Investing in an Uncertain World

By Ed Mendel

We live in very uncertain times, and there are many things to worry about both domestically and internationally. Remember, there’s never been a time when there wasn’t something to worry about.

An amazing 70 percent of Americans think the country is going in the wrong direction. This statistic goes a long way in explaining the phenomena of Bernie Sanders and Donald Trump. But in terms of managing your finances in the midst of the uncertainty, I’m going to try in this article to share some unfortunate truths about investing to help you navigate the markets.

Ed Mendel

I recently read an article that presented 50 bullet points on investing. Here is the list of my favorite missives (and a few of my own) that I think you should keep in mind:

Most people would be better off if they stopped obsessing about Congress, the Federal Reserve and the president and focused on their own financial mismanagement.
Markets go through at least one big pullback every year and one massive one every decade. Get used to it. It’s just what they do.
Not a single person in the world knows what the market will do in the short run. End of story.
You don’t understand a big bank’s balance sheet. The people running the place and their accountants don’t either.
There will be seven to 10 recessions over the next 50 years. Don’t act surprised when they come.
Most of what is taught about investing in school is theoretical nonsense. There are very few rich professors.
The market doesn’t care how much you paid for a stock. Or your house. Or what you think is a fair price.
Most initial public offerings will burn you. People with more inside information than you want to sell. Think about that.
The low-cost index fund is one of the most useful financial inventions in history. Boring but beautiful.
If you have credit card debt and are thinking about investing in anything, stop. You will never beat 30 percent annual interest.
However much money you think you’ll need for retirement, double it. Now you’re closer to reality.
The next recession is never like the last one.
The stock market will never accommodate you. It doesn’t make winners out of losers. Never has, never will.
Don’t let a little mistake become a disastrous mistake. Manage risk and take losses.

Over the years, I’ve dealt with many of the biggest names on Wall Street. I have seen them make and lose fortunes. One of the things I have learned over the years is to be weary of people who make forecasts. As my former partner Ned Davis taught me, the only thing in life that is worse than making a forecast is sticking by it.

With this in mind, here is a list of some of the worst forecasts by gurus and pundits in the two recent bear markets.

Worse Economic Predictions Ever

Ben Bernanke, Jan. 10, 2008 — “The Federal Reserve is currently not forecasting a recession.”
Joseph Cassano, head of financial products at AIG, 2007 — “It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of these credit default swap transactions.”
Franklin Raines, CEO of Fannie Mae, June 10, 2004 — “These subprime assets are so riskless that their capital for holding them should be under 2 percent.”

From the 2007-08 Credit Meltdown

Ken Fisher — “This year will end in the plus column … so keep buying.”
Rep. Barney Frank — “Freddie Mac and Fannie Mae are fundamentally sound.”
Barron’s — “Home prices (are) about to bottom.”
Worth magazine — “Emerging markets are the global investor’s safe haven.”
Bernie Madoff — “It’s virtually impossible to violate the rules.”

These are some of the things you need to know for investing in an uncertain world. But finally, as a reminder, while we worry about dollars and cents, the really important thing in life is to do your best to keep a balance of family, friends and good health. That is what will make you truly wealthy.

Ed Mendel co-founded Ned Davis Research Group and Davis, Mendel & Regenstein, is a philanthropist and a limited partner in the Atlanta Falcons, and serves as life trustee at the Marcus Jewish Community Center and Pace Academy.

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