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Some Timely Thoughts About Roller Coaster Riding

March 15, 2020

by Tommy Williams

A roller coaster is a type of amusement ride that employs a form of elevated railroad track designed with tight turns, steep slopes and sometime inversions. Kingda Ka at Six Flags Adventure in Jackson, New Jersey is known as the scariest roller coaster in the world. Its most terrifying aspect is its signature giant drops. Since 2005 Kingda Ka has reigned as the tallest and longest roller coaster in the world. It has something in common with all roller coasters. You wait in line. You climb aboard. They scare you senseless. Then with wobbly knees you step off and wander down the midway to replace the food you just lost in your stomach. But walk away you do – assuming you did not panic and jump off on one of the huge down drops or twists and turns. This week our financial markets continue to provide a similar ride. What with a major oil shock and the continued spread of the coronavirus. I hope you did not respond to the panic of the many investors who bailed out, driving the markets down.

Many people do not have any business riding roller coasters. If you are on the terrifying ride and realize you shouldn’t be, now is not the time to get off. It would make more sense to ride it out – and when it comes to a stop you can reflect on the experience and make rational plans to occupy yourself with different activities in the future.

It is not lost on me that we are not talking about a day at the State Fair. We are talking about the impact on our life savings – retirement, maintaining lifestyle, etc. – our ability to continue life as we know it. I get it – I’m 67 and am a lot more interested in hanging on to what I’ve got than building a financial future over the next several decades. So how am I feeling?

First off, the problem is there’s a lot more that we don’t know than some really important things we do know. However, there are a few very important things that we do know:

  1. The oil shock caused by the Russia/Saudi Arabia price war cannot last. Neither of their economies can stand low oil prices very long – soon you’ll see governments/regimes topple if they can’t meet financial obligations. They depend on higher oil prices.
  2. This is not a financial crisis like 2008/2009 where the banking system was in danger of total collapse. 
  3. Shocking “triggering events” are about the only things that modify human behavior for most people – and in our country we could use a lot of behavior modification.  Like less polarization and a lot more collaboration. Regretfully, sometimes the best way to make friends is to have a common enemy.
  4. History has shown big jumps in the market tend to follow big drops. Perhaps because fundamentally sound assets become very favorably priced. When people eventually feel comfortable they pile on.
  5. The biggest thing we need is a clear communication from our government about coronavirus related data. How to prevent spreading, how to test for the infections and successfully treat those infected. In other words, the fear/panic factor has to be reduced. Thus far the message has been unclear. That is likely to improve significantly, very quickly. 

Seventy percent of our economy is consumer spending. If everyone keeps calm, continues to spend money and carefully goes about their daily lives this “crisis” will be shortened immensely.

In the meantime, I suggest you look for: 

  1. a slowing in the rate of confirmed new cases of the virus
  2. reportable and observable improvement regarding information related to preparedness: that is, available testing kits, vaccines, treatment methods, etc.
  3. a general improvement in the way people feel about the spreading of the virus.

And finally, in our firm we are taking the opportunity to rebalance portfolios (a forced method of buying low and selling high!). And, I might add, there are entertaining activities further down the midway past the roller coaster.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including loss of principal. 

Visit us at Tommy Williams is a CERTIFIED FINANCIAL PLANNER™ Professional with Williams Financial Advisors, LLC. Securities offered through Private Client Services, Member FINRA/SIPC. Advisory Services offered through RFG Advisory, a Registered Investment Advisor.  Williams Financial Advisors, LLC, RFG Advisory and Carson Group Coaching are separate entities from Private Client Services. Branch office is located at 6425 Youree Drive, Suite 180, Shreveport, LA 71105.