“For 100 years optimists have carried the day in U.S. stocks.” Sir John Templeton

“This time it’s different!”

Those four words I’ve heard, I can’t even tell you, how many times, over the last two years.

Sometimes I ask, “So what’s different?”

The response, “The market crash, bank failures, world-wide recession, the administration, the oil spill, a nuclear Iran, deficit spending, congress, run-away inflation.” And then the question, “How do we protect ourselves?”

I recently had this question again as I chatted with a friend in my office. I replied, “There are really only certain building blocks of investments—cash, fixed income, stocks, real estate, commodities and precious metals. That’s all we have. We have to figure out how to invest in all economic seasons based on using those. And in that sense it’s no different. The challenge is each performs well in different parts of the economic cycle.”

He asked, “So what do you think will lead next?”

“I have no idea,” I responded. “And, truly, neither does anyone else.”

“So what do we do?” he asked.

“What we’ve always done, assume this time really isn’t different and invest in the best possible way we can.”

I went on, “Realize we’ve been through problems before but the U.S. and the other free economies are incredibly resilient. That’s why the stock market has gone up over the last 200 years through world wars, depressions, nuclear threats, and some governments, well, that have been less than stellar. Because people innovate and create wealth when they’re left free to do that.”

“And, really, if this time is different we have no way of knowing what would work anyway. If we can’t go by the past we have no clue as to what will be effective in the future do we? Unless you brought your crystal ball because mine’s a little cloudy.”

I found interesting the rest of what John Templeton wrote in his article, the above quote was taken from. Templeton wrote this in 1993. We were in the midst of the biggest bank failure since the depression. He had just watched hyper-inflation and interest rates. Real estate had crashed taking with it the economy and the stock market. Hmm, sound familiar?

Yet in the midst of this carnage he wrote, “By the time the 21st century begins . . . I think there is at least an even chance that the Dow Jones Industrials may have reached 6,000, perhaps more.”

Wow! Talk about an understatement. We recently crested 12,000. Templeton, the realistic optimist, had underestimated the growth by half. Yet he was continually optimistic, one of the reasons he was a phenomenal investor.

Ok, but we all get bombarded by bad news.

Day after day the drum beat of high unemployment, the real estate market collapse, the stock market gyrating, foreign countries on the edge of default, dictators of third world countries wanting to be master of the world.

Yikes, it’s down-right scary! Sometimes the fetal position in bed seems like a perfect idea.

And with our investments, it seems like we ought to go into protection mode until it all blows over. The only problem? The stock market often has it’s best gains in stressful times. Look at last year. And if we get left behind we may never make it up.

So what do we do? How can we stay realistically optimistic?

A few things that help me.

First, I remind myself, we have been here before. I personally have lived through the Cuban missile crisis when the world really did almost end, a 25% market drop on one day, Vietnam, a president resigning, another impeached, a third assassinated, several thousand banks failing, twice. Yet, if I had bet on the disasters snuffing out human innovation I would have missed a huge opportunity. People, set free, keep moving forward inventing and creating wealth for everyone.

Second, I adjust my focus. Couples are still getting married and will need a new home, furniture and appliances. Cars wear out so new ones will be needed. Last I looked we all still eat every day.  A few of us too much. But we need food produced, packaged and shipped. People still like to travel, go to movies, go to restaurants, buy new clothes.

In other words as long as we keep living we need things and someone will produce it. That in a nutshell is Econ 101. Think how smart you’re getting because you read this.

Finally, and most important, I focus on God as ultimately my source. At the end of the day, when it is the end of my days, it will all go away anyway. I’m trusting, when that time comes, I’ll be taken care of. So why would I not trust God to take care of my needs now? Seems to me if he has eternity worked out he probably has this thing called life, which he created, figured out too. And if he does and he truly cares about me, then he’ll guide and protect me in the chaos. Having that focus keeps me calm in the midst of it all.

I love what Isaiah says, “You will keep him in perfect peace whose mind is stayed on you.”

I like the image that when my mind is locked on God’s love I can’t help but have peace no matter what’s happening around me.

How about you? Are you a realistic optimist?

How do you unleash that power in your life? Let me know.

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Important Disclosures:

Douglas Armey, the LPL Financial adviser associated with this website, practices in Fresno, California and may discuss and/or transact business only with residents of the following states: California, Idaho and Oregon.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results.

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