As this market continues south through its previous lows, the economy continues to slow and unemployment creeps higher, it is becoming widely accepted that this country is going through some severe, unavoidable changes.
People are beginning to accept that their lifestyles are changing, and that an era of easy money is coming to a close.
We must also recognize that this is not the end of the world, and the sun will still rise tomorrow. Recently, many meetings with clients and colleagues have taken on tones that are somber and with reserved optimism.
In our lives, when times are good, we rarely stop to reassess (a) where we have been, (b) where we are going or (c) what is really important. Every so often, some event comes along that prompts us to do just that. Quite often our lives are in need of change. We’ve gotten comfortable. And something in the world makes the decision for us that our lives need a change of scenery; that we need to stay on our toes.
For an increasing number of people, the economic crisis in the fall was just that event. More and more people are being forced to rethink their lives and make changes; changes that they never would have made when times were good, but are now being forced to do so out of necessity.
We believe, not without reason, that we are about to witness the greatest transference of wealth that will occur in our lifetimes.
In recent years, millions of jobs have moved overseas as this country transcended the industrial economy. These jobs never needed to leave. They left because, in our highly educated society, we thought that the wages they offered weren’t competitive. How wrong we were.
Now, almost 10 percent of Americans would stand in line for any of those jobs that they willing exported to countries with cheaper labor. Many of these jobs are going to come back. With the state of things, the United States can no longer afford to have trinkets made in China because we refuse to work in factories.
The shift of wealth that we see coming will be to those who can recognize opportunity in the midst of this crisis. It will go to those who have left their comfort zone, whether or not it was of their own free will. Those who stayed adaptive, learning new skills and keeping focused on the future, will come out of this better off than when it started.
Recently, we met just such a person, who had been let go after working in the steel industry all his life, only five years before he hoped to retire. Yet his attitude could not have been better. He knew that he couldn’t have continued working in steel as long as he needed to in order to retire, so he looked at this as a forced career change. Now, he is looking to utilize unemployment so that he can go to school and become a nurses’ aide, where he can work as long as he wants. Moreover, with an aging parent, he will be able to better care for his loved ones with newly acquired skills.
In a previous entry, I made mention of my recent opportunity to speak with a gentleman who lived through the Great Depression. Now in his mid-80s, he was still as sharp as a tack, and could vividly describe experiences from his childhood. He recalled people coming to his family’s home to beg for food, some without shoes or socks in the dead of winter. Another Depression survivor we have met recalled Sunday dinner: bacon grease spread over a single slice of bread, accompanied with a glass of water. This is why we say that people who claim this is a return to the 1930s truly have no idea what they are talking about.
While Americans are now being forced to reassess their lives, recognize opportunity and adapt accordingly, it is also important to rethink everything that you knew about investing. Unfortunately, the days of the buy-and-hold strategy are gone, and are not coming back anytime soon. Since their peak in October 2007, the Dow and Standard & Poor 500 have given back every bit of their gains since 1997.
That means that if you owned the Dow since ’97, your return on investment would effectively be zero. In real terms, it would be negative, as the cost of living (inflation) has risen since 1997. It is important at this time to completely rethink our lives, from how we prioritize to how we save for retirement. If you feel that you need help in either of these areas, please speak with someone. There are plenty of professionals who are more than willing to sit down and help without charging by the hour.