If you haven’t heard yet, the stock market just crashed, dropping over 1000 points before rebounding (somewhat). Everyone is freaking out, as is the usual case with the stock market.
Everyone is blaming China’s stock market woes, but that’s simply the straw that broke the camel’s back. The real, underlying reason for this crash is rumblings from the Federal Reserve that they might increase interest rates in September (or March?).
Just wait until everyone starts blaming this recent crash, and any forthcoming ones, on “capitalism.”
- Interest rates are set by the government. (Under capitalism, they would be set by the free market.)
- Monetary policy is set by the government. (Under capitalism, you’d have a free market in currency, with many currency options.)
- All these trillions of dollars in money printing is done by the government. (Would never have happened under capitalism.)
- Wages for all these stock market corporations are set by the government, via minimum wage laws. (Under capitalism, wages are set by the free market).
- Many of these stock market companies are kept afloat by government corporate welfare and government bailouts and government lobbying. (There would be zero corporate welfare under true capitalism.)
- Through quantitative easing, the government has given the banks 3.5 trillion dollars to keep them in business since 2008. (Under capitalism, these banks would have gone out of businesses and their CEOs would be on the streets begging for food, where they belong.) (And yes, I realize the Fed is technically private, but you know what I mean; it’s a government-endorsed system that the government allows, follows, enforces, and loves.)
The recent crash, and any near future ones, will be caused by big government, not capitalism.This is corporatism, not capitalism. The US isn’t a capitalist country. (I wish it was.)
Remember that when everyone starts blaming “capitalism” for all this, which they almost certainly will.
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Stocks are volatile, but over the long run they’re still a good deal. If you had put $1,000 in an S&P 500 index fund 3 years ago, you would have $1,330 today even after the correction, earning over 9% annually. Even if you put that $1,000 in at the highest point before the 2008 recession (which was actually in 2007) you’d have $1,200, or a little over 2% annually. Not bad for just about the worst possible time to invest in history, with a very pessimistic start and end date.
You’re making the common smart-guy mistake of using mathematics and nothing else to explain something driven by complex, real-life human behaviors. Math on a spreadsheet is one thing, but the reality is I know many men who have lost most or all of their retirement savings by relying on stocks as their primary form of investment.
I’m not saying that no one should ever invest in stocks; sometimes you can do well with them and everyone needs to make their own decisions. But putting most of your much-needed retirement savings into something as rigged, artificially controlled, and bubble-prone as the American stock market is not a good idea, unless you are superhumanly robotic about how you do it for 30-40+ years consistently (which human beings in the real world rarely are).
I have *never* lost money in my annual investment portfolio, ever, in my entire life. Reason number one? I don’t invest in stocks.
What would you recommend investing in? Real estate, shares in businesses, GICs, options (where you can buy and sell betting if the market goes up OR down; for normal stocks one can’t bet down)?
I get that question a lot and I don’t like answering it because I’m not an expert in this area and I’m not qualified to render specific investing advice.
The single best “investment” you can make is putting money back into your own self-owned business.
But in terms of actual investments, my general answer is that my portfolio completely changes every 10-15 years or so based on economic trends. In the 90s I was heavily invested in real estate (and I made a lot of money doing it). In the 2000s, while everyone was pumped about stocks, I was heavily invested in gold, way before it became popular (and I made a lot of money doing it). In the 2010s, since things are so uncertain right now, I’m mostly in a weird mix of commodities and municipal bonds (haven’t made a lot of money, but I’ve done okay).
Am I recommending you do this? No. I’m just giving you an idea of what I’m doing.
My primary goal when I invest, which I learned from Brian Tracy, is to NOT LOSE MONEY. My actual rate of return is much less important to me (as long as it’s even a little bit over inflation I’m happy). Because I’m such a fanatic about this, I’m the only man I personally know who’s never lost money investing. When I’m old and I need that money, I know it’s going to be there.
I sleep very well at night. 🙂
Thanks for the reply, and congrats on always making money!