ECONOMIC ARMAGEDDON: PLANNING ON THE WORLD COMING TO AN END WON’T MAKE YOU RICH
In today's segment of Armageddon watch: a new poll released by CNN shows that 48% of Americans believe that we're headed for another Great Depression. That's an impressive statistic. Think about that for a second. Another Great Depression. Not a recession. Not a deterioration in living standards that moves Earl out of his SUV and into a compact car. A Great Depression. Earl essentially thinks that within 12 months his 2010 Chevy Suburban is going to be traded in for a 1982 Chevy Chevette.
I speak about the importance of knowing who is accompanying you in your investment adventures often. What I mean by that is you want to make sure that when you are running, it is the wolves who are running beside you and not the sheep. If you find yourself running with a flock of sheep, odds are that you are about to be eaten. You're clearly on the wrong side of the trade. The sheep are inevitably wrong not a majority of the time....all of the time.
You know who the sheep were? The guys who sold out of the market in 1987 following the stock market crash and vowed never to invest in stocks again. It was the guys who thought we were heading for a depression during the early 90's and missed out on one of the greatest decades of stock market gains ever.
You know who the sheep were? Your neighbors, yourself, myself. All of those who were buying tech in 1999 and 2000. We thought we were wolves at that time. Looking back on it, how much company did we have? Everybody was running with us. Wolves tend to stay in smaller packs. It's the sheep that can swell in ranks to the point where you can see a ball of white from outer space.
You know who the sheep were? The guys who were buying 5 bedroom homes in the middle of the desert, with no money down and an income that couldn't support a house half that size. The guys who used their homes as piggy banks to buy yellow jet skis that ended up sitting in the driveways of the homes they couldn't afford. The ones who were under the impression that 20% per annum gains in real estate were the reality of the new America.
You know who the sheep are now? All the guys who are buying into the gloom and doom of great depressions, economic collapse and a Dow Jones Industrial Average that will never break 14,000. A Nasdaq that will remain in the decade long range that people have become so used to that they can't wrap their heads around the fact that we could shoot up to 4,000 faster than anybody expects.
Earl has run with the sheep in each and every incident mentioned here. Each time he has been sucked back into an investment after vowing that he wouldn't lose money again. Earl likes cash now. Earl wants safety. Earl's loss this time will come in the form of opportunity cost. The opportunity lost to invest at a time when inflationary forces are bubbling beneath a global economy that's bursting through at the seams. Led by former third world countries who are making their presence felt. Countries that are hell bent on cultivating a middle class and giving them the infrastructure they need to create jobs, industry, ideas and growth.
The U.S. is not leading the charge forward for the first time in decades. However, the charge is good enough that even a fundamentally flawed system will have much to gain. This becomes especially true after a decade that saw stock prices grind in place, while company balance sheets were strengthened. An accommodating Federal Reserve doesn't hurt either. And neither does the fact that there are vast reserves of cash globally that can't find a home due to government bond rates that can't beat inflation.
Meanwhile Earl has sworn off stocks (recent CNN poll suggests that 44% of Americans will NEVER buy stocks again) for the remainder of his life. He has traded in his passion for capitalism and replaced it with a passion for firearms. Armed to the tooth, he sits waiting for an Armaggedon that will never arrive.
