Podcast #013 - 7 Ways To Beat The Financial Crisis

Well, with the onslaught of the Coronavirus, fear and panic has permeated the minds of the entire world. It has been a crazy time hasn’t it? Mass quarantines, people forced to quit their job, worry that their businesses will be shut down, worry that they won’t make their rent/mortgage payments. It’s catastrophic. And yet it’s amazing.

I remember the 2008 crash, however, I was at a different point in my life. My life was simple. I had no kids, no family, no mortgage. I had just started as a police officer, and for that reason, I had a great paying job with a pension. While people were complaining they had lost $40k in their 401k, I barely knew what a 401k was, and wasn’t worried about it, because I was not planning on a retiring anytime soon. However, much has changed since then. I now have a family and my rent has doubled and there’s a lot more on the line, so I really do empathize now with the people that were panicking in 2008. At the same time, I find great solace with the chaos going around right now. Instead, I think, “Wow, what a great time to be alive. What a great time to buy stocks at such low prices. What a great time to possibly buy a home right now. What a great time to start planning your next trip (since airlines and travel expenses are so low right now).” Where there is a peril, there is prosperity. You just have to look for it. You have to be willing to change your perspective and ask the right questions, instead of, “Why did this happen to me?” Wrong question.

In this episode, I revisited Tony Robbin’s hit book Unshakeable: Your Financial Freedom Playbook Creating Peace of Mind in a World of Volatility. In one of Tony’s chapters, titled Winter is Coming, But When… he talks about the seven “financial freedom facts.” After re-reading that chapter, I felt great ease with the whole financial crash and downturn during this Corona Virus scare. I wanted to share this facts with you in hopes that it could empower you, give you courage, or give you the impetus to be bold during times of fright. This is an amazing time to be alive, and we should all embrace these moments because one day we’ll look back at this time period and think “Ah, it wasn’t that bad.

PreQuel Notes

1. Financial winter comes on average, every year

2. When any market falls by at least 10% from its peak, it’s called a correction. When a market falls at least 20% of it’s peak, it’s called a bear market

3. The biggest danger isn’t a correction or a bear market, it’s being out of the market

   Freedom Fact 1: On Average Correction Have Occurred About Once a Year Since 1900

   1. There’s been a market correction every since 1900

   2. The average correction has lasted only 54 days - less than two months

   3. Over the last 100 years, the market has fallen only 13.5%. 

   Freedom Fact 2: Less than 20% of All Corrections Turn Into a Bear Market

   1. Fewer than one in five corrections escalate to the point where they beomce a bear market. 80% of corrections don’t turn into bear markets

   Freedom Fact 3: Nobody Can Predict Consistently Whether the Market Will Rise or Fall

   1. The only value of stock forecasters is to make fortune-tellers look good

   Freedom Fact 4: The Stock Market Rises Over Time Despite Many Short-Term Setbacks

   1. Despite a 14.2% average drop within each year, the US market ended up with a positive return in 27 of the 36 years. 

Freedom Fact 5: Historically, Bear Markets Have Happened Every 3 to 5 years

1. There’s been 34 bear markets in the 115 years between 1900 to 2015. They happened nearly once every three years. That’s a rate of one bear market every five years.

2. In more than third of bear markets, the index plunged by more than 40%

3. Bear markets don’t last. They varied widely in duration from a month and half (45 days) to nearly 2 years (694 days). On average, they lasted about a year.

   Freedom Fact 6: Bear Markets Become Bull Markets & Pessimism Becomes Optimism

   1. March 9, 2009 - the S&P surged by 69.5% over the next 12 months.

   2. Warren Buffett says he likes to be greedy when others are fearful.

   Freedom Fact 7: The Greatest Danger is Being out of the Market

   1. 1996 to 2015 the SP 500 returned an average 8.2% a year. If you missed out on the top 10 trading days during those 20 years, your returns dwindled to just 4.5% a year. Can you believe it? Your returns would have been cut almost in half just by missing the 10 best trading days in 20 years!

   2. JP MORGAN found that 6 of the 10 best days in the market over the last 20 years occurred within 2 weeks of the 10 worst days