Now that the Fed has begun its rate cut crusade, you don’t want to wake up sometime down the road and realize you have no return on your cash. You and I have been talking about getting your lazy cash off the couch and working. Money market assets have gathered trillions of dollars and continue to do so even with rates just under five percent.
What happens if the Fed cuts rates like it has in the past, enticing investors out of cash and into the only game in town—stocks? Have we not learned some lessons from the three market cracks so far this century? The Fed has a track record for cutting cash returns, propping up stocks, and watching it all come crumbling down like a sandcastle.
If I had a grain of sand for every time investors said, “That won’t happen to me,” I could build a small city of sandcastles. We live in a time where not only companies disappear like sand through a child’s hands, but entire industries literally vanish overnight, never to come back again. That’s the devastation and destruction I’m talking about—not tiny market corrections here and there.
Back in 1963, when Dick Young graduated from Babson College with Graham and Dodd’s Security Analysis in hand, he began his lifelong study of protecting money and guiding investors. Those aboard his ship knew he wasn’t blowing with the wind. There was going to be one captain. It was his way or the highway. It wasn’t the easiest time for stocks.
On a recent golf outing, talking with my partner between shots he asked, “What’s your investment philosophy?” It’s simple, I said. “Don’t lose money. You’ll thank me down the road.”
Action Line: Investors believe losing money is the other guy’s problem. Then, they end up in cash to stop the pain and wonder how it got so bad. Investors never think down the road will come for them. Let’s talk about your road. Email me at ejsmith@yoursurvivalguy.com.
Read the entire series here.
