March 22

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Stock Market Crash Coming Soon

I'm excited to share with you all an update on our family's recent trip to Gainesville to visit the University of Florida. Our daughter, who is set to graduate in May, has been accepted to several schools, including UF, and we wanted to explore the campus and get a feel for the atmosphere before making a final decision.

Our time at UF was wonderful and we were able to explore the stadium, campus, and downtown. Gainesville is a true college town, and being in such an environment was a unique experience. We even saw the business buildings where our daughter would be studying sports management. The campus has a classic college feel with grand brick buildings, old oak trees, and large quads, which made for a great tour.

When it comes to choosing the right university, we've found that it's more about the people who attend rather than the school itself. Attending a university with strict entrance requirements attracts driven, responsible, smart, curious, and interesting individuals, which is important in building meaningful relationships and fostering a productive learning environment. On the other hand, schools that take on anyone can turn into big keg parties.

Also, my wife feeds the cats wet food each morning when the kids are getting ready for school. They like their treat so much that if my wife happens to get up at 5:00 AM to go the bathroom, there are three cats in the dark, staring up at her (to make sure they don’t miss something).


Harry and Wanda Johnson were watching the evening news when a story about the stock market came up. Their hearts sank as red numbers filled the screen, showing a 3% loss in the stock market for the day.

"I know Dave keeps telling us that the ups and downs don’t matter. But they sure feel like they matter. With the country the way it is now, it just feels like things will get worse," Harry said.

"But Harry," Wanda interjected, "remember how Dave showed us that most periods feel unprecedented, but investing in stocks and bonds has never failed?"

Harry rushed to the internet and searched for stock market prognostications.

The first article popped up: "Dr. Doom’ Nouriel Roubini says a severe recession will cause stocks to drop 25%—and warns zombie companies are in danger."

Harry said to himself, this guy is an economics professor. This is terrible! And what in the heck is a zombie company?

The next article was titled: The world’s top stock strategist says an ‘earnings recession’ is coming for markets—and it could be similar to what happened during the 2008 financial crisis.

A top stock strategist said this? Oh no! Harry thought.

I’m calling Dave. It seems like the market drop is almost guaranteed, he thought.

"Harry," Dave said on the other side of the phone. "I will send you an email that might help you from derailing your long-term financial health."

Harry opened the email. It showed a list of predictions from the past.

Time Magazine, September 1974: "A Gallup poll published last month found that 46% of adults feared a depression similar to the classic one of the 1930s." Yeah, that never happened.

Business Week, August 1979: Cover story, "The Death of Equities." Here’s a sample from the article: "The old attitude of buying solid stocks as a cornerstone for one’s life savings and retirement has simply disappeared … The death of equities is a near-permanent condition." Just three years later, a roaring bull market that lasted twenty years got underway.

Forbes Magazine, July 1993: Cover story, "Bearish on America." Morgan Stanley’s Barton Biggs advised readers to sell domestic stocks, saying Bill Clinton’s policies were bad for the country. What actually happened: The S&P 500 index delivered a compound return of 18.5% over the next seven years.

Business Week, March 1998: "The year 2000 is a unique and unprecedented event .. the first economic disaster to arrive on schedule." Whatever happened to that Y2K disaster? It ended up being quite a yawn, didn’t it?

Fortune Magazine, September 1998: Cover story, "The Crash of ’98: Can The U.S. Economy Hold Up?" Fortune columnist Joseph Nocera wrote, "This time it is different. This time, the market won’t be so quick to bounce back … Who can look at the world and not conclude that things have changed dramatically?" Um, not so much. Markets rocketed upward for the next three years.

Money Magazine, April 2004: "Apple's share of the worldwide personal-computer market has shrunk to 2 percent from 3.2 percent five years ago … It's unclear what Jobs can do or plans to do to turn around Apple's fortunes." Yeah, Steve Jobs’ return to Apple didn’t work out well at all, did it?

"Dow Could Crash to 3,000 in 2013" is the title of a piece from 2011. This outlandish prediction came from Harry Dent, CEO of economic research company HS Dent and the author of the ambiguously titled book "The Great Crash Ahead." Dent predicted in 2011 that the Dow would have a tough 2012 and eventually crash to 3,000 in 2013. It’s hovering around 38,000 today.

Think Advisor, April 2022. Market Crash Has Begun; ‘Fireworks’ to Blow by June. Nope. No fireworks.

Dave’s Take: As I write this, I can't help but feel frustrated at how often fund managers, economists, and professors spout complete nonsense with such confidence and authority. Even well-educated clients can fall prey to their smokescreen.

In the past, when clients expressed concern by forwarding an email, I saved the message and placed it off to the side for future reference. Here are just a few.

"2014 crash will be worse than 1987's"

"The Stock Market Crash of 2015 is Just Getting Started"

"Stock -market crash of 2016: The countdown begins."

"80% Stock Market Crash to Strike in 2017, Economist Warns"

"The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History"

"Trader who predicted 2008 financial crisis bets $1.6bn on a stock market crash by the end of 2023."

And look what I received a couple of days ago:

"The stock market is set up for panic, and it could spark a steep crash, portfolio manager says."

This would all be almost funny if it weren't so destructive. People are making devastating financial decisions based on this stuff. The simple fact is that nobody can predict the ups and downs of the markets. Ignoring the noise is one of the hardest parts of being a successful investor.

So, if someone sends you an email predicting an imminent financial catastrophe, don't fall for it. Just delete it and send it to junk email. And, please, forward this to friends who tend to fall victim to these tricks.

Be Blessed,

Dave

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