For anyone that’s been either following or actively trading the markets over the last four years. The over used, and now maligned phrase, “It’s different this time.” has for all intents and purposes become not only irrelevant rather, has taken on the same implications as being lumped in with crying wolf, or riling up Ms. Little. However, the only bird that hasn’t (or more likely wont) taken notice of the past weeks market gyrations – is an ostrich.
Personally I don’t know if it “is” or “is not” anything this time. What I do know is most people, especially those that have mimicked ostrich like behaviors or traits during this run-up since 2010 will be the most surprised and, probably feel the ravages more acutely if there is anything remotely different going forward from here. Only time will tell as all this plays out. Yet, the stage this time is set a whole lot different for act two than what we’ve been watching play out in act one.
The distressing point I see today that wasn’t as prevalent before 2010, is the way far too many still involved with “investing” are handling their money. I am both dumbfounded as well as staggered when I hear people talk about their investments. (I try to shun away from the conversation but it never saves me.)
Either they have no idea what they’re doing or worse, they transfer account balances to and fro with anyone bearing a business card. i.e.,
“Hi, I’m Joseph (I just graduated from school yesterday so can I have access to all your money?) Schmoe.
We really know how to invest for your future here at Snidely Whiplash’s Emporium of All Things Financial and Banking Inc. Let’s look at your allocations and get you ‘diversified properly.’ What’s you’re SS# and Retirement account # so we can get started today and, get you that free toaster!” Yet, so far – it’s worked. So why worry? Right?
Well, here’s an issue all those so-called “smart crowd” talking heads said wasn’t anything to worry about, but now? “OMG! It’s the taper!” (As in the Federal Reserve will taper its purchasing or quantitative easing programs aka QE)
The issue that’s really putting the pressure on what the, may, or, may not happen paradigm is this: Not only did many not heed the perils of 2008 and fortify themselves with education, as well as a more hands on approach with their investments. It seems they took the mantra, “The Fed’s got your back.” as some form of gospel. And, like I’ve stated earlier, “So far – it’s worked.” Which is where I believe a lot of the unforeseen repercussions will metastasize from if something were to go awry.
Here’s a personal example of what I’m trying to illuminate. During 2010 the markets were very volatile. The melt down was fresh in everyone’s mind and to many, they were (although scary) behaving much like they should.
We were on the cusp of what seemed like another downdraft approaching. I remember clearly for 2 reasons. First: I had already immersed myself into becoming financially literate and understanding markets during the first rumblings in 2007 as to handle my own money. And, was comfortable in this period with my knowledge of what and, what not to do. Second: My mother had just passed and I was being quizzed by relatives after the services about what they should do.
The market at this point and time was showing all the signs of rolling over once again, and everyone was nervous. This was May 2010 right before Federal Reserve Chairman Ben Bernanke’s famous (or for some infamous) Jackson Hole speech and the onslaught of QE.
As I spoke to one family member in particular the conversation revolved many times with them just having “faith.” They worked for a Fortune 100™ company for years and were hard pressed on (or about) doing anything. Doing nothing (as in channeling a casino term, “let it ride”) for them seemed like the best course of action. Why? Because people by and large put more faith into others than they do in themselves. Plus – It’s easier. With the added benefit whether consciously or unconsciously allowing for the possibility of having someone else to blame rather than themselves. (I’m not being smart alacky, we’re all guilty of this at times)
At this time I was firmly in the “markets are about to roll over camp.” I stressed over, and over again, “You don’t need to heed my warnings if you don’t want to. However, get educated and know why you don’t want to heed them. Not because some talking head on TV said this or that.”
The reply as it usually does comes back something akin to'” Yeah, you’re right. I should do something like that. Maybe later this year when I get some free time.” And, that’s when you know in your gut right there – they aren’t going to do anything. And, just like a broken record I say again, “So far – it’s worked.”
This is where my whole crux for concern with the dreaded, “It’s different this time” resounds. What happens this time in a sell off with any magnitude of size or scale? Do people just, “let it ride” once again like my family member? (Or possibly someone close to you? Maybe really close?)
Will a 25%, 30%. 50% liquidation in values once again leave anyone with some calming reference of, “Don’t worry. The Fed’s got your back!?” For if one were to be honest with oneself, “If the Fed has your back.” How can they allow the market to ever go down again? And, if it does go down. Does that mean the Fed. has lost control? Or, does it mean the Fed believes you have too much money and can afford to lose some? The answer truly is one – or the other.
And that’s the difference in today’s market that is – different this time.
Never before in the history of the financial markets has such a quandary ever shown itself. Nor, the implications that are present today been so acute. For the true answer to the question or statement, “It’s different this time” resides in the answer to the above questions which I repeat:
“If the Fed has your back.” How can they allow the market to ever go down again? And, if it does go down – does that mean the Fed. has lost control? Or, does it mean the Fed believes you have too much money and can afford to lose some?”
There are a lot who are going to dread finding out the answer. Just don’t let it be you.
© 2013 Mark St.Cyr