Very Thoughtful Comments from AdvicePeriod I Thought You Would Want to Read

So many organizations and people are sharing such great insights during these challenging times, and this is another one from AdvicePeriod that I thought you would want to read.

As Ben Carlson points out in his blog on March 23:

  • The U.S. stock market is currently down 32% from all-time highs. Stocks have fallen by this much or worse roughly once every 7 years going back to the 1920s.
  • Stocks have fallen 40% or worse once every 15 years, on average.
  • And they’ve been cut in half or worse an average of once every 18 years.
  • We’ve had an inordinate number of crises this century. Maybe that continues, but it’s rare for stocks to fall 40% or 50%.
  • To get to a 40% drawdown would mean another 12% down from here.
  • A 50% decline would take further losses of between 25% and 30%.


Ben goes on to quote Charlie Munger, who wisely states:

If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations.


There are a few things that we believe are true:

  • The entire world is in the same boat with respect to this pandemic and its effects on global economies.  The world is not going to end and markets will not fail.
  • The markets will come back…they always do.  They cannot go to zero.
  • Americans have the spirit to rally and we will get through this crisis.
  • The government will create a number of plans to rescue our economy.  Many won’t work. But, enough will (or the Fed and others will keep trying until they do).


Over time, stocks will outperform bonds and bonds will outperform cash. 

The Ultimate Trade

We are trading the economy for human lives by forcing people to shelter in place. It is the right trade. The goal of flattening the curve is to reduce the strain on an overwhelmed and under-prepared medical system.  And each day that we extend the virus we hurt the economy a little bit more. But it’s the right trade. The market will come back.  However, lives that are lost can never be recovered. 


This is a time to hunker down and believe in our country, our markets, our humanity, and not to give in to emotion.  It is time to honor those who are at work in the grocery stores and pharmacies and every other necessary staple so that we are able to weather this crisis.  More importantly, remember that there are so many health care workers who have chosen to risk their own health to work in hospitals and clinics to save our lives and the lives of our loved ones.  Finally, remember the people who walk your dog, cut your hair, provide maintenance, or other services to you and that their financial pain is likely greater than yours. Consider helping those that you can if you feel you are able.


And, stay the course.  It’s that simple.


Good points for all of us to consider from AdvicePeriod, I thought. Take care and stay healthy. 


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