In January of 2008, I researched the failure of the White Star Line to add enough lifeboats to the Titanic because they believed the ship unsinkable. Today, the Titanic of the U.S. economy is compromised by the arrogance and greed of the financial behemoths and the gluttonous appetite for power by the dolts in D.C. -- the U.S. Congress, presidents of the past 16 years and the misguided ambition of the current U.S. President for a "change" to the unknown... at least it's unknown to you and me.
The problem for the typical American is the possible failure of the good ship Economy -- especially the financial structure that supports it. The media is not trumpeting the nature and outcome of such a failure, nor is the faltering financial community keeping us honestly informed. Instead they feed us the pabulum advice to...
- Stay the course
- Don't make decisions now
- Wait for the market to settle
- Buy now when the market is down so you can capture the gain on the upswing
You and your clients were told the same thing when the market was at 12,000; 11,000; 10,000; 9,000 and 8,000. That advice has created immense losses for Americans -- trillions of dollars in losses, in fact.
What if, on the other hand, you had advised what common sense and a few advisors who are not controlled by the behemoths recommended as early as July of 2007? What if you had moved your clients' money into a lifeboat when all the signs pointed to the sinking of the good ship Economy? Your clients would have lost nothing. Of course, if the market had surged at that time you might be disappointed that you didn't advise them to hang on for the gain. However, that is like folding a losing Texas Hold'em blind only to discover that the next three cards would have made it a winner.
In the current situation, had you advised your client to move their money from "the market" to the lifeboat of a credit union, money market account, CDs, whole life insurance policy (my choice), or any other financial product with guarantees
-- your clients would not have lost a single penny and would have earned fair market interest rates the entire time. Want proof?
- $100,000 left in the "market" in July of 2007 is worth less than $50,000.00 today.
- $100,000 moved into a lifeboat in July of 2007 at 3 percent is worth more than $105,000 today.
- That is a difference of more than $55,000 -- 3 percent doesn't look so bad from this perspective.
The advice of the behemoths and their minions aims to bolster the balance sheets and income statements of, believe it, the behemoths and their minions -- not your clients. Their advice aims to keep their
ship afloat at your
clients' expense. It's bad advice for you, for them and for 99.9 percent of Americans.
Hell, Warren Buffett -- America's iconic investment guru -- lost money last year. So did T. Boone Pickens and many other notable investors. The wonks on Wall Street [I now call it Dull Street] -- the same folks the behemoths quote to entice you to "invest" [a.k.a gamble] with them -- have failed across the board.
It gets worse. The dolts in D.C. have spent more than a trillion dollars in the last six months in a disorganized and undisciplined attempt to right the good ship Economy. They have committed almost two trillion dollars more of our money
since January 20th, 2009. They have failed so far. We all want success in this regard. However, the plenitude of pork that permeates the spending plans of these programs indicates discomfort for "We the people" and contentment for the cronies of the dolts in DC.
If your clients haven't taken refuge in a lifeboat yet, it's time. If the market grows dramatically and rapidly they may miss a part of the upsurge. That's very unlikely. If there's hope to repair the massive breach in the hull of the good ship Economy, it will likely have to be put in dry-dock for a period of time. In the short-term it is better to have a small guaranteed gain than the possibility of no gain or significant losses. For all practical purposes there is no long-term until the good ship Economy returns to full functioning capability.
"Relying on the long run for investment decisions is essentially relying on trend lines. But how certain can we be that trends are destiny? Trends bend. Trends break. Today, in fact, we have no idea where any trend lines might begin or end, or even whether any trend lines still exist."
Posted Feb 27 2009, 10:16 PM
by John Mauldin
If you continue to encourage your clients to keep bailing while the ship is sinking and sturdy lifeboats are waiting, you may very well be fired. The common-sense approach to creating wealth and managing your personal economy does not depend on the success or failure of other people and self-serving financial institutions. It relies on you advising your clients and other like-minded Americans to take control of the money that flows into their lives and to assure their
success, not the success of some behemoth, banker or politician.