So I’m going through my newsfeed this week and an article jumped out at me. This is pretty common, actually, because the fake financial news drives me absolutely nuts.
The article proved once again why you guys are scared stiff. The fear, the worry, and the sick feeling of believing that your life savings may evaporate from a global recession might really mess up your emotional health.
It makes sense, of course. If you don’t have money, you can’t survive. Running out of money is a terrifying prospect. Studies show that people fear running out of money far more than dying.
The article I noted is titled: Majority of Americans say US will hit a recession in next year.
The numbers from the survey are haunting:
33% of Americans believe a recession is “very likely.”
42% of Americans believe a recession is “somewhat likely.”
7% of Americans believe a recession is “somewhat unlikely.”
12% of Americans believe a recession is “unlikely.”
This is a perfect example of how the general population is being completely manipulated by the financial media.
Those numbers absolutely floor me. What kind of life is that? Walking around believing a recession is “highly likely”? What a miserable way to view our world.
A “recession” or a “bear market” is described as a 20% loss in the stock market. Let’s look at history instead of pointless prognostication. Since 1933, the stock market has lost more than 20% (total over a whole year) four times.
Let me repeat this for dramatic effect. In 88 years, you would have lost more than 20% over that calendar year, four times. Statistically, we have a 5% chance of a recession. But statistics can lie.
So is a recession likely? I have no idea.
“But Dave, the market has been going up for thirteen years!”
Bull markets do not die of old age.
“But Dave, the government is crazy!”
The economy and politics play a very small role with each other. Historically speaking, it means much much less than you would expect.
“But Dave, what about inflation! It’s going to make the markets collapse!”
Nope, there is no historical or academic evidence for this.
“But Dave, we are living in unprecedented times! What about Covid? What about supply chain problems?!”
The world is always crazy! Times are always unprecedented! Russians threatened nuclear war a few decades ago. That was unprecedented. The markets were fine. Supply chain problems stem from all kinds of pent-up demand for spending. Isn’t spending good for the economy?
The financial media has you so confused that 75% of you believe a recession is coming. Based on what? The world economy is incredibly complex. The complexity is far beyond anything anyone can understand, or ever will understand.
If you are ever asked, “Do you think there will be a recession next year?” Please answer, “I have no idea. It doesn’t matter to my long-term financial health. Stop asking me such dumb questions.”
For your viewing pleasure, here’s what was being said last year. Remember the markets have returned over 20% during the past 12 months.
Economists fear a “double-dip” recession is coming soon (CBS News, November 26th, 2020)
Why the Next Recession Is Likely to Happen in 2020, and What It Will Mean for Housing (Yahoo News/Zillow, July 25, 2019)
A Recession Is Coming. Government Needs to Keep It From Becoming Something Worse. (Barrons, March 18th, 2020)
The Next Global Depression Is Coming and Optimism Won’t Slow It Down (Time Magazine, August 6th, 2020)
How many people read this stuff, panicked, and moved all of their investments? A lot. This is why I get so upset. This is not a victimless crime. Real people are having their financial futures upended by stuff like this.
Presenting: Ask Dave Anything
I wanted to give back to the community. So I’ve started scheduling short, free phone calls, where I will answer any financial questions you may have. Spots go pretty fast.