accumulated. When CNBC, Yahoo Finance or The Wall Street Journal post scary headlines, they know that they will keep you reading, clicking and engaged. The fact that it works for their bottom line does not mean that it’s best for yours. Remember, they aren’t really your friend.
We all know that substantial investment risks will always be present in a portfolio. Some risks just can’t be removed. And if you follow markets, you understand that there is always a reason to sell, because the market is either at or near an all‐time high, or in a drawdown. Many will maintain that, when we’re at all-time highs, the market is extended and it’s time to opt out. And when we are in a drawdown, there is usually a reason for it. Which means that many are calling for markets to unravel.
What we to do for our clients may not always look exciting, but it helps them reach their goals. Discussing asset allocation, inflation hedges, insurance levels or estate planning will not excite most people. But when we focus on our client’s total picture and keep them calm, we are creating legacies.
These days, with all we have endured, the market is hovering at all‐time highs. So, if you had the ability to mute out the noise and remain invested, hats off to you! This is not to say that we won’t have a correction or a crash. We will. And they may even be big ones. But to consistently make money in the market, we need to believe in a brighter tomorrow.
