About Financial Safety

Since so many of the financial community talk endlessly about where to invest, it always seems good to focus on the issue of financial safety. In my view, way to much emphasis is given to getting investing ideas, and little to how to keep what you have. Lots of people get caught in that. It doesn’t help that the financial media, like CNBC is always saying ‘how can you play this’ or where would you invest in this situation. There certainly is nothing wrong with that, and surely CNBC wants to be relevant and useful to their massive world audience. But, aren’t there times where the clearest strategy is what NOT to do? But financial professionals make money by selling various investments, where they make a commission. There is just little incentive to encourage a person to put his money in a safe place and park it for a while. So, we never hear about that (or rarely). Stay for the long term paradigm One of the most dangerous investing paradigms we hear over and over and over is that a person should stay in the stock market because its average gains over 100 years or something is like 10 or 12% (they say). These stay forever people say if you get out of markets when they drop, you end up selling at bottoms, and if you were to stay with it, the market recovers …etcetera. But of course, when the markets are facing a huge crash, this concept of hanging in there wears a bit thin. If you look at what happened to stocks in 1929 worldwide, or the US, the stock market dropped over 90% in a couple of years, and began the Great Depression in the US that lasted 10 painful years. Stocks did not start to really recover till the mid 1950’s. So, if people followed that logic of staying in for the long term, they were basically wiped out. I think that it’s clear that the idea of always hanging in markets looking for the ‘long term’ is a bogus and self serving idea for the brokerage industry. The Yield paradigm Then we can consider what I call the Yield paradigm. (A paradigm is a deeply held way of thinking about something, which often you don’t even realize.) The Yield paradigm is that, if you have money it always has to be ‘working’. The person cannot sit still if it’s not ‘always working’. This one keeps a lot of people out of gold longer than they should. It also keeps people in dangerous markets way too long for their own good. The Yield paradigm is also a reason many people stay in the stock markets, as they believe that they should never let their money sit ‘idle’. This paradigm works well together with the ‘stay in the market long term’ paradigm, and it again keeps people in markets when, perhaps, they should be out in cash or something (or gold coins in possession). Now, Jesse Livermore, one of the greatest stock speculators of all time, s...

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