Now that we’ve had a couple of days of negative market volatility (ever notice how no one objects to the positive variety?) soothsayers are coming out of the woodwork to predict the collapse of markets worldwide. There are a few interesting things to note about these predictions.
- They usually come AFTER markets turn down, when it’s too late to do anything. I would think it rather silly if the weather service only told me about the threat of a dangerous tornado AFTER it had already knocked my house down.
- The latest in explanations for the swoon in stocks is that central banks worldwide are printing too much money and now you ought to hold cash as a result. Brilliant!!!! If central banks are printing money, why on earth would I be excited about holding cash? Increasing the supply of money only serves to devalue it. I would rather hold companies that will just eventually raise prices when money becomes less valuable.
- I have found time and again that the people who are most vocal about bad things to come tend to be those with a secret axe to grind. The often benefit economically from creating fear and getting you to take action based on that fear.
The moral of the story is to not allow yourself to get rattled by inevitable market ups and downs. They are, indeed, to be expected. Think of it this way. Without volatility, there would be no greater expected returns in markets versus fixed income investments. We get paid for putting up with the bad, so embrace it.
