Every time there is a major crisis, I get asked “What should investors do Now?”
My answer is always the same:
The time to look for the emergency aisles and where the exits are located is before takeoff, not after the wings fall off the plane. You must have a plan in place to deal with unanticipated events, a just-in-case things head south scenario.
Ideally, you put this plan together when you are objective and unemotional and calmly contemplative — not when things are figuratively and literally melting down.
The people claiming you cannot anticipate an Earthquake/Tsunami/Nuclear accident are missing the point: We can anticipate disruptive events, as they come along all too frequently in history. Consider the following list, via Doug Kass of those 100-year flood/once in a lifetime events. These occur far more regularly than most people believe:
Black Swan events over the past decade
• Sept. 11, 2001, attacks on the World Trade Center and Pentagon;
• 78% decline in the Nasdaq;
• 2003 European heat wave (40,000 deaths);
• 2004 Tsunami in Sumatra, Indonesia (230,000 deaths);
• 2005 Kashmir, Pakistan, earthquake (80,000 deaths)
• 2008 Myanmar cyclone (140,000 deaths);
• 2008 Sichuan, China, earthquake ( 68,000 deaths);
• Derivatives roil the world’s banking system and financial markets;
• Failure of Lehman Brothers and the sale/liquidation of Bear Stearns;
• 30% drop in U.S. home prices;
• 2010 Port-Au-Prince, Haiti, earthquake (315,000 deaths);
• 2010 Russian heat wave (56,000 deaths);
• 2010 BP’s Gulf of Mexico oil spill;
• 2010 market flash crash (a 1,000-point drop in the DJIA);
• Surge of unrest in the Middle East; and
• Thursday’s earthquake and tsunami in Japan.
Do you have an emergency plan ready for when things get dicey . . . ?
The time to do drills is before the blitz, not after.
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.