Denial’s Not a River

“Everything popular is wrong.”

—Oscar Wilde

Popular Opinion

Well maybe not “everything” – but we think Wilde makes a very good point. We tend to cast a wary eye at consensus, and like to think for ourselves. To us, following popular opinion involves a lot of “others you don’t even know thinking for you.” And having strangers doing your thinking, is to us, a potentially dangerous thing. Especially when you consider the possibility those strangers may be trying to shape your opinions for reasons which don’t necessarily align with your best interests. Or that they are uninformed. Or just plain wrong!

Instead, we prefer to seek objective feedback from those we know and trust. We think the best formed opinions eliminate emotion. And it’s also our belief hope is certainly not a strategy. Actually we’re of the opinion it’s often the last resort of those whose game-plan is unraveling – or flimsy at best. We never want to be cheerleaders. We simply want to determine the facts as clearly as possible, and do our best to get our clients on the right side of the trade.

Facts vs. Emotions

As John Adams said, “Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.” Yep. And while most would reflexively concur with Adams, it’s interesting to watch the reactions of certain people when those stubborn facts challenge, or run contrary to their “wishes, inclinations” and “passions.” To us, that’s when we can really tell what a individual’s opinions and views are based on.

To us, it’s not “doom and gloom” to acknowledge facts (which are what reality is supposed to be based on). And we tend to notice the phrase “doom and gloom” seems to be used primarily by those resistant to change, and whose strategies (business, investment, etc.) are not in alignment with the information being presented to them. You can lead a horse to water, but…! We simply believe the acknowledgement of facts is the lynchpin of seizing opportunity. Without accepting facts – it’s our opinion one’s strategies simply become more closely related to rolling dice. And that’s a dangerous game we’re unwilling to play.

Based on facts we continually gather, we form opinions – and then decide whether we’re bullish or bearish on things. When we’re very bullish on something, we align with it because we believe opportunity exists. When we’re very bearish on something, we don’t run away from it, instead we align against it for the same reason – our belief that opportunity exists. We know what you’re thinking – this doesn’t sound like rocket science! And you’re right – it’s not! At least intellectually. But just open the door to emotions – along with John Adam’s “wishes, inclinations” and “passions” – and it’s amazing how things can change in the minds of human beings.

For a generation indoctrinated with “stocks for the long haul” suggesting positions contra to broad-based equities can seem downright audacious – even though the S&P 500 has returned around minus 30% over the past decade.[1] Suggesting the Dollar as we know it is near the end of its road (and that paper money is being debased globally) is tough for some people to swallow. In certain quarters it may even be considered unpatriotic. To us – it’s unpatriotic for a government and its central bank to debase the currency its citizens use to store their hard-earned savings. As we illustrated in “Kicking the Can” the Dollar has lost over 95% of its purchasing power since the creation of the Federal Reserve Bank in 1913, and the National Debt enters hyper-drive. To us, that’s not doom and gloom. In our opinion it’s just another opportunity based on facts.

Public opinion has been quite wrong recently. Stocks for the long haul? 10 years seems like a long time to us for -30% return. Real estate always appreciates? It certainly does not. The Dollar as the reserve currency of the world? In our opinion – not forever, and perhaps not much longer.

To us – there are always opportunities. We believe several fantastic ones are staring us straight in the face right now. You just have to seek the facts and accept them – as “unpopular” as they may be.

After all, as the saying goes, “Denial’s not a river.”

While there is a lot of tough reality going on out there – we maintain our positive outlook. That outlook is based on our belief that a bear market in one thing is often a bull market in another.

As we enter this critical time – now, more than ever – we believe investors need to focus on their investment strategies. Those readers who are clients are fully aware of the strategies we’re implementing in light of unfolding economic circumstances. Others may feel free to contact us to learn more.

Sincerely,

Stephan R. Ernharth, J.D.
Vice President
Ernharth Group
www.ernharth.com

Go to www.ernharth.com/economic-commentaries to read past articles from our Economic Commentary series.

1. BigCharts.com