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Below is a letter I recently sent out describing the volatility we are seeing in the markets with events like the slowdown in China, the drop in oil prices, and here in the United States with our Fed's monetary policy.
There's no diplomatic way to say this: the global stock markets are supremely volatile right now. Going forward, it's hard not to be worried about predictions like the one from Royal Bank of Scotland analyst Andrew Roberts, who says the global markets "look similar to 2008." Roberts also predicts technology and automation are set to wipe out half of all jobs in the developed world. If you listen closely out the window, you might almost hear traders shouting "Sell! Head for the exits!"
When you're in the middle of so much panic, when people are stampeding in all directions, it's hard to realize that there is no actual fire in the theater. Yes, oil prices are down dramatically, and could go lower, which is not exactly terrific news for oil companies and oil services concerns - particularly those who have invested in fracking production.
But cheaper energy is good news for manufacturers and consumers, which is sometimes forgotten in the gloomy forecasts. Chinese stocks and the Chinese economy are showing more signs of weakness, and there are legitimate concerns about the status of junk bonds. These bonds have stabilized in the past few weeks, but another Fed rate hike could destabilize them all over again, leading to forced selling and investors taking losses in the dicier corners of the credit markets.
If you can think above the shouting and jostling toward the exits, you might take a moment to wonder about some of these panic triggers. Are oil prices going to continue going down forever, or are they near a logical bottom? Is this a time to be selling stocks or, with prices this low, a better time to be buying? Are China's recent struggles relevant to the health of your portfolio and the value of the stocks you own?
And what about Roberts, who's essentially yelling "Fire!" in the crowded theater? A closer look at his track record shows that he has been predicting disaster, with some regularity, for the past six years - rather incorrectly, as it turns out. In June 2010, when the markets were about to embark on a remarkable five-year boom, he wrote: "We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable," he added, ominously. ("The unthinkable," whatever that meant, never happened.)
In July 2012, Roberts wrote: "People talk about recovery, but to me we are in a much worse shape than the Great Depression." Wow! Wasn't it scary to have lived through, well, a 3.2% economic growth rate in the U.S. the following year? What Great Depression was he talking about? Taking his advice would have put you on the sidelines for some of the nicest gains in recent stock market history. It's also interesting to note that Roberts did not predict the 2008 market meltdown.
Since 1950, the U.S. markets have experienced a decline of between 5% and 10% (the territory we're in already) in 35.5% of all calendar years - which is another way of saying that this recent downturn is entirely normal. One in five years (22.6%) have experienced downturns of 10% to 15%, and nearly 18% of the last 56 years have seen downturns, at some point in the year, of more than 20%.
Stocks periodically go on sale because people panic and sell them at just about any price they can get in their rush to the exits, and we are clearly experiencing one of those periods now. Whether this will be one of those 5%-10% years or a 20% year, only time will tell. But it's worth noting that, in the past, every one of those downturns eventually ended with an even greater upturn and markets testing new record highs.
In times like these it is helpful to remember that, in order to generate the type of long-term returns that create wealth, you have to accept a certain amount of risk. With that risk comes volatility. The key is not to take steps to avoid the risk altogether, but to manage the risk where possible.
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you do, you live your life with basic truths. A lot of times we learn those truths at a young age from our parents, teachers, or others; we may acquire them by observation; and as we live our lives we learn lessons. Diliberto believes if we have all of these basic truths in our personal lives we ought to have them in our business lives as well. The book covers 23 Basic Truths he has in running his financial advisory practice. Here are three I found most interesting
quality of schools, transportation options, parks, crime rates. You can add proximity to a Whole Foods or Trader Joes to the list. According to a study by Zillow, homes within a mile of Whole Foods or Trader Joes are worth twice as much as the median value of other homes across the country. Even if they open up stores in cities where the home prices lagged a surrounding city, they start to outperform the city once the stores arrive. It's almost as if it's a signal for homebuyers validating the neighborhood. 
