It’s been a number of years of amazing results in many markets. Stocks had been rising incredibly, until they started falling a few weeks in a row. Crypto? How could you be wrong, until it started a ripple fall in November and fell to just over $38,000 from nearly $67,000. Real estate values have soared, but management consultancy Kearney says public real estate companies have the highest percentage of zombie firms. And according to recent research, SPACs pay off for sponsors, underwriters, hedge funds, and just about everyone but end-retail investors, as John Rekenthaler wrote on Morningstar.com.
Most people want to progress financially. For most of us, however, it’s about getting as much money as possible, if we’re lucky, from what’s left after paying for housing, food, clothes and the car, student loans and maybe a restaurant meal and entertainment.
There are voices saying cut the coffee, the avocado toast, all the little things because that’s the way to wealth. But it’s not. It’s a scam game. There will never be enough when $20 saved per month and put into a 6% return for 40 years, you end up with $39,829.81. It’s a retirement schedule that ends with enough money to keep you going for, what, a year or two if you’re exceptionally frugal?
There are a lot of people who want to attach themselves to the average person and make money from it. It could be those gurus who rake in big bucks from book sales and media campaigns and whatever else they do to keep the hope hype going.
But at least they have some points. If you continue to place money on a regulatory basis in safe investors, you will earn more money through the tax grace of compound interest. You’ll end up having more, although it’s not the same as back when people got real pensions and the invention of the 401(k) was to add extra savings on top of that, not to self-finance its golden years.
However, pushing people to themselves to pocket money that would otherwise be spent on employees that senior management will never see again after benefiting from their own retirement plans is just one problem. Another is the predatory forces of the financial world. There are too many looking for, for lack of a better word, suckers.
SPACs are a domain. Cryptography is another. Not because there is anything inherently wrong with the concept – and the ideas behind blockchain are far more interesting. But you see so many people trying to swing things one way or another, mostly looking to increase their own investments. It’s like the good old days of online stock discussion groups that frequently dominated touts. Self-interested marketers keep saying nothing else could be better and they’re all in and no smart person could come up with a different idea.
Except when the price is stratospheric, which cheerleaders do, if they are intelligent and not “true believers”, tries to employ the biggest fool theory. Someone must be dumb enough to believe the hype and let the talkers walk away with the money.
Like so many times before – the dot com fiasco, the derivatives crash of 2008, the savings and loans crash of the 1980s and 1990s, or any other dream project dating back to the tulip bubble of the 17th century – reality has proven that things were too good to be true usually are.
It’s a dangerous time for investors, especially those looking for magical answers to the experience of lag. As painful as it can be to hear, there are no quick fixes. It’s like looking at a multi-level marketing program years after the real money has gone to the early entrants and later entrants are trying to figure out how to make it work.
Pay attention to stories of collapse and look for ways to protect yourself. Warren Buffet said that when he died, his wife would have an inheritance of index funds backed by Treasury bills. Remember that there is a financial meltdown or disaster every 10-15 years and we wait for the next one late. Cautiousness and caution could be two good traits to cultivate. Maybe the various fans will all be right, but that seems unlikely in the fact of history.