Fed Chair and centimillionaire Jerome Powell is a DIRE Movement enthusiast by continuing to raise rates despite a global stock market sell off. More pain is on the horizon as JP bows to no one.
I’ve never liked investing in stocks as much as I enjoy investing in real estate due to the volatility, occasional corporate malfeasance, and countless uncontrollable exogenous variables stocks face.
When you’re but a piddly minority investor with no say in anything, investing in stocks can sometimes feel hopeless. However, I recognize that investing in stocks is one of the best ways to build wealth over the long term, which is why I’ll always have at least 20% of my net worth in stocks.
Although losing money in the stock market is never fun, I thought I’d highlight some benefits of a stock market meltdown. After all, if it wasn’t for the global financial crisis, Financial Samurai would never have been born.
The Benefits Of A Stock Market Meltdown
- More humility. People tend to brag about their wins and hide their losses. When times are good, there is an incessant amount of boasting that can get extremely annoying after a while. It’s very similar to people posting only the best moments of their lives on social media. A return to modesty is a wonderful benefit of a cratering stock market.
- Reset expectations. People tend to get bearish when stocks are going down, and bullish when stocks are going up. Being a contrarian thinker by forecasting what might happen in the future is extremely difficult, but worth practicing. With lower earnings growth expectations, stocks now have a higher chance of beating beaten-down expectations, resulting in better future performance. The below chart shows that global fund managers are as pessimistic as they were during the global financial crisis, which seems excessive.
- Fewer crowds. A stock market boom creates more jobs. More jobs bring more people to restaurants, bars, and other entertainment venues. Due to more people, reservations and tickets are harder to come by. Everything is also more expensive. Further, traffic can become unbearable to the point where you don’t want to leave the house. Back in 2001, San Francisco was a pleasant city with lots more room thanks to the dotcom bubble pop. Now, San Francisco feels more like Manhattan, where every time you step outside feels like going to battle.
- The return of mega unemployment benefits. Sometimes, you just need a break from the grind….