Live Big Digest – Double Dip ed.

Yet again, the word of the day is double-dip, and not double-dip ice cream we needn’t add.  Slower growth for the US economy during the first half of this year and debt worries in Europe seem to have driven investor anxiety over the top, causing many to head for the exits.  Even a better-than-expected jobs report and a down-tick in the unemployment rate – both reported this mornng – have done little to ease public worries.  So, what should we make of this?  Is there a double-dip recession in our future?  And, most importantly, what can we do to prepare ourselves?

First of all, we’d like to repeat what we said a few days ago (because it still applies): this is not far from where we found ourselves a year ago, when the market also took a summer slide.  And even after yesterday’s large decline, we’re still well above those year-ago levels.  Furthermore, the fact that the market continues to gyrate is to be expected during a prolonged and relatively anemic economic recovery. Under the circumstances, there are two things that are important to remember:

1.) It is in the nature of markets to swing with every bit of news and every shift in sentiment.

2.) The only way to ride the market up, is to ride it down from time-to-time.

That second point is the most important.  While the human imagination can easily conjur the fantasy of riding to the crest of the wave and then stepping aside in time to avoid the inevitable decline, this simply isn’t possible.  It would require the perfect foresight that humans are denied.  What we must do instead is ask ourselves this: will the ultimate path of the economy (and the financial markets that move in sympathy with the economy) be up or down?  There is no question in our mind that the path will be upward.

Why are we so sure?  Because the economy is nothing more than the aggregration of all the individual decisions that you, your family, your friends, and everyone else in the world make, day-by-day, about how to earn, spend, save, and invest.  Add all these individual decisions together and you have what we call “the economy.”  To believe that the economy will permanently stagnate, is to believe that individuals will abandon their pursuit of a better life.

Over 2,200 years ago, it was recorded in Ecclesiastes that “the sun also rises, and the sun goes down, and hurries to its place where it rises.” That long ago writer also reminds us that “there is nothing new under the sun.”  There is a rythm and a cycle to all things in the world, including human economies and markets, and it has ever been thus.  We can prepare ourselves to survive and thrive through all the inevitable ups and downs by saving and investing, diversifying and rebalancing, and maintaining prudent liquid reserves.  Beyond that, we should give ourselves permission to just breathe and focus on the things we can control, like how we’re going to enjoy ourselves this weekend.

Take care and have a great weekend!

The Yeske Buie Team