Fear & Volatility

Over the last month, our financial markets have been crumbling before our eyes. Stock market losses have decimated retirement accounts, bank failures have completely seized our credit markets, and our housing decline has incinerated the equity of millions of American families. The adjectives used to describe these occurrences – crumbling, decimated, seized, incinerated – pale in comparison to the true description of the lives of those affected by our tumultuous economy of the last few months. Yes, most of us are having a much more difficult time in our average day, but what about those people we are reading about? The people who are losing everything as the market dives, the people being evicted from their house, or the people whose jobs are being cut because the businesses they work for cannot afford to keep them?

As our markets continue the downward spiral, more and more of us are falling over the cliff and joining those who are already experiencing ultimate hardships. Our media airwaves are dominated by fear and scare mongering. Guest speaker after guest speaker keeps telling us what the problems are but that there is no real answer to fix the situation. Yes, we all know what the problems are which we are facing… we have a handle on that. The problem is for every minutes of airtime being given to these problem speakers, there is no answer to soothe the fears of the citizens listening.

Our President has repeatedly gone on national television in an effort to quell the fears and anxiety we are facing. He is trying to restore the confidence in the markets in an effort to loosen up the grip fear has upon our collective psyche. It isn’t wishes or hopes to fix our fear, it’s is a must. If fear is allowed to roam free amongst us at an ever increasing rampage while destroying our confidence level, our financial markets will not only continue their freefall, they will ultimately collapse under the pressure being exerted by fear and anxiety speculation.

Along with fear and anxiety, comes volatility. It’s readily apparent as you watch our stock market tumble hundreds of points only to recover and then plummet minutes later. People are consumed with fear at this point in time. People are being told to pull their money from banks and store up cash because credit cards may become worthless in the near future. Cash is king and is the most liquid. It helps keep the demon of fear at bay. However, what if every American family heeded this “advice” and promptly removed $500 or $1,000 or more from their bank, or sold off their stocks to place into simple interest bearing accounts?

The answer to that question is complete financial market breakdown. You may think what we are going through is terrible at this juncture, but if people begin hording cash, the issues we face aren’t even the tip of the iceberg in that scenario. While we must live our lives prudently and rearrange our investments into those that will secure our financial stability, we must not let panic and fear rule our investing decisions. The fundamentals of many companies are still strong, but their prices have lowered due to the stock market instability and sell offs. The old adage of “buy low, sell high” applies here. Several dominant companies are well within affordability these days and they should be targets of the savvy investor.

Rather than feed the fear monster our media and country have allowed to grow into a giant sized financial hurricane within our markets, we must focus on how can we act rationally in this situation. Rational is not using your mattress as your bank account. Rational is not selling out of your investments and walking away with a pittance of your previous wealth. Rational is not seizing up your life as things get hard. Yes, we must make alternative choices and decisions, but we cannot allow the demon of fear rule our lives or we will only fuel its power.

No, we cannot live the way we were, we know that. But, we can live rationally well within our means while making rational choices. Our country is currently acting irrationally and allowing outside influences alter choices without understanding the overall consequences of the actions. Media must temper what they are saying because people are easily led to irrational decisions when fear is clouding judgment and decision making. The outlets telling people to pull their cash out and store it are perpetuating the disaster we are feeding. They are allowing it to grow. Be careful in your decision making and make sure you are doing things rationally because they are sound decisions based on rock solid information and not determined by fear and volatility. Rational thinking MUST return to our markets and until then, consumer confidence will continue to decline along with our markets.