When the Markets are Making You Nervous

“I bet you’re getting a lot of calls.”

I could tell by the background noise he was driving with his windows down. I suppose calling to needle me seemed a good way to pass the time.

I didn’t take the bait. “Calls about what?” 

“This dang market,” he said. “Inflation is out of control. Fuel prices are double—just like every other commodity price.”

“No doubt about it,” I agreed. “And how are corn prices?”

“Well…they’re up too.”

“I bet that part doesn’t hurt your feelings too much, does it?” (I had to needle him a little, too.)

He ignored me. “But seriously—when commodity prices go up like this, it’s not long before the rest of the economy goes to hell.”

In 30+ years as a financial advisor, I’ve learned lots of lessons. One is that when someone believes the economy is about to go to hell, it never works to argue with them.

“That could be,” I said. “But then what?”

“Then what…what?”

“What happens after the economy goes to hell?”

He was quiet for a minute. “What are you getting at?” he finally asked.

“Do you ever plow your fields under?” I asked.

“Of course.”

“Why do you do that?”

“To get them ready for next year,” he said.

“Look,” I said, “What I know about farming would fit in a tiny basket—with room left over. But I know this: the plowing you do after harvest helps prepares the soil for next year’s planting season.

“It’s the same in the world of finance. When investment markets reach the peak of their growth in a given economic season, they naturally fall…sometimes quite a bit. The investing public typically views this as a problem, as if something has gone wrong.

“In reality, this is just the natural (admittedly painful) process of economic pruning taking place in the markets. Less successful companies recede into history. Successful companies sow the seeds of their future success. And startups, disrupters, and innovators appear on the scene as capital finds new places to invest.”

It was quite a speech. I was proud of it.

“Well, I’m still nervous,” he said.

“I know.”

“So, you don’t think I should do anything?” he asked.

“Not anything different than we’ve already done before today got here,” I said. 

“Remember, we put you in the investment allocation you’re in because of multiple factors: your age, your investment time horizon, the amount of risk you said you could take, and when you’d eventually want to turn this money into income to spend. None of that has changed, so we don’t need to panic just because the markets are doing what comes naturally.” 

Long silence. I could still hear the wind blowing through his truck windows.

“Okay. I guess I just needed to hear you say it.”

“I understand,” I said. “You still enjoying farming?”

“Wouldn’t ever think of doing anything else. It’s in my blood.”

“Good,” I said. “You’re feeding the world and doing the work of the Lord. Keep it up.”

“Thanks. Stay in touch,” he said.

“Always,” I agreed.

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