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Start Here: “The Ultimate Guide to Personal Finance”

Chicken Little and Kooks Who Don’t Know What They’re Talking About

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This post is long, but there are emails and comments from a bunch of nuts that I pasted, so don’t be intimidated. Today I threw all pedagogical goals out the window. My goal is instead to have you shaking your head saying “what the hell?” by the end of this.

See, every single day I write on here, I try my hardest to communicate the idea that personal finance is not very hard to get started with. There are a few strategies that time and research have proven work for making money. Yes, there are endless strategies to optimize, but for most of us, they’re irrelevant: The largest, most important problems are that we don’t get started early enough and we’re not disciplined enough. Unfortunately, that message isn’t sexy enough to sell magazines or satisfy kooks who want to wring their hands about the current state of affairs. As a result, we see people confusing global geopolitics with personal finance. They worry about how the oil shortage in Chechnya (or whatever) will affect the currency crisis that will affect their country’s immigration policy that will affect the unemployment numbers that, somehow, will affect the amount of money they’re able to save.

I hear these kooky tales and they infuriate me. Today made me rise out of my PBwiki cave and write this because we have half the financial pundits on TV freaking out about yesterday’s drop in the stock market.

Minor stock-market drops like this amuse me because we see these crazies come out in full force. On the Reddit page describing yesterday’s stock-market decline, for example, we see some very good comments (towards the top) and then many idiotic ones like these:

  • “The 10% return myth is nothing but Wall Street propaganda”
  • “500 points on teh dow in one day is a big deal. If that continutes for 1-3 more days it will melt down”
  • “Equities only got really good returns when most people were scared of them”
  • “The real history of US equities is just that there were three really big bull markets: in the 20s, in the 60s, and in the 80s/90s. Outside of those periods broadly investing in stocks has been a lousy plan, and for most of the 19th century it got you soaked.”

Here’s a tip: If someone starts using words that sound really big combined with accusing somebody of a Very Large Conspiracy, chances are they don’t know what they’re talking about. Also, you’ll notice that kooks use qualifying words like “broadly” and “in general” and “melt down” (what does that mean, exactly?). It’s hard to be wrong when you can’t be pinned down.

I have a serious problem with people using wide-eyed, handwavy geopolitical logic to explain what’s going to happen with their money. But one thing these short-sighted pundits forget to remember is that a market goes up and it goes down. YESTERDAY IT WENT DOWN. ALL DATA WE HAVE INDICATES IT WILL GO UP SOMETIME SOON.

* * *

A couple months ago, a friend of mine called me and started telling me about her personal finances. This girl goes to a Very Good Law School, so don’t dismiss her for being unintelligent. But I couldn’t help but feel rage as she started telling me the following things:

  • ”I’m not going to invest in the stock market because it’s not safe. The current crisis means our money will be worth less and less every day. When you factor in the immigration crisis, it’s virtually untenable.” I have to give her credit, though: It was a good use of the word “untenable.”
  • ”I really want to start my own company doing something I love. I think entrepreneurship is safer than investing.”
  • ”I want to stop working in 5 years and support my family financially (even though I’ll stay at home to raise the kids). So I have to start something successful.”
  • ”I don’t think 401(k)s are the way to go because there is a lot of risk and you can’t control your choices.”

We see someone here who doesn’t really know what she’s talking about. She’s not stupid, just misinformed. I told her that, too. These are not the reasonable conclusions of someone who’s informed about personal finance, but someone who’s cobbled together a shaky theoretical framework that ties personal finance, global politics, and entrepreneurship together. I wanted to die.

I probed a little bit. “Where did you learn this stuff?” I asked. She hemmed and hawed and finally said that she’d read “part of” Donald Trump and Robert Kiyosaki’s book (read some thoughts on the book here).

This made me so mad. Here we have someone who’s getting bad information—and then, only reading part of the book—and not comparing it to any information. While she was misinformed, she needs to take some responsibility for actually learning this stuff. Think how much time we spend on things like our email, our problem sets, or even reading US Weekly. Then think how much time we spend seriously learning about personal finances. Which affects us more? Which one will you complain about more for the rest of your life?

I was doubly frustrated that she was using one book as her gospel. Listen, if you use one place as your only source of information, you are a moron. I don’t care if it’s iwillteachyoutoberich or the Wall Street Journal. One source is not enough. You need to be reading multiple, research-based sources so you can compare what is actually happening, not just discussion groups on the Internet where people share their opinions about what’s going on.

If you do read sources that only confirm each other, you get something like this. Here’s an email I got recently that just blew my mind. This iwillteachyoutoberich reader uses the shakiest logic I have ever seen to paint the most dire picture of personal finances in America. Take a look:

“The blogs on personal finance have exploded since then. Good way to tell we’re at the cusp of a serious recession now, not that half-asssed one when the stock market dot-bombed.

Of course, that mini-recession hurt me badly, because there was a state budget crisis nationwide and I work in government. I couldn’t find a job. I’m working now so I guess I’m better off now than I was then. So, we’ll see.”

This is all I asked:

“Why do you think we’re coming up on a recession?”

And the handwaviness began:

“The housing bubble peaked in mid-2005, and construction jobs are dropping. The government picked up some of the slack in the 2000-2005 period by hiring people in defense, and of course many of the construction workers were illegals who are now leaving in droves. So unemployment isn’t bad right now. What’s on the horizon now is weaker consumer spending because the HELOC ATM is closed for business. Also, as the subprime lenders fail, a lot of money in the system is starting to vanish.

Loans are on the books for much more than the house (asset) is worth, especially in today’s dead housing market (huge inventories from overbuilding, houses spend months on the market). Debt was sold and resold, leading to a chain of insolvency that could bring us back to an S&L crisis type disaster. Check out the Mortgage Lender
Implode-o-Meter:

http://ml-implode.com/

Also, we have an inverted yield curve and the dollar has lost a lot of value in the last two years. This by itself doesn’t mean much but it could lead to government actions with a recessionary outcome–or (as many fear) stagflation.

With any recession, not all sectors are affected, and, from my reading about the Great Depression, even in a deflationary era those who were accustomed to hustling for their living–artists, musicians, insurance salesmen–continued to make a living, while those who expected a job to just be there for them ended up destitute.

Right now the warning signs are all in place, and the housing bust is beginning its drunken walk to the bottom. Vast amounts of wealth, as held in RE, are vanishing. Prices of certain commodities are dropping (=weak building/production/jobs outlook), while the price of food, which everyone needs to buy, is looking to go up, which will squeeze out the market for everything else.

Look at Ford. Look at SoCal real estate. Interesting times are ahead…”

I asked this:

“Out of curiosity, do you have any specific, measurable factors that you predict? Something you could be held to in 3 months, 6 months, etc?”

The response:

“Wow, put my money where my mouth is? Well, I’m not an economist, and I’m relying on other people’s analysis. I expect that this coming spring real estate season is going to be very painful for a lot of people, with the median sale price finally dropping as the cash-back lending scam is exposed to the light of day. (It’s already being exposed in AZ, which had one of the worst bubbles in the country in Phoenix.) But this is all old news–my mother tells me that home valuations in Massachusetts are already at 1997 levels.

In six months? Seriously, that is so short term. A lot could happen depending on whether Bernanke raises or lowers the Fed rate in the short term. Also, many major players are continuing to prop up the dollar. Japan wants a strong dollar so they can sell Sony and Toyota products, China wants a pegged dollars so they can sell cheap crap, and even Germany has a vested interest in a strongish dollar (look at where their trade surplus is coming from). Central banks won’t be able to keep this house of cards up forever, but they should be able to manage the next 6 months. So far (last year), there were some times went the dollar softened a lot, and certain central banks rushed in to prop it up. Hence the dollar see-saw.

Here is a pretty hard-and-fast prediction: food prices are going up. Wheat production has dropped in favor of corn for ethanol, there was a freeze in California and a freeze is coming Florida, ravaging vegetable crops. In the mean time, with the savings rate flat instead of negative, as HELOCs go away, there are going to be a lot of Americans who look at the high price of eating out and just say no (or seek bargains). Some restaurant chains (eg Don Pablo’s) are already in trouble; I expect more to be in trouble in 6 months as higher food costs (traditionally the cheapest part of the equation), and increasing wage demands run smack into lighter wallets. Middle class, keep-up-with-the-Joneses America is being squeezed here. Just look at the woes of Target last year. Look at 2006 holiday shopping (flat, YOY). Multiple middle/upper middle chains are in trouble; discount chains are also in trouble. High end had a great year, with all the huge profits from hedge funds and private capital lbo’s (legal thievery) and huge bonuses on Wall Street.

Some expect Toyota, Honda and other Japanese car makers to do well this year because foreigners do not like the new Japanese gov’t and are discounting the yen as a result. I don’t really know much about this, though.

Wall street: insiders say that everyone is in lalala denial mode, trying to get another quarter or year of profit before the shit hits the fan. For example, Bernanke right now has the power to unleash a bloodbath in the bond market (which is in bubble mode), but so far has hung back… However, that may be out of his hands by the time 2007 is over if Congress becomes deeply involved in credit tightening due to failed banks and Joe Sixpack anger over liar loans, suicide loans, rising ARMs, etc.

The stock market is a sleeping Cthulhu right now. Everyone is hoping that nothing will wake it. Many pin their hopes on high inflation, which will keep nominal values high even if true values plummet. Since there are contrary indicators out there (both inflationary and deflationary), but a strong gov’t bias towards inflation (helps the taxman and reduces the debt), betting on high inflation is probably the most rational course of action.”

By this point I was mentally exhausted.

“Ok–thanks for clarifying. I completely disagree but I was/am very curious to hear your reasoning, so I appreciate your thoughts.”

Her final response:

“They say that optimists do better in the end (in investing and in life), and your real asset is your entrepreneurial skills, not whatever stocks you own. For you, dumping money in a cheap index and forgetting about it will probably be fine because your earning power will only grow with time.

As for myself, I have lousy networking/leadership skills and I work in local gov’t which doesn’t pay so well (but the bennies are okay). I have inherited money which I need to preserve and grow to ensure I have a decent retirement (as traditional pension plans are in big trouble these days). I have a more pessimistic outlook anyway, hence
the extreme risk aversion.

Worries about the US stock market were keeping me up at night, so I had to do something. You have to do what works for you.

PS–I know I sound like a granny but I’m only 27.”

Ok…take a deep breath.

Can you imagine me saying something like that at work? “Hey guys,” I might say, “I really think the color blue makes people upgrade more often. No, seriously. You look at the sky and note the reflections of the moon off the ocean and the thousands of years of the Egyptian pyramid-makers causing sand to be blown hundreds of feet in the air, and you can understand that the long-term consequences make us cognitively wired to respond to the color blue. So I think we should make our upgrade text blue.” If I ever said that, David and Nathan, the other two PBwiki co-founders, would just put their hands in their pockets, stare at me, and blink. Then I would immediately commit seppuku in front of them.

PLEASE STOP MAKING STUPID GRAND GEOPOLITICAL ANALYSES THAT YOU THINK WILL AFFECT YOUR MONEY. PLEASE!!!

There are more important things to worry about. Are you saving enough? I’m willing to bet $100 right now that the people who make these handwavy arguments haven’t maxed out their retirement accounts, properly allocated their portfolio, and diversified. In fact, I bet these arguments are simply a misguided excuse to do nothing.

There is a simple way to point this out: ask them what they’re doing instead. This is where two things will happen: First, they will start talking about grandiose “alternative investments” like hedge funds, commercial real estate, and venture capital. Second, when you point out that most people can’t invest in hedge funds and venture capital, and that the stock market generally returns better than some of their other asset classes (“municipal bonds!!!”), they will start stuttering. Oh, there’s a third thing. You will want to kill yourself.

The people who make these kind of broad, sweeping statements (“The looming currency crisis will render retirement accounts worthless!!!”) are so far off base that I don’t even try to educate them. But they’re dangerous because they know enough buzzwords to convince novices that they might possibly be right–so, of course, they better hoard their money and do nothing because it’s too unsafe to invest!!!

If there’s one thing I really hate, it’s people taking advantage of others financially. (As a sidenote, there are over 30,000 words of Things I Hate on my other blog.) In any case, this post today is a plea to you: If you hear this kind of stupid, kooky reasoning from someone, call them out on it. If they think investing is so risky, what are they doing instead? What evidence do they have that their strategy will work? How do they explain away the last 70+ years of success in the stock market? What about the benefits of tax-free and tax-deferred growth (i.e., through Roth IRAs and 401(k)s?). How about the thousands of peer-reviewed research articles and hard data supporting sensible, long-term investing? Press them hard and watch their arguments fall apart. And remember: You can worry about the world’s political situation and the commodity price of salt in Hong Kong, or you can be constructively concerned with how to maximize your savings rate, how to live below your means, and how to invest for long-term growth to achieve your goals. Which one is more manageable?

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55 Comments on "Chicken Little and Kooks Who Don’t Know What They’re Talking About"

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moom
9 years 4 months ago

The woman in local government with the inherited money sounded really on the ball and very sensible to me.

b
b
9 years 4 months ago

The major problem I have is that you dismiss her “handwavy” argument with one of your own. I’d like to see more constructive criticism than “I completely disagree.”

Alex Boutet
Alex Boutet
9 years 4 months ago

Wow. She’s hot. She explains how the civilised world is going to crumble and suceeds at pluggin the name Cthulhu in it.

This is arguable, but some of the things she said made sense.

KMB
KMB
9 years 4 months ago
Hi Ramit, I wanted to write to add my opinion that that believing there is a recession coming or being worried about geopolitics does not necessarily imply all of the things these folks think it does. Quite a few people, among my favorite being Ben Graham the so-called ‘Father of Value Investing’, have shown that trying to buy the dips and sell the peaks is futile because you will almost always get it wrong, and that having a steady, regular investment strategy works out better for almost all. One step further in the Ben Graham school of investing, for those… Read more »
Elizabeth
9 years 4 months ago

Whether or not there is going to be a recession is not only unpredictable, it’s irrelevant. You should have your money in the market for the long run. If you do, then you shouldn’t worry about or pay much attention to a “looming recession” (unless it you pay attention to it for the sole reason of buying more when the market is low.)

b
b
9 years 4 months ago

awesome post KMB. I’ve not heard of Ben Graham but now I’ll be reading up on him!

Brandon
Brandon
9 years 4 months ago
Index Funds. Tax deferred accounts. Automatic re-occurring investments into the fund(s). Forget about it till you want to retire. ***** Attempting to explain why things are happening is at best laughable. The world (including financial markets) is more complicated than any single persons explanation can attempt to make sense of. The idea that you can explain or rationalize what is currently going on, and use that explanation to predict the future is ridiculous. Her explanation of why things are happening sounds amazing, but I’m more impressed with someone who realizes that they don’t understand something than someone who uses smoke… Read more »
Paul
9 years 4 months ago

you are right about getting your information from multiple sources. There seems to be a large circle of bloggers who are young and inexperienced giving out their expert advice on how to get rich. And who is the audience for these blogs? Young, inexperienced investors.

As a culture we dismiss the wisdom of older people who have gone through the ups and downs of markets, business failures and successes.

Alex Gierus
9 years 4 months ago
Holy cow, it’s like having money is magic and the only thing anyone knows how to do is buy home theatres. Stocks are good and bad. Your reader is currently very unhelpful because she is not consuming her money (thereby helping the rest of us get wealthier) nor is she putting her money anywhere that helps grow the world. She is just hoarding it because she’s scared. Speaking economically she’s really taking money out of circulation and only helping her self-fulfilling prophecy. Investment “systems” are garbage. They become either obviously correct or obviously wrong when you have understanding. At that… Read more »
Marisa
Marisa
9 years 4 months ago
I can’t talk about investing with my mother anymore – her main point always seems to be that “You’ve always been able to buy an expensive men’s suit with an ounce of gold,” therefore gold has kept pace with inflation, therefore investing in gold makes more sense than investing in the stock market. I did initially try to get her to explain the reasoning, but I didn’t get anywhere. So now I’m pretty much stuck worrying that my mother will have no retirement money because she’s just buying gold. (She owns about a dozen rental properties, though, so I think… Read more »
Willie
Willie
9 years 4 months ago

I admire the fact that your reader is concerned enough to research about them. I think it’s good to read and learn more about what’s happening around us. Her research could be put into better use individually in other topics, but in the context of this discussion, her research seems to be stitched together into something that’s ultimately… nothing.

I failed to see, from the arguments, how it’s all going to affect her money, my money and everyone else’s money.

Again, I admire his/her motivation and efforts, but I think his/her focus is just misplaced.

K
9 years 4 months ago

The macroeconomic talk always drives me a bit bonkers too. The same people don’t know what interest rate they’re paying on their credit cards.

Get your own backyard in order before you try to fix up the street.

JW
JW
9 years 4 months ago
I feel like your basic point here is rock solid (and I’ve been on a similar rant for the last 24 hours since the CNBC heads went ape-shit): Just because Factor X in Nation Y caused a decline of Z points on N stock exchange doesn’t mean you shouldn’t save and invest. That’s a lunatic conclusion. It’s like not driving to the grocery store because someone got into a car crash in Maine. Nevertheless, while using geopolitical trends, possibly wrong macro-scale predicitions and all that crap from “The Economist” isn’t a reason not to invest, it is (in my opinion)… Read more »
nick
nick
9 years 4 months ago

what the hell?

(shaking my head – both at the article’s content, and at the moronic comments to the article’s content)

🙂

luboman411
luboman411
9 years 4 months ago
”The looming currency crisis will render retirement accounts worthless!!!” Well, now that you mention it, that really did happen in 2002 in Argentina. There was a huge currency crisis due to a great many factors, mostly stemming from the Argentine government overextending itself with too much sovereign debt. It crashed and burned into the greatest default in modern financial history, and to pay off foreign investors it froze the bank accounts and retirement savings of millions of people, more or less raided those funds to pay off the most important foreign investors and to keep the economy from collapsing completely,… Read more »
Mike
Mike
9 years 4 months ago

My coworker and I talked about the stock market slump at work. I think it went like this:

Coworker: “The Dow is down 500.”

Me: “Awesome, if this keeps up my 401K contribution this month will be at discount.”

Coworker: “Hey that’s true.”

Point is, if you invest regular amounts at regular intervals and diversify (index funds are great choices), then you’ll hit some peaks and hit some drops, but overall you’ll get a good return over the longterm.

MyNameIsMatt
9 years 4 months ago
I wouldn’t doubt each of these persons is individually smart simply because they can even attempt to reason for more than a sentence such grand and broad implications. However, I think they’ve fallen for too much marketing and advertising on Wall Street. They’re probably not day-traders, or maybe they are although I hope not, but when faced with the simple principle of the Efficient Market Hypothesis (EMH), you really do have to go to extremes in order to try and derive some informational advantage over everyone else that implies some form of improper pricing the markets. This is why I… Read more »
Adam
Adam
9 years 4 months ago

Ha… great post. It seems the modern day evolution of the fight-or-flight response has become a last ditch effort to try and justify ones convoluted manic logic on the internet. Unfortunately, a blog or forum can not eat certain people.

David
9 years 4 months ago

When I started reading the piece about the “misinformed” woman who went to a good law school I started thinking to myself, “sounds like she has been reading Kiyosaki”. Right on. All of his followers start sounding the same after a while. BTW, the link to the thoughts on the book is not working.

Bobby Saini
9 years 4 months ago

great post, thanks.

John
John
9 years 4 months ago

I like the way Mike in 16 thinks. Every morning I (metaphorically) get down on my knees and pray for the stock market to drop 50%. And so should most of your readers (on the assumption that most of them are young and not planning on retiring any time soon). The fact is, I don’t need the money I put away today for another 40 years so why would I want to pay $10/share for a stock if I could pay $5/share.

Warren
Warren
9 years 4 months ago

#21

Exactly. That’s what Buffett says. Why does everyone pray for the stock market to go up? Do you enjoy paying a lot for your shares every month? You should be praying for it to tank until the year before you retire. Heh.

WallyTgoat
WallyTgoat
9 years 4 months ago

While I am sure that civilization as we know it would drown in a pool of their own sweat if the above post 21 got his way, I kind of have the same attitude toward the game. A point drop to me is like a huge sale at my favorite clothing store, I love it when I can get more for my buck. It’s all about the long term…

However, I need my money in like 30 years, so lets drop the market say 60%…

mariobox
9 years 4 months ago
Right on Ramit! I’ve also had it with these pundits talking crap just because they have to justify their salaries. I should feel sorry for all those people who act like sheep and buy into the panic, but I really don’t. I think Americans have the tools and the information to educate themselves and know better, but most of us just chose not to. What really made me explode was when they tried to explain Tuesday’s correction with Dick Cheney’s assasination attempt in Afghanistan. Is it any surprise to anybody that some wacko in the Middle East would want to… Read more »
KMB
KMB
9 years 4 months ago
It is good to see a number of people chiming in with the right reactions to this; problems usually equal bargains. I couldn’t resist getting in the fray again with a response to comment #17 about the Efficient Market Hypothesis, because I think it is very wrong and believing in it is a good way to discourage would-be investors (Everything known is already priced in, whats the point in getting in the market?). The EMH has a huge, glaring, critical flaw that I’ve never seen resolved. It not only doesn’t explain, but actively wishes away one of the most prevalent… Read more »
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[…] Ramit Sethi wrote a great update to his site I Will Teach You to be Rich, which has generated a lot of interesting discussion in the comments. […]

Aaron W. Thorne
9 years 4 months ago

Based on the article, I would like to propose Ramit’s First Law of Kooks: If someone starts using words that sound really big combined with accusing somebody of a Very Large Conspiracy, chances are they don’t know what they’re talking about.

mapgirl
9 years 4 months ago
OMG RAMIT! You are on the money. I often encounter people who have no training in economics to understand what macro-level forces are at play. They just read some short article and think they’re suddenly ready to become a Governor of a Federal Reserve Bank. Personally, the phrase I like to use is, “windmilling arms”. I like the imagery of it. It’s so… VIVID. For me and one of my investor friends, we saw the dip as a great buying opportunity. After all, my favorite investment advice comes from Jeremy Siegel who wrote Stock For The Long Run. I highly… Read more »
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[…] Will Teach You To Be Rich does a nice job breaking down why global economic fluctuations may have just about nothing to do with your own asset management.  I would add a few more little history lessons we’ve seen over the years, which teach us […]

Sally Parrott Ashbrook
9 years 4 months ago

Yeah, my response to the drop in stocks was, “Wow, more stocks for the money right now–I hope the drop sticks long enough for us to buy at this rate.”

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[…] I Will Teach You To Be Rich » Chicken Little and Kooks Who Don’t Know What They’re Talking Abou… “We see people confusing global geopolitics with personal finance…” Ramit’s take on the “market is falling” hysteria from last week. (tags: investing money economics) […]

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[…] on the real intrinsic value market of real companies with real products and services. As Ramit at I Will Teach You To Be Rich puts it, “These are not the reasonable conclusions of someone who’s informed about personal […]

Phil
Phil
9 years 4 months ago

I happen to think she is right on some points.

We have had a boom for a long long time and the housing market is imploding. People will not be able to use the housing ATM anymore.

I don’t think this is the crash, but I suspect it is going to happen in the next 6 months.

Ramit – I have money invested in the stock market and have for the last 3 years, so I am not a nut, but protecting my gains is smart, not paranoid.

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[…] Chicken Little and Kooks Who Don’t Know What They’re Talking About Warning, big time rant alert.  LINK […]

roiking
roiking
9 years 4 months ago

I like her, Even if you think she doesnt know, her logical way of explanation is good. And in many points, she is right 🙂

BxCapricorn
9 years 4 months ago
I admired the interviewee’s attempt to put a large and confusing concept into some kind of context. The lack of your own imput to the interview showed how shallow your own knowledge is, of the economy, of “getting rich”, of stock picking, etc. I cannot for the life of me understand how your blog continues to draw readers. I’d like to bet that I can pick twenty stocks that will outperform your twenty stocks, during a one-year period. I’ll even make it any time period you choose, with the prize being a link on the other person’s blog. Then maybe… Read more »
John
John
9 years 4 months ago
While I generally agree with the idea of “short term drops in the market are great, you can buy more shares for your money” there is one fault in that statement. Sure, your weekly $100 401k contribution will buy you more shares in the short term, but it is overshadowed by the $10,000 hit your portfolio took as a whole when the market goes down 10%. I would think that most young people are generally “fully invested” meaning they aren’t sitting around on large piles of cash just waiting for a decline in the market so they can pick up… Read more »
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[…] and stocks they don’t understand. And, on the other side of the spectrum, you get people like this who are so intimidated by all the handwavy financial punditry that they simply opt out of investing […]

Susan
Susan
9 years 1 month ago
I agree that you dismissed the write as ‘handwavvy’ but you did so as well. What troubles me is both of you are right and both of you are wrong. Ramjit, you need to go back further than 70 years to make your argument about investing over time or you will not see the precipice we are on. You need to be following the aging of the population and life cycles chich show we are actually in 1927 or 1928 in terms of market conditions… a complete parallel. Or, for more recent history, look to Japan pre-1987. And this is… Read more »
Graham Klerks
Graham Klerks
8 years 11 months ago
I live in the UK, and we’re not approching a depression, we are IN a depression. It’s not widely known, but it can be obvious, ‘Sale’ signs in a lot of shops, housing prices are sky high, unemployment has reached a new high. Now i’m not some sort of economic advisor (noticed yet ?) but I do know you have to be a bit intelligent and well-informed to play the stock market sucessfully. I’ve got investments in ISA’s (tax-free) and normal saver’s, but I also rent out a house. I’ve not seen anyone mention land/property as an investment, but it’s… Read more »
Leia
Leia
8 years 10 months ago

I’m one of those handwavy people but I do invest in foreign currency as well as buying gold, which isn’t an investment but a storage of wealth. I got out of the market over 6 months ago and placed my money in T-bills. I will buy real estate when the prices go down but will stay pretty liquid until that time. I do still fund my Roth which is with Vanguard. and I contribute to TSP up to the match. I’m debt free to, including my home so some of us handwavy types have our heads on right!!!

Bob Johnns
Bob Johnns
8 years 9 months ago

Ramit, do you believe that we will never again have a recession? That all recessions are caused by FOMC policy error? That the law of business cycles is dead?

You remind me of Abbey Joseph Cohen in 1999.

Bobby

Michael Murphy
Michael Murphy
8 years 9 months ago
Ramit – look at what has happened to the dollar since your original post, and tell us why the dollar won’t continue to decline in value versus the euro, yen and pound. Then tell us how all your advice about saving and investing in dollars does not have to be tempered with protection against the dollar’s decline to protect the purchasing power of your money. A falling dollar is good for nominal stock prices, nominal asset prices and (eventually) even nominal real estate prices. But it is very bad for cash held in dollars, dollar-denominated notes and bonds, or mortgages.… Read more »
walter Kennedy
walter Kennedy
8 years 8 months ago

Your comments to the women are so perfect – It’s very refreshing. People blather on about doom etc. and go on for years doing nothing. Your advice is to the point.Keep this up !

Cameron Schaefer
8 years 7 months ago

There are always a million reasons not to invest in the stock market, but at the end of the day you have to a make a decision that makes sense for YOU. Put your effort into the things you can control, budgeting, saving, maxing out your IRA and leave the things you can’t control up to the talking heads on CNBC. Thanks Ramit for being a clear voice in the midst of a bunch of circus clowns.

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[…] where he refuses to give specific predictions.Also, (I call this a Kooky Alert), notice how Chicken Little people who predict doom and gloom always argue for the gold […]

Deepak Shenoy
8 years 4 months ago
Turns out Chicken Little was right, wasn’t she? This is one time you have to sit back and think to yourself – why should you assume the stock market only goes up? There was a 8 year period, between 74 and 82 – when the stockmarket crashed and recovered just about back to its initial value (1000). 8 years of nothingness. 8 years when “doing nothing” was actually the best thing to do. There was a clue in what the lady said: Invest in commodities. Not anyone can do that you say? There are exchange traded funds that buy gold… Read more »
Vijay Bhatter
8 years 2 months ago

I completely agree with Deepak Shenoy!

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[…] this bear market unravel itself. It’s happened nine times before since 1956. Turn off the TV Chicken Little – we’re not done investing quite […]

Jeremy
7 years 11 months ago
Ramit – this is a case that Chicken Little was pretty much right on in her conclusions, although she didn’t know why. Course of action? There’s two, really: Real money (gold, silver) and cheap assets (value stocks by traditional or nontraditional, aka magic formula, measures, and in a couple of years time real estate that has significant cash flow, after prices have returned to levels that can be sustained by income and/or rents). And while some of what she was spouting was nonsense, a lot of it makes sense. You would do well to read a lot more about the… Read more »
Jim Starzyk
Jim Starzyk
7 years 9 months ago

Ramit,
I am a new reader (just discovered the blog yesterday!), but I have been voraciously reading posts. I just read this, and while I don’t know how often you check comments, particularly dated posts, I’m curious about your thinking regarding this issue given the events of the past two weeks. Maybe a revisitation post? Keep up the great work!

!Jim

ChrisV
ChrisV
7 years 9 months ago
Are you kidding me with that budget? There is no where in a major city where a bar tab costs $20 a person, its more like $20 per person PER HOUR. And minimum food costs EVEN IN MEXICO are $35 a person, in the US its more like $50-60. The largest way to cut costs is your guest list. Fixed cost like DJ, Photographer, cakes can be left out or arranged with friends but the guest list which means invites/thank you notes, dinners, drinks, favors, etc is what costs the most. I am actually writing a book on budget weddings… Read more »
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[…] Will Teach You To Be Rich does a nice job breaking down why global economic fluctuations may have just about nothing to do with your own asset management. I would add a few more little history lessons we’ve seen over the years, which teach us that […]

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