There's a saying in the investment world that the perma-bears and perma-bulls, that is those who are always predicting a market decline or run-up, are bound to be right every now and then. I guess that's the investment world's variation of: Even a blind pig finds an acorn every now and then OR Even a broken clock is right twice a day.
Still, when someone "predicts" the latest market crash or bull run, we are all supposed to bow down to their infinite wisdom. Generally, I don't. Not because their predictions are not predicated on sound reasoning, but rather because the proximity of their prediction to the actually occurring event is happenstance. No one can predict the future with exactitude.
A logical and sound assessment such as "our current monetary policy will lead to hyper-inflation" is vastly different from the hyperbolic and unfounded statement "the fed will make your money worthless by 2014." And should the second statement come to fruition, it was merely a lucky guess.
Most people know this intuitively, but still fall prey to the sublime and manipulative marketing practices of the financial services industry. For example, I regularly see books for sale or courses promoted with language like: "By the man who successfully predicted the 2008 crash!" Really? Even IF you could show me the person who said the the Dow would lose 30% of its value in 2008, I would still maintain that the prediction had nothing to do with the timing of the event...that it was purely coincidence. (By the way, and proving the point a bit more, the crash actually began in October of 2007 and didn't complete until March of 2009. Where is the person who called that?) Remember, no one can predict the future with exactitude.
Even worse is the climate created by such assertions. I regularly have to remind clients that I can NOT foresee the future. Of course I believe my macro-economic calls of hyper-inflation, market devaluation and other economic woes, but I simply can not say WHEN that will occur. Can I venture a guess? Sure. Should you pack your bags based on that guess....well, you know the answer to that!
Rather we should put our energies to work on productive enterprises and activities where we do have some measure of control and determinable outcomes. By this I mean to discipline ourselves to save and to do so in a protective fashion. You can read how to do that here and here.
Finally, beware the charlatans who claim to have "predicted the crash of 'whenever'" and, for a minimal fee, will tell you how to avoid doomsday! They are liars and are trying to profit from your fear. By the way, why do they want your money if we are going to doomsday anyway?!?
I predict there will be an automobile crash tomorrow in Louisiana. Am I right? Probably 100% accuracy. However, I can not, nor can anyone else, tell you when or which intersection to avoid. But while I will never charge you a fee to advise you to buckle up and drive carefully, some people are not so scrupulous.
Wednesday, July 25, 2012
Tuesday, July 10, 2012
Breaking The Bank...And That's You!
In Nelson Nash's book, Becoming Your Own Banker, he mentions 4 "human problems" that would cause the system to fail. Now the "system" was how to grow one's wealth. So who would want that to fail?
Of course the answer is no one, but oddly, many people do indeed fail to increase their savings via personal "banking" because they either lack a true understanding of the nature of finance, disbelieve the "banking" message, refuse to follow the discipline required or fall back into old habits. Now I hate it when that happens, so I am dedicating this blog to addressing that issue.
A quick quiz: What is your greatest asset?
If you said, your house, your retirement account or some other investment, I give you half credit...but 50% is still a failing score!
If you said, your education, your business or your tools of the trade, I give you a C+. You are getting closer to the mark because you recognize PRODUCTION as a prerequisite for wealth and assets.
Now if you said that you and your work is your greatest asset, then move to the head of the class! Your work IS your asset. And the product of your work, usually represented in dollars and cents, is what everyone else is trying to take from you and what you should guard and use on your terms.
Much of modern finance is predicated on the simple idea that the common man (that's you and me) is too lazy and undisciplined to protect himself. That he would rather have discipline imposed on him even if it was detrimental to him and his wealth. Now whether that is a fact of nature or rather that we have been conditioned to be so is irrelevant. What matters is that too many people fit the description and are being enslaved and impoverished needlessly.
Establishing your personal "bank" is only half the problem. You must then, as Nelson Nash says, "use it or lose it." And when should you use it? WHENEVER you expend capital reserves on an item that you would normally finance.
If you do not understand that last sentence, then let me guide you through it with my advice. If you "disbelieve" and think that you don't have to "bank" to get ahead, then all I can suggest is to hit the books again or ask for a refresher course. If you "despise the discipline" that "banking" imposes upon you, then ask yourself how it profits you to have the discipline imposed on you from an outside source...who will gladly relieve you of your money. Finally, if you have a bad habit of making excuses or coming up with rationales that negate the value of "becoming your own bank," then simply accept the fact that you are torpedoing your own future.
Perhaps these are harsh words. But harsh problems require harsh medicine. And my sole goal and purpose is to help you protect your greatest asset and increase the rewards of your labors. Dangers abound that could break the "bank". Let's not let ourselves be one of them.
Of course the answer is no one, but oddly, many people do indeed fail to increase their savings via personal "banking" because they either lack a true understanding of the nature of finance, disbelieve the "banking" message, refuse to follow the discipline required or fall back into old habits. Now I hate it when that happens, so I am dedicating this blog to addressing that issue.
A quick quiz: What is your greatest asset?
If you said, your house, your retirement account or some other investment, I give you half credit...but 50% is still a failing score!
If you said, your education, your business or your tools of the trade, I give you a C+. You are getting closer to the mark because you recognize PRODUCTION as a prerequisite for wealth and assets.
Now if you said that you and your work is your greatest asset, then move to the head of the class! Your work IS your asset. And the product of your work, usually represented in dollars and cents, is what everyone else is trying to take from you and what you should guard and use on your terms.
Much of modern finance is predicated on the simple idea that the common man (that's you and me) is too lazy and undisciplined to protect himself. That he would rather have discipline imposed on him even if it was detrimental to him and his wealth. Now whether that is a fact of nature or rather that we have been conditioned to be so is irrelevant. What matters is that too many people fit the description and are being enslaved and impoverished needlessly.
Establishing your personal "bank" is only half the problem. You must then, as Nelson Nash says, "use it or lose it." And when should you use it? WHENEVER you expend capital reserves on an item that you would normally finance.
If you do not understand that last sentence, then let me guide you through it with my advice. If you "disbelieve" and think that you don't have to "bank" to get ahead, then all I can suggest is to hit the books again or ask for a refresher course. If you "despise the discipline" that "banking" imposes upon you, then ask yourself how it profits you to have the discipline imposed on you from an outside source...who will gladly relieve you of your money. Finally, if you have a bad habit of making excuses or coming up with rationales that negate the value of "becoming your own bank," then simply accept the fact that you are torpedoing your own future.
Perhaps these are harsh words. But harsh problems require harsh medicine. And my sole goal and purpose is to help you protect your greatest asset and increase the rewards of your labors. Dangers abound that could break the "bank". Let's not let ourselves be one of them.
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