Ludicrous Advice
by Dave Ramsey
| My dad has been reading a book, and the author says the stock market is about to crash. He’s scared my dad to death, and now he wants to pull out all the money from his 401(k) and other investments and buy gold overseas. What can I say to talk some sense into him? |
Dear Dave,
My dad has been reading a book, and the author says the stock market is about to crash. He’s scared my dad to death, and now he wants to pull out all the money from his 401(k) and other investments and buy gold overseas. What can I say to talk some sense into him?
Amanda
Dear Amanda,
I’ve seen books like this every year since I was old enough to read. This is ridiculous!
COULD the stock market crash? Sure, but there is absolutely no realistic indication of that happening. In order for the stock market to crash all the giant companies like Microsoft, Ford, GM and GE would have to blink out of existence. I’m not talking about lower earnings and economic slow downs, I’m talking about closing their doors and going out of business completely. Can you honestly imagine this happening?
Our stock market and banking systems are structured and operate much differently than they did before the Great Depression. There are many more safeguards in place. When President Nixon resigned the stock market dropped almost the same exact percentage it did back in 1929. There was no depression. Fifty-six days after the attacks on 9/11 the market was back up to the level it was on September 10. Did it drop for a while?
Of course, it did. But the people who run around spouting this end of the world kind of stuff are doomsayers trying to make a buck off people’s fear.
I don’t own any gold, and I’m not buying any gold. The returns are horrible – only about four percent over the last 50 years – and the volatility is all over the place. Next to gold, the stock market looks like a cake walk!
Dave
Posted by Jacob
from SLC Utah
Dave Ramsey, you and Amanda assume that her father is only motivated by a possible stock market crash. Your reply is misleading and suggests that you don’t really know how our financial system works. I do agree that his actions may be a bit extreme, but I also believe that calling his actions ludicrous is not appropriate, and inaccurate.
You don't back up anything you say, you simply expect us as sheeple to take your word for it. Why don't you share with us the safeguards that are in place now to protect the investors that were not in place before the Great Depression? Furthermore could you please explain how those safeguards will prevent another Great Depression? If you've done your homework you'll know that it was not the stock market crash that caused the first Great Depression. That was just the smoke screen. It was the deliberate, brutal contraction of the money supply done by the privately owned Federal Reserve Bank. If this comes as a surprise to you, consult any experienced economist who has studied the Great Depression. They will tell you the same thing. I think that if you sat down with the person who has made this seemingly rash decision to buy Gold, you will find that what he is actually doing is taking his money out of a currency that is becoming so inflated it will soon be history. The dollar is what concerns people who understand how our financial system really works. The false protections provided by the Federal Government and privately owned organizations are merely illusions. It’s unfortunate that you, in an extremely visible position with people who blindly follow your advice, could be so ill informed. Please get the facts before you unwittingly misguide us.
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Posted by Reed
from Portage, Wisconsin
Perhaps Amanda's father has read in the book she mentioned that the nature of today's economic climate is more precarious than previous situations because of the unstable mind and character of civilization's sworn enemy, exaggerating the likelihood of catastrophic economic collapse. If our enemies precipitate a truly horrific war time situation, as they admit they wish to do, we'll have more serious problems to worry about than economics. Gold won't solve those problems any better than currency. Amanda's father should have his investments balanced appropriately for his attained age. If he'd feel more comfortable and secure with a small portion of it in gold, that's all right. There's something to be said for comfort. And don't forget food storage.
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Posted by Scott
from West Jordan, UT
To preserve your buying power, especially in times where the dollar is losing value like it is today, converting some of your dollars into commodities like junk-silver coins, silver rounds, and gold bullion, is not a bad idea at all. Of course, it was better to buy it a few years ago when gold was less than $300/oz, as opposed to today when it is around 300% higher! Yeah, a 300% return if you bought Gold eight years ago - or in other words, you would have preserved that much buying power in converting some of your assets into precious metals.
If your Dad is worried about the stability of his investments, an alternative to pulling everything out is to convert some of his 401K investments into other funds less likely to be affected by fluctuations in the dollar (energy, utilities, basic commodities, foreign currency, gold, etc.). Just some ideas.
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Posted by Lorri
from Texas
The advice your father was given is sound advice. We are living in a world of illusion if we refuse to see the writing on the wall, and the writing in the scriptures. Please pray about this and come to your own conclusion.
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Posted by LaRee
from Wallsburg
Thanks Dave, your advice is GREAT! I've heard these kinds of comments all my life. If we will just trust our own "personal revelations" we'd be better off...
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Posted by Markham
from Pleasant Grove, UT
Dave says:
"Sure, but there is absolutely no realistic indication of that happening. In order for the stock market to crash all the giant companies like Microsoft, Ford, GM and GE would have to blink out of existence.... But the people who run around spouting this end of the world kind of stuff are doomsayers trying to make a buck off people’s fear."
Hmmm... Bear Stearns, one of the largest and most established investment firms in the country, recently 'blinked out of existence' due to the no-end-in-sight sub-prime housing catastrophe. One day it's $63 a share -- then it tanks so fast that JP Morgan has to make an EMERGENCY Saturday buy-out bid on it for $2 a share to keep it from plummeting into oblivion. Then a few days later JP Morgan RAISES its buying price from $2 to $10 per share, to appease all the horrified Bear Sterns investors. (Since when, in the history of finance, has any organization offered to RAISE its per-share bid after already striking the deal -- and offering 500% more per share?!?)
Then you have David Walker, the former US Comptroller General (the nation's chief accountant), who has been on Glenn Beck and many outlets (most won't host him) trying to stress the fiscal solvency of the US government is in such bad shape due to non-stop spending that we're facing an unprecedented economic crisis so awful no one dares touch it:
http://www.glennbeck.com/content/articles/article/196/4595/
The signs are everywhere of a major financial tsunami heading our way -- everywhere but in the mainstream press (whether 'liberal' or 'conservative'). A major stock market crash should be the least of our worries.
The prophets have counseled us for decades to get at least a year supply of food storage and reasonable supplies. Now, of all times, it is imperative to heed that counsel. If one has a sizable 401k and no food storage, where is he casting his lot? With the counsel of prophets or with the wisdom of man?
And, no, I'm not trying to sell a book.
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