In this so called "information age," there is a lot of stuff out there on economics and finance. I hesitate to call it "information," as most of it is sales pitches, propaganda, or disinformation.
When it comes to economics, I have my point of view, sometimes expressed in these columns. While there are alternative points of view, I can and will defend my reasoning to any and all critics. But when it comes to predicting financial markets, that's a different story. Economists can't predict the future. But neither can anyone else.
If you have ever subscribed to a financial newsletter, you are deluged by ads urging you to subscribe. Many of them paint a disastrous future - you are about to lose your entire life savings unless you act now - by subscribing to this newsletter, and following its author through the financial wilderness, to tremendous wealth.
Some claim that the market will crash. Others assert that we are on the verge of unprecedented prosperity - stocks will soar, but only some of them, and "this newsletter will put you on the fast track to tremendous wealth."
Some predict total collapse of the dollar. Some predict imminent hyperinflation. And some claim knowledge of a "secret" income stream known only to the world's richest people. Subscribers to that newsletter will make you privy to secrets previously known only to the world's richest people.
I recently received an ad for a newsletter that contained a scare tactic I considered especially bizarre. The author claims that his "research" suggests that the Dow (now around 15,000) will soon fall to a ledge of 6,000, before the ultimate crash to 3,000. The ad follows with, "That's why we recommend putting everything into cash, as soon as you can, at least for now."
No kidding. The self-proclaimed financial guru expects deflation, which would indeed make cash king. I'm curious as to whether his actual newsletter would suggest converting all your assets to cash, but not curious enough to subscribe to it. Most observers, myself included, believe mild inflation is far more likely. Our local bankers and financial advisors can speak for themselves, but I doubt that any of them would recommend placing and holding all assets in cash.
The actual financial newsletters I have read stop short of the wild claims used in their scare tactics getting one to subscribe. While some specialize in the energy and natural resources sector, and others in income generating stocks, they tend to recommend stocks and low maintenance mutual funds that most advisors would consider as a solid foundation for a sensible, diversified portfolio.
Predictions of the stock market vary all over the place. You can find anything that conforms to a preconceived point of view. One recent writer for Forbes, using the price/earnings ratio of the S&P compared to its long-term average, asserts that the S&P (now in the 1,620 area) could easily reach 1,800 or 2,000 by year's end. He, wisely in my view, doesn't even mention the Fed's "quantitative easing." Another commentator dwells exclusively on the Fed's "quantitative easing," and asserts that the market can only fall.
Another writer, a fund manager, asserts that attempting to predict short-term financial markets is a fool's game. Now that makes some sense to me. Warren Buffet says he can't predict short-term financial markets. And if he can't, who can? He goes for stocks he sees as "value stocks," and holds them. No need to predict short term. And I believe it was Buffet who advised investors to pay no attention to most, or all, of the nonsense bandied about.
So, nobody can predict the future, but we have to prepare for it anyway. Whether we realize it or not, we make financial decisions, based on assumptions, probably most of them implicit. The earth will keep spinning, the sun will rise tomorrow. Tomorrow will be somewhat like today. So will next week and next month, but probably less so, but we can't predict in what way.
The surest route to asset accumulation is to save and invest early and often, letting compound interest over time do the work for you. I know, that sounds like an "eat your spinach" approach, tedious and boring. We Schweitzers are reputed to be that way. And some of us probably are, but seldom are we accused of being totally stupid.
On a modest income with expenses of raising a family, saving and investing is hard to do - but it is essential. And for anyone fortunate to work for an employer with a retirement plan, any financial advisor worthy of the name will advise you to participate to the max.
As for the mix of real and financial assets in which to invest your hard-earned savings, that's for you and your financial advisor to decide. The general recommendation is a diversified mix, erring on the conservative side, yet allowing room for growth. That's pretty generic, but it's an uncertain world. But it is certain that compounding works for you over time.
There is no way to avoid financial risk - keeping everything in cash bears the risk of its value eroding through inflation.
This Swiss frugality, for which we Schweitzers are sometimes panned, is a misunderstood concept. Frugality is not about depriving yourself of the finer things in life. Frugality is about managing your resources so that you can have the finer things in life, realizing that you can't have it all, especially not right away.
So that's where I come out after sifting through all the financial chaff. Nobody can predict the future - except that life won't get any simpler.
And as for most of the popular writing and commentary on financial markets, it's like a lot of partisan political rhetoric. It proves that the more you drive over a dead cat, the flatter it gets.
- John Waelti's column appears every Friday in the times. He can be reached at jjwaelti1@tds.net.
When it comes to economics, I have my point of view, sometimes expressed in these columns. While there are alternative points of view, I can and will defend my reasoning to any and all critics. But when it comes to predicting financial markets, that's a different story. Economists can't predict the future. But neither can anyone else.
If you have ever subscribed to a financial newsletter, you are deluged by ads urging you to subscribe. Many of them paint a disastrous future - you are about to lose your entire life savings unless you act now - by subscribing to this newsletter, and following its author through the financial wilderness, to tremendous wealth.
Some claim that the market will crash. Others assert that we are on the verge of unprecedented prosperity - stocks will soar, but only some of them, and "this newsletter will put you on the fast track to tremendous wealth."
Some predict total collapse of the dollar. Some predict imminent hyperinflation. And some claim knowledge of a "secret" income stream known only to the world's richest people. Subscribers to that newsletter will make you privy to secrets previously known only to the world's richest people.
I recently received an ad for a newsletter that contained a scare tactic I considered especially bizarre. The author claims that his "research" suggests that the Dow (now around 15,000) will soon fall to a ledge of 6,000, before the ultimate crash to 3,000. The ad follows with, "That's why we recommend putting everything into cash, as soon as you can, at least for now."
No kidding. The self-proclaimed financial guru expects deflation, which would indeed make cash king. I'm curious as to whether his actual newsletter would suggest converting all your assets to cash, but not curious enough to subscribe to it. Most observers, myself included, believe mild inflation is far more likely. Our local bankers and financial advisors can speak for themselves, but I doubt that any of them would recommend placing and holding all assets in cash.
The actual financial newsletters I have read stop short of the wild claims used in their scare tactics getting one to subscribe. While some specialize in the energy and natural resources sector, and others in income generating stocks, they tend to recommend stocks and low maintenance mutual funds that most advisors would consider as a solid foundation for a sensible, diversified portfolio.
Predictions of the stock market vary all over the place. You can find anything that conforms to a preconceived point of view. One recent writer for Forbes, using the price/earnings ratio of the S&P compared to its long-term average, asserts that the S&P (now in the 1,620 area) could easily reach 1,800 or 2,000 by year's end. He, wisely in my view, doesn't even mention the Fed's "quantitative easing." Another commentator dwells exclusively on the Fed's "quantitative easing," and asserts that the market can only fall.
Another writer, a fund manager, asserts that attempting to predict short-term financial markets is a fool's game. Now that makes some sense to me. Warren Buffet says he can't predict short-term financial markets. And if he can't, who can? He goes for stocks he sees as "value stocks," and holds them. No need to predict short term. And I believe it was Buffet who advised investors to pay no attention to most, or all, of the nonsense bandied about.
So, nobody can predict the future, but we have to prepare for it anyway. Whether we realize it or not, we make financial decisions, based on assumptions, probably most of them implicit. The earth will keep spinning, the sun will rise tomorrow. Tomorrow will be somewhat like today. So will next week and next month, but probably less so, but we can't predict in what way.
The surest route to asset accumulation is to save and invest early and often, letting compound interest over time do the work for you. I know, that sounds like an "eat your spinach" approach, tedious and boring. We Schweitzers are reputed to be that way. And some of us probably are, but seldom are we accused of being totally stupid.
On a modest income with expenses of raising a family, saving and investing is hard to do - but it is essential. And for anyone fortunate to work for an employer with a retirement plan, any financial advisor worthy of the name will advise you to participate to the max.
As for the mix of real and financial assets in which to invest your hard-earned savings, that's for you and your financial advisor to decide. The general recommendation is a diversified mix, erring on the conservative side, yet allowing room for growth. That's pretty generic, but it's an uncertain world. But it is certain that compounding works for you over time.
There is no way to avoid financial risk - keeping everything in cash bears the risk of its value eroding through inflation.
This Swiss frugality, for which we Schweitzers are sometimes panned, is a misunderstood concept. Frugality is not about depriving yourself of the finer things in life. Frugality is about managing your resources so that you can have the finer things in life, realizing that you can't have it all, especially not right away.
So that's where I come out after sifting through all the financial chaff. Nobody can predict the future - except that life won't get any simpler.
And as for most of the popular writing and commentary on financial markets, it's like a lot of partisan political rhetoric. It proves that the more you drive over a dead cat, the flatter it gets.
- John Waelti's column appears every Friday in the times. He can be reached at jjwaelti1@tds.net.
