09-27-2021: Stop Listening to Fear Mongers!
There are a LOT of newsletter writers that are profiting off of fear, scare tactics and outright lies. Investors who read this drival can become quite worried about the future with all the doom-and-gloom being written right now. Here are some headlines:
"US Dollar to lose reserve currency status!"
"Silver will replace gold as a safe-haven commodity"
"USA will soon default on debt forcing government into insolvency"
"Companies temporarily propped up by debt and liquidity measures will be forced into insolvency."
"Coronavirus mayhem has plunged financial markets, global economies, and geopolitics into chaos."
"Fed announces taper plans as Evergrand's fate hangs in the balance!"
"It's twilight in America, and, if painful and drastic changes aren't made soon, an economic depression is coming that will last at least a decade!"
"If you don't own (a lot) of gold now, tomorrow may be too late!"
These over-the-top forecasts are nothing (and, I mean absolutely NOTHING) but guesses and are used to sell books and newsletters and, in a few cases, talk you into investing in the author's fund that is designed (not promised) to offset the fear that is being promulgated by the author.
I’m sure you’ve heard that it’s fear and greed that moves the stock market. These so-called economic 'experts' appeal to your fear to try and get you to buy their products. The headlines above are no different than the yellow journalism we’ve read about in history books.
Something else you should consider… Do you know how newsletter copywriters are compensated? They’re paid on commission and the more subscribers they get, the more in their paychecks.
Also, and this is very important, did you know that many of the newsletters sold in the US could not be sold in the UK or in Australia? That’s because newsletter writers in this country have an “FTC Exemption” that allows them to write almost any outlandish thing they want and not be held liable for any of it. In the UK and Australia, these same writers have to be registered with regulatory agencies and if they write anything that is not regulatory compliant, they are fined for purposely misleading consumers.
Why anyone listens to these stopped-clock charlatans anyway is beyond me. But, they draw huge crowds and get lots of TV time, when in reality they are just self-promoting guessers. Oh... yes... every once in a while they will guess right, but the outcome is never as dire as they predicted. If you relied on the percentage of times that these fear mongers are right, you would likely lose your shirt 90% of the time.
Let me tell you how to know the truth and what to rely on... and, no, it is NOT my opinion that you should follow. The real truth detector is the stock market. The stock market is composed of many millions of investors (individual and institutional) who are assessing all potential issues that could impact (negatively or positively) their collective investment bias and/or holdings.
If the US currency was going to collapse, the market would know it long before any so-called pundit would know and the market would shift from US dollars to other safe havens and we would all see it in the trends of currencies, commodities, stocks, bonds, etc.
And to put all of this in perspective, the US Dollar is actually climbing right now versus the major world currencies. And by the way, gold is trading 15% lower than its all-time high made a year ago. And silver is trading more than 50% lower than its all-time high made more than 40 years ago, and it’s trading more than 33% lower than its high in the last 10 years; not exactly the safe haven that’s being touted by many of these fear-mongering writers.
Do you really think our great economy could fall into a major recession or depression and the market sink 70% or more? If you do, I am in agreement with you. Does that surprise you? But... and this is very important... I know it is not going to happen this afternoon. Why? Because the stock market is showing little to no signs of a big move lower and believe me, the stock market ALWAYS knows.
A lot of people think the market crashed in 1929. In reality, the crash started in 1929, but it took 3 years to get to its first leg down, before dropping again.
Last year, the market crashed 30%. The major crash started on February 24, 2020, but it began moving lower on the 20th of February and when it did, our sell points took us to cash... 4 days before the beginning of the major sell-off.
"Black Monday" (October 19, 1987), the market crashed lower by nearly 24% in a single day. But, our algorithms back-tested during that time moved us to cash on the Thursday before Black Monday.
Does that mean our algorithms are prescient? No. But, what it does mean is this. The market has ALWAYS given warning signals before all major moves lower. The pundits, economists, book sellers, newsletter writers, et al, do not want you to know this fact: The market is the real truth-detector and can always be relied upon to tell you when economic changes that directly impact the stock market are about to happen and/or are happening.
This is why we monitor the market closely. This is why we look for early signs of an impending sell-off. Does the market always follow through with an early warning? No it doesn't and this is what causes whipsaws; many of which we have seen this year. But, the market will warn us when risk becomes elevated and the market will give us a lot of early warnings. We do not need a bunch of self-serving, egotistical, fear-mongering guessers telling us what 'might' happen at 'some point' in the future. The market tells us whether we should be in cash or buying long or shorting via inverse ETFs.
Sometimes the market is fickle and switches from bullish to bearish and back again. Those are frustrating times. We have seen a lot of that this year. But, at some point, the market will pick a solid trend and it will be obvious. When it does, we will get our client capital in sync with that trend. That, you can count on.