So. The stock markets are taking a dump. The direction of real estate values ranges from softening somewhat to plummeting rather dramatically, depending on where you live. There is a lot of hysteria out there in the media, but realistically the declines in North American markets, so far at least, simply mean that long term investors are giving up some of the gains accumulated over the past few years. Long term investors who bought their stocks or their homes or their investment properties paid much lower prices, so they can be pretty smug at the moment.
But what about the others, the investors who piled on towards the end, who thought that the party will never end, that low interest rates, high returns and strong demand would continue forever? Things don't look quite as good for them.
I have puzzled for years about why it is that humans are herd animals, consistently doing the wrong thing at the wrong time, simply because everyone else is doing the same. If everyone is doing it, it must be OK, right? It may be OK for a while, but if you join the lemmings just as they are about to head over the cliff, you're screwed. If you join the herd long before they reach the edge, at least you might have a chance to come to your senses before you dash out your brains on the rocks below the cliff. Or not. Most individuals simply don't get the fact that the majority is seldom right for long. It may be right for a while, but not for the long haul. The fact that a group is ever correct about anything is merely coincidental.
Is this the big apocalyptic stock market crash that some of us expect to come soon? Is the U.S. dollar going to melt down at an accelerated rate against other currencies? Are the Chinese going to dump their U.S dollar holdings and move into Euros or gold or simply hoard chopsticks?
I don't think this is the big one yet. But I think this is a serious warning. The problem is that warnings often go unheeded and people simply go on with their lives and activities as usual. It is too difficult to change direction. It is too hard to think. It is too taxing to admit errors of judgement. Then, it becomes too late to do anything except kiss your ass goodbye and watch your assets disappear.
I think there is still some time left for anyone who wants to take the trouble to clean up their financial affairs a bit, to blunt the effects of a larger and certain collapse some time in the foreseeable future. How? Stop spending money. Pay off debt. Reduce expectations. Delay gratification.
And what if a big collapse doesn't happen? Well, you will have more money, less debt, more financial security, and most importantly, peace of mind.
Won't that be worth it?