The headline reads, ‘Stocks dive amid frenzy in 16,410,000-share day’.
The subheading reads, ‘Combined Financial Giants Finally Halt Plunge Towards Chaos as Bankers Ease Up on Credit’.
The opening paragraphs read:
‘An incredible stock market tumbled toward chaos today despite heroic measures adopted by the nation’s greatest bankers.
‘Wall street throbbed with excitement all day and tonight the men who guide its destiny are wondering whether they have won a hard-fought victory in their back-to-the-wall battle to stem the unprecedented and frenzied liquidation pouring in from the four corners of the country.’
Sounds ominous doesn’t it. I guess it’s just one more mainstream media piece to add to the compounding fear of investors.
Except for one thing. The article above is from The Los Angeles Times. Except the publication date was 30 October 1929. These were the early days of The Great Depression.
Over the next few years the US economy crumbed. Unemployment rose to around 25% by 1933. Millions of investors were completely wiped out. Around half of the US banks failed. It was the worst economic period in modern history.
In Australia unemployment rose to around 30% by 1932. GDP fell by more than 10% in just three years. It was a period of deflation, falling GDP, worsening terms of trade, high unemployment and economy desolation.
Fast forward 89 years…
The headline reads, ‘Stocks on track for worst December since the Great Depression’.
The opening paragraphs read:
‘Few people on Wall Street remember the last time the stock market had this tough of a December. That’s because the Dow and S&P 500 are currently on track for their biggest December loss since the Great Depression.
‘The Dow and S&P 500 were each down about 7.8% through Monday. That’s the largest drop for each key market barometer since 1931, according to data from LPL Research. But those Depression-era losses were much bigger: the S&P 500 plunged 14.5% while the Dow plunged 17%.’
This is one of many pieces we’ve read about the dire economic situation the world finds itself in today. A period which markets are starting to resemble those during The Great Depression.
But this isn’t really what’s happening. This is pure fear to sucker you in to the herd mentality. And the millions of sheep investors out there will happily fall for this nonsense. They’ll wind off their investments. They’ll park up in cash until everything blows over. They’ll just ‘wait and see’ how it all plays out.
That’s what sheep do, they just follow the masses. It’s easy, it’s part of their DNA. It’s what they’re good at. Of course as an investor it’s easy to follow the crowd and do what the mainstream do. It’s easy, it’s part of our DNA.
There’s a good reason why some of the most successful people on Earth we call ‘outliers’. The kinds of people that sit on the edges of the bell curve. They think differently, they’re built differently, they do the things that the average person won’t/can’t do.
But they’re really no different to you. It’s just they’ve managed to figure out the benefits of the risk/reward trade off. And they play that to their advantage.
If you can learn how to play the risk/reward trade-off to your advantage, then maybe you’ll one day be considered an outlier too.
How close are we to a Great Depression?
Of course it doesn’t take much to realise we’re not anywhere near a Great Depression situation. In fact we’re far from it — very far from it.
Sure things aren’t perfectly rosy. There are issues in government, in banking and finance, in digital communications. There are problems everywhere. But none of it is really as bad as the media would have you believe.
I mean really, how bad is your life? Is it absolutely destitute? Are you queuing up at the petrol station because tomorrow there might not be any left? Is Coles closing its doors because they simply have run out of meat, bread and milk?
Or are you just annoyed because your energy bill is higher, avocados are in shorter supply and the public transport network isn’t upgrading as fast as you’d like?
Is there a rout on spending on infrastructure projects? Has your mobile service shut down? Are you about to foreclose on your home, your investment property?
No, it’s unlikely. If you really look at things, are they really that bad? I mean, Great Depression bad? Of course not. And things really aren’t as bad on the markets as the masses would have you believe.
Every day the stock market delivers winners. Even when the market might look like it’s about to capitulate, it still delivers winners. And when you know how to pick the right stocks, you can find winners in any market.
When you realise that the economy isn’t dead, and the markets aren’t about to capitulate you can open your eyes to reality. And the reality is now is a wonderful time to be an investor.
You’re looking at entering stock positions at values we haven’t seen in around a year and a half. That’s the kind of market correction this has been. About 18 months of gains ripped off the table.
Now you can follow the sheep and think this is only going to continue. Or you can be an outlier and see this is a great buying opportunity. Real wealth is made often contrary to popular opinion.
The reason this occurs is because contrary to popular opinion often means a level of risk the masses aren’t prepared to take. And most people aren’t prepared to take on any risk.
The Chase is on
Here’s a wonderfully perfect example. In the UK there’s a TV show called The Chase. I’m pretty sure there’s a franchised version of it now in Australia too. It’s also in the US. But originally, it’s a British program.
The contestants answer a series of ‘bank building’ questions. Each one they get right they add £1,000 to their balance. Most people will get between four and nine questions in a minute.
Then the ‘Chaser’ gives them an option. They can take a higher offer usually tens of thousands of pounds higher than their ‘bank builder’. Or they can take the ‘bank builder amount’ (the middle option). Or they can take a lower offer, usually a few thousand less than their bank builder, sometimes even a negative amount — just to ensure they answer enough questions versus the chaser without being caught.
The point here is almost every person takes the middle or lower offer. It’s lower risk. It’s the ‘safer’ way to go. It gives them a better chance to win and take home a little bit of money.
Rarely do they go for the higher risk, larger amount. But time after time we see situations where they would have won the larger amount, had they been comfortable taking on a little extra risk…in this case, just one more quiz question.
This typifies the average person. They are middle of the road. They are low risk. They are conservative and will always be that way.
But those who can appreciate the risk/reward trade off, have conviction and self-belief know how to manage higher risk. And when that pays off it can deliver life-changing money.
Watch The Chase if you haven’t, you’ll quickly see what we mean. And when you do, ask yourself would you take the low, the middle or the higher offer? Your answer will let you know a lot about your capacity for risk. And the better you know your investing-self, the better you’ll know how to play markets that really aren’t as bad as you think.
Editor, Secret Crypto Network
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