Ric’s Take on Yesterday’s Market Decline – and a Fortress Option for You

Plus, whether a financial advisor can be of help 

Ric Edelman: It's Tuesday, August 6th, and what a day we had yesterday. Dow Jones industrial average fell 1,000 points. The S&P 500 down 3%. NASDAQ down 3.5%. Then Japan, the stock market there had its worst day ever. Stock markets fell in Europe, Asia, across the board. Crypto crashed as well. Everything everywhere was down, and it's raising recession fears. When's the last time you heard anybody use the R-word? It's been quite a while, And now there's panicking ensuing. People are wondering, what should we do if a recession is coming? Should I get out of my stocks, get out of my bonds, sell my real estate, dump the crypto? What do I do?  

Well, what you do is recognize you've seen this movie before. I mean, come on, this isn't shocking, this isn't unusual, this isn't different. This is how the markets work periodically. We need to recognize that it's the business cycle. Prices go up as the economy expands. Prices go down as the economy retracts. 

We have had a growing economy, it's pretty safe to say, since 2009. Oh, there was certainly a very big blip with the pandemic, but we understand the unusual circumstances associated with that. But quite frankly, we have had, on average, over the past 100+ or so years, a recession about every six years. We haven't had one since 2008. It's safe to say we're long overdue.  

So just put these numbers in context. Ordinarily. The stock market grows 10% per year. This year, prior to the mayhem of the past several trading days, the stock market was up over 12% in just the first seven months of the year. We're not supposed to grow 12% in seven months. We're supposed to grow 10% in 12 months. The stock market has grown too fast, too quick. Naturally, it's inevitable. You're going to see a correction at some time or another. Now, am I suggesting stock prices aren't going to fall further? I'm not saying that at all. Nobody knows what's going to happen in the next day, week, month, quarter, or even year.  

What I am telling you is that if you have invested, you simply need to do one simple thing. Remind yourself why you invested. Think about it. When you bought the investments you currently own, what was your intention in terms of how long you were going to hold them? Was it your intention to sell them in a week, in a month, in a quarter? Or was it your intention to hold on to them for the next ten years, or even longer? If you had a long-term intention before the stock market fell yesterday, why should what happened yesterday have any impact on your thinking? It shouldn't. 

Instead, you should be doing what you had set out to do. Not merely owning a long-term portfolio, but a diversified portfolio. That's why you own stocks, and bonds, and gold, and oil, and real estate, and crypto. It's why you own a little bit of everything, and you rebalance. When prices fall sharply, like they did, two opportunities arise. Number one, the opportunity to rebalance, because some assets fell further than others, and that means that the portfolio allocation you originally created is no longer in place today. If you had a 60/40 to begin with, right now maybe it's 61/59. It's an opportunity to rebalance. Second, if you bought a month ago or a year ago because you liked the prices then, you ought to be ecstatic about the prices now because the prices are even lower. It's like buying on sale. If you, in fact, have a long-term time horizon, this is the opportunity to buy at even lower prices than before. This is how smart investors think.  

Now, the alternative to all of the above is to fall into the trap that you're going to be seeing from the major media. They're going to be wringing their hands. They're going to be crying, oh, woe is us. They're going to be fearful that a recession is coming and that stock prices and bond prices and real estate prices and gold prices and oil prices and crypto prices are going to fall even further. They're going to scare you into thinking that you need to take drastic action immediately.  

And to further that element, you might be hearing in the news about something called the Fortitude Ranch. Oh, yes, I want fortitude. That's what we need these days, right? What is the Fortitude Ranch? It's a timeshare for people who are worried that the end of the world is coming. Yeah, this company has built five properties around the country, West Virginia, Nevada, Wisconsin, Colorado and Texas. They have built dormitories that can house 100 people a piece. You pay up to $20,000 to join this timeshare. And when doomsday arrives, you simply go there. You enjoy the underground shelter, which is protected by concrete and steel, with walls lined with cans of coffee and tuna and ready to eat meals. Seriously, in the middle of a doomsday, you're worried about your cup of coffee? They have an armory with assault rifles and crossbows. They've got a radiation detector. They have guard towers, a medical shed that has supplies for emergency care and first aid. Outside, they've got chickens, sheep, and rabbits. They guarantee to give you a 2,000 calorie per day diet for at least a year. And to provide electricity, they've got solar panels on the roof. Really? This is what you're going to be focusing on in an environment like we have this week because of what happened in the market yesterday? Seriously? Is this idea even have any appeal to you at all? 

Well, if so, I have some questions. Let me ask you this. Let's assume that you decide doomsday is upon us. What are the odds you're going to be anywhere near this timeshare facility that you purchased? Are you going to be anywhere near West Virginia, Nevada, Wisconsin, Colorado, or Texas? And if you're not, how are you going to get to it? I mean if we've got mayhem in the roads if we've got a crisis in the country, do you really think you're going to easily be able to get the gasoline you need to fuel your car or plug in your tesla, for crying out loud, to drive to this facility? And when you get there, what's the situation gonna be? You're gonna run underground into this underground shelter? Great. Hey, they've got a guard tower. Well, I got a question for you. Who's guarding that tower? Aren't the guards gonna want to be down in the shelter with you? And wait a minute. They hired someone to man the guard tower? Well, isn't that person going to be more concerned about guarding their own spouse and children? Why are they going to abandon their family to come guard you in this underground fortitude? Does that make any sense? Oh, and here's the good news. They have chickens and sheep and rabbits, who are exposed to the radiation you're trying to shelter from. Who's going to leave the shelter to go up into the atmosphere to go kill a rabbit and bring it down to feed a hundred people? Really? Is this making any sense to you? They've got a medical shed with emergency first aid supplies? Wonderful. How about a nurse or a physician? And similar situation with the guard tower, what nurse or doctor is going to abandon their family to come take care of you in an underground shelter? This thing doesn't make any sense at all. And yet, there are news stories talking about a doomsday economy in the midst of a mere market correction that we are experiencing at present. 

You gotta get a grip. You have to decide, once and for all, who you are. Are you someone who has the stomach to tolerate the volatility that periodically occurs in the financial markets? Or aren't you? And if you're not, you had no business purchasing those financial instruments in the first place. Your money should have been sitting in bank CDs and T-bills, suffering from the ravages of inflation. And if you are going to participate in the financial markets, then you have to fully participate. You have to acknowledge that stuff like what we're experiencing right now, happens from time to time, and rather than wringing your hands in a woe is me attitude, you simply say, what a wonderful opportunity to rebalance. What a wonderful opportunity to regard this as a buying opportunity. What a wonderful opportunity to ignore the whole darn thing and go watch the Olympics, which is exactly what I'm gonna go do, after I answer this question from George in Philly. We'll do that next. 

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Ric Edelman: Here's a question I got from George in Philadelphia: 

"Hi Ric, how do you know if getting a financial advisor is a good idea? Myself and my wife are of very modest means and we are 10 to 14 years out from retirement. My concern is I don't want to reach the finish line and be sorry I didn't take the plunge to get the best retirement outcome I could have gotten. What say you on this dilemma?” 

George, I really don't think you have much of a dilemma at all. Of course you will get benefits from a financial advisor. You'll never know until you talk with one or two or three. And I do say one or two or three, because talking to one, you won't know if what they're saying makes any sense or not. You need to talk to two or three so you can compare, I would recommend you make sure they are a fee-based advisor, as opposed to a commission-based broker, or a commission-based insurance agent. A fee-based advisor acts as a fiduciary, meaning they are legally obligated to serve your best interests. This way you know that the advice is for you and not to benefit them. 

So, the fact that you are of modest means increases the reason you do need to talk to a financial advisor. I mean, let's face it, those millionaires and billionaires, do they really need a financial advisor? I don't know. They have millions and billions. So what if they have a million or two less, or a billion or two less? They're still millionaires and billionaires. But you, who have much less going for you financially, you need to make sure you're maximizing all of the opportunities you have. And if you've got 10 to 14 years to go prior to retirement, now is the perfect time to get started.  

So, George, I think you're really onto a good idea here. Talk to a financial advisor, talk to two or three, compare what they have to say. And what you're really looking for beyond all else, aside from their fiduciary role, serving your best interest, is the breadth of service. Not just investment advice, but estate planning, wills and trusts, mortgages and homeownership, life insurance, disability insurance, long term care insurance – you want to make sure that they are giving you advice on the full breadth of issues that you are facing in your family, college planning for children or grandchildren, elder care issues for parents or other relatives. You want to make sure that they are talking to you about everything involving a dollar sign in your life. Not just the world of investments and with what's been going on in the world of investments so far this week, time is perfect for you to be talking to a financial planner. 

You can send me your question as well, just send it to AskRic@TheTruthAYF.com. The link is in the show notes.    

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Ric Edelman: I’m glad you’re with me here on The Truth About Your Future. If you like what you're hearing, be sure to follow and subscribe to the show, wherever you get your podcasts, Apple, Spotify, YouTube – and remember leave a review on Apple podcasts. I read them all! Never miss an episode of The Truth About Your Future. Follow and subscribe on your favorite podcast app. I'll see you tomorrow. 

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