This weekend, some of my colleagues and I attended a specialty retail conference for one of our businesses. It was a chance for me to actually see some of the buying decisions that get made for our product offerings, and it was extraordinarily useful. What struck me, however, was that on the sales representatives, employees, and staff members of this event had one thing, and one thing only on their minds – recession. Most, if not all, of them were unaware of my profession and my background in finance.
Ah, recession. The dreaded “R” word that no economist dare repeat for fear of much loathing and, perhaps, even hate mail. Yet, it occurs to me – how many of the people that were talking to me actually know what a recession is? Furthermore, how many of them even know what the stocks they own actually do to generate profits and how a slow down, or a weak dollar, would influence the earnings per share of those companies? The general feeling seemed to be that the United States was going into some tough times, and there wasn’t a lot that any of these people could do about it. They worried about their investments. Why? We’ve been buying like crazy over the past ninety days at headquarters and hope to continue doing so for the immediate future as long as equities remain cheap.
That got me thinking – how is it that we, as a nation, have become so spoiled that a slowdown in growth causes this sort of angst? Do we have any idea of the historical volatility of the world economic systems and stock markets? We are very, very blessed. We panic over any inflation rate greater than 3%, where in the rest of the world, this would be heaven-sent. My personal opinion is that people get so worked up over recessions because they are in debt to the hilt and a paycheck stoppage could put them under. They don’t have emergency funds. They don’t have six-figure portfolios. They are merely surviving. So it’s not that they fundamentally disagree that the long-term outlook for the United States is good, it’s that they wonder if they will be able to afford to buy milk and bread during the interim.
The only real defense against this sort of anxiety is financial independence. That is, to have enough wealth or income to live the lifestyle you want, free from the interference of others, without worry about meeting your obligations such as bills, food, clothing, shelter, medical, etc. The number is different for nearly everyone based upon his or her personalities and ambitions. To do that, you’re going to have to either build up a large asset base of cash generating assets or go into business for yourself, running the operation very well to ensure that you cannot be “fired” through your own failure. That is the best chance you have at being able to buy in undervalued markets using cash from your other activities.
These are just some thoughts; that’s what a blog is about, after all. I’m very grateful for my temperament. When things get bad, I simply remind myself that even with extreme wealth, had I been born in the sixteenth century, my experience on this planet would have been miserable compared to even the most cash strapped college students or working parents of today. We have free Internet access, a modern health care system that has ways to treat many diseases and conditions, societal institutions such as art museums, symphony halls, colleges, universities, athletic teams, not to mention a political system than allows any one of us to stand in front of our elected officials in protest. It’s helped me tremendously to remember these simple truths when facing panic in the markets. I hope they will bring you some comfort, as well.
