- The National Debt Clock has rolled over the 18 TRILLION dollar mark. Real income for the average worker has declined under Mr Obama, and frankly a good chance exists that something terrible may lurk on the financial horizon yet few prepare for when it all will hit the fan.
- Until late 2008, the average investor thought more about making money than about keeping it.
People focused on gains or income and paid little attention to the threat of losing in a major way. Virtually no one prepared against the risk of great loss. They belittled the idea of a crash or panic that bankrupts the institutions and wipes them out personally. We were rolling along for so long without a major financial disaster that most people no longer considered such an event possible. After all, just like arrogant teenagers who have it all figured out, many felt that we were much smarter than the folks of days gone by. After all… we have computers.
- If you have ever started a business and tried to make a profit, you know how tough it is to make money.
- It can take years of work and struggle to get into the black. Conversely, it used to be quite easy, with seemingly good advice, to make money investing in real estate and stocks & bonds. Since the end of the Second World War real estate and stocks has offered up huge profits and U.S. Government bonds offered safety. Up until about 2007, it was easier than ever to harvest these gains in the booming real estate market. The game has changed.
Despite a few mild recessions, the years since the end of the second war have been the Golden Age of investment. It’s been a period of relatively worry-free financial affairs. Prior to this sixty-plus-year period the U.S. was racked by depressions, panics and hyper-inflations. In fact, throughout history, panics, hyper-inflations and depressions ruined countries and currencies and turned the rich into poor. In other words, the six decades of investment bliss were the exception rather than the rule. American’s had come to believe that we are immune from true economic calamity. Many believe there is some “smart guy” in Washington, D.C. who won’t let really bad financial things happen to them.
Up until late 2008, chances are, you probably never worried much about grievous financial loss in the markets. You may have thought about it in passing but you never experienced such an animal. The widespread belief that the government won’t let anything bad occur, without fixing it, used to reinforce the view that you are immune to destructive losses. Consequently, you probably took no measure at all to protect yourself against the financial plagues that have regularly afflicted mankind, and the United States.Not only were many individuals heavily invested in stocks and mutual funds and real estate that may have been bought at high prices, they had their entire retirement plan committed to equities and real estate and the belief that these are long-term investments that will always payoff.
This may be a true statement as long as you add to the statement…”If I only live long enough…” It took until 1954 after the crash of 1929 to break even. Maybe you are young enough and healthy enough that you KNOW you have 24 years left. Even if you do… 24 years is a long time to wait to break even… in anyone’s book.
Whenever such an event begins in earnest, fear turns into panic, losses jump quickly and values evaporate. Many ‘market crash virgins’ have never experienced such a crisis. Many turn into nasty, snarling lunatics, terrified by the mounting losses.
Some will go out the window. Others will huddle “shell shocked” in their homes until the sheriff shows up to throw them out on the street, unable to meet their financial obligations committed to in better times.