Why You Should Ignore Market Doomsayers and Their Meltdown Theories

Members of “Armageddon, Inc.” who constantly predict doom and gloom aren’t really trying to help you.

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There is an entire industry that few people know exists. This little known industry is made of individuals and companies looking to tap into the fears of investors who buy into the idea that “this time it’s different”. Whether it’s that the government is driving the country into the ground and/or the global economy is about to drown in the ocean of money that central banks have dumped onto the world trying to keep it afloat or some other wild theory, they want to scare you into action.

They go around spouting doomsday scenarios year after year predicting Armageddon, despite the mountains of evidence disproving their theories. It shouldn’t be surprising that often the proposed solution to whatever the crisis du jour is just happens to be whatever business or investment they’re promoting (gold storage, silver bars, funds that attempt to profit from declining stock prices, etc.).

These doomsayers are creating an outlet for the slice of the population that buys into these theories.

One example of this was a particular fund manager who created a fund in 1995 with the express purpose of profiting from declining stock prices. [1]

One of the main ways he would attract investors was to appear on TV and talk about the worst case scenarios that he felt could unfold (remember Y2K?).

While this individual would cite facts and figures, those facts would inevitably lead to the same conclusion… we’re all doomed. And for anyone who agreed with his thinking, they would be led to invest their money with him….and they did. He ended up selling his fund to a large fund management firm in December 2008 for an estimated $140 million.

Betting against American prosperity has been a losing bet since the beginning of our nation. We’ve had our hiccups along the way, a Civil War, the Great Depression, quite a few recessions, two World Wars along with other conflicts, inflation, deflation, oil crises, tax hikes, bank failures, government shutdowns and regulatory changes.

We’ve also had 44 presidents, some good, some bad, and some really bad, and in November we’re about to elect a new one. What time has shown is that time and again the great businesses of the world adapt to changes in the economic/political environment and find ways to thrive. And for long term investors, that’s good news.

[1] http://www.federatedinvestors.com/FII/mutualfunds/details/overview.do?fundshareid=10956&basketid=19144

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