The News Flow Tug of War

You likely haven’t thought about playing tug of war for many years, but without conscious awareness you have actually been engaged in one strenuous game of tug of war since the current administration first uttered the words “change”.

The news flow tug of war is a particularly exhausting battle because the media loves a good story. Thus, every detail, bullish or bearish for the economy, stock markets, jobs, global debt, housing markets, etc is thrust upon us at high volume until it feels like Chinese water torture. Eventually, we’re so numb that we only know that things are bad everywhere and we believe there isn’t a darn thing we can do about it.

Let’s take a deep breath and empower ourselves with conscious, directed thought that is harmonious with natural laws. Consider the effects of a severe wind storm – which trees do you see lying destroyed on the ground afterward? The flexible trees that can be seen nearly bending over during the storm, or the massive old hard wood trees that don’t appear to be suffering from the storm until they give way with a great crash to the ground? Our challenge is to make sense of the big picture evidence and adapt as necessary!

While I personally see the same (likely more) news flow you do relative to the economy, I do not feel stress or hopelessness about my future or that of Alpha Fiduciary clients. The key is to understand and accept what you can and cannot change and adjust your mental or financial posture relative to the environment. Notice that I did not say “stick to a long term plan” concocted by your advisors assuming a static environment over 30 years producing 8-10% per year in gains. You can’t survive that kind of plan anymore than you can survive the affects of a hot poker placed upon your skin while being given the knowledge that all things physical return to the ambient temperature in time!

If you have been following my blog , you no doubt recall that many of my posts cite financial rock stars such as David Rosenberg who today in his briefing stated that positive gross domestic product readings and other mildly hopeful signs are masking the ugly truth that, “the U.S. economy is in a 1930’s style depression.” He further stated that the great depression had its high points, with a series of positive GDP reports and sharp stock market gains. But then as now, those signs of recovery were unsustainable and only provided a false sense of stability. Rosenberg calls current economic conditions “a depression, and not just some garden variety recession” and further notes that any good news both during the initial 1929-1933 period and the one that began in 2008 triggered “euphoric response”, he went on to explain that the 1929-1933 period saw six quarterly bounces in GDP averaging 8% gains and sending the stock market up 50% in 1930 as investors thought the worst had passed. False premise of course as the stock market plunged almost 90% in the following years as investors eventually had to face the truthful reality of fact.

If you’re keeping score, recently we have recorded four quarterly advances in real GDP, and the average is only 3%. Goldman Sachs and JP Morgan have recently slashed GDP projections for 2010 to 1.5 to 2%. Even the Chicago Fed President Charles Evans on Tuesday said that the risk of a double dip recession was escalated. The overall economic malaise has come despite aggressive efforts by the Federal Reserve to stimulate the economy through rate cuts. The central bank itself has scaled back its economic projections, and could be arranging another round of quantitative easing measures when it meets in Jackson Hole at its summit this week.

Remember it’s never as hopeless as it seems, you can and should shift your focus from the stock market to other asset classes rich with opportunity. We encounter debilitating mental anguish when we accept that we are powerless against the environment, but like the flexible trees we can adjust our stance and survive. Hire a wealth manager such as Alpha Fiduciary who will adjust with the environment and utilizes ten asset classes to protect and grow your wealth in turbulent times. The storm will be no less severe, but you will endure its powerful forces, and you will find peace in the knowledge that you have consciously chosen not to participate the way most investors suffer- instead you will be empowered in the knowledge that while you can’t control the environment, you have two powerful forces at your disposal. The first is the choice to adjust your approach by embracing a tactical ten asset class approach to you wealth management, and the second is to exercise your right to vote for whatever ideals you hold dear.

Be Well.
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