In early October, 1871, a fire turned Chicago’s business district into a smoldering ash heap. Today, visitors to the Windy City marvel at a skyline of beautiful architecture.
In late December, 2005, quarterback Drew Brees of the San Diego Chargers suffered a severe injury to his throwing shoulder. Many experts believed his NFL career was over.
But after surgery and months of grueling rehab, Brees signed with a new team: the lowly New Orleans Saints. His presence changed the culture of the franchise. In 2009, he led the team to a Super Bowl championship. When he retired in 2021, he owned a number of NFL all-time passing records.
The moral of these stories? Sometimes big setbacks create opportunities for better things.
That’s not always the case, of course. But it’s always smart to look for opportunities in and behind the problems we encounter.
Case in point: The runaway inflation we’re facing now
While pundits assign blame and recommend cures, the Federal Reserve is trying to put out this “economic fire” ASAP. Raising interest rates is the fire hose they are using. By dampening economic activity, they hope to stop inflation.
It’s a tricky, delicate task. The markets are skittish. Higher interest rates increase the possibility of a recession. Recessions lead to lower corporate profits, and investors don’t like that.
So…we have a problem, which presents us with a choice:
1. We can bemoan the problem. (Not exactly helpful since we can’t now go back in time and prevent it; nor can we look into the future and see when it will end.)
2. We can ignore it and do nothing. Assume the crash position, hold our breath and wait. Or…
3. We can look for surprising opportunities amid the smoke and embers.
Savvy long-term investors prefer option three. They realize there may be some long-term bargains out there. When markets fall, good judgment often flies out the window. All companies in a sector are often treated the same, even though they aren’t all equal in value.
This means long-term investors may have an opportunity to get a bargain on good stocks that were a bit too pricey yesterday.
Investors who want income from their portfolios may also be staring at a silver lining. When the Fed raises rates, it means better returns for savers and fixed income investors.
In short, even though the economic news feels bleak, smart investors could be looking at some great opportunities!
Still, it’s important to be a careful shopper in this environment. In fact, now is a good time to enlist some professional help.
Don’t mishear me. I am not minimizing disastrous fires or making light of serious injuries. Nor am I dismissing the impact of huge financial shakeups.
I’m saying that when problems strike you should control what you can and accept what you must. And never stop looking for opportunity.
To help you think more clearly about your finances, I’ve created a free tool. It’s a comprehensive checklist of pre-retirement questions for people who are 60-something. Email me at bmoore@argentadvisors.com if you like a copy. I’ll send it to you right away.
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