Often, media and pundits tell us things are just “too scary,” the news too bad, the world too dangerous for stocks to rise. (More on how to better interpret media in Chapter 16.) Yet the world has always faced risks. Investors may say, “Yes, but that was then, and I always knew those past scary times would work out ok. But this time it’s different.”
First, as discussed elsewhere in this book, folks always think this time it’s different. But it’s never so very different as folks fear. This is why Sir John Templeton famously said, “The four most expensive words in the English language are, ‘This time, it’s different.’”
Among the jumble of evolutionary responses that helped humanity long ago but making investing tougher now: Humans evolved to forget past pain, fast. It was a survival instinct! We may think we were cool as cucumbers when faced with past fears, but the reality is, we very often weren’t.
Think we’ve had a rough few years recently? A major Japanese earthquake and tsunami and nuclear accident. Heightened Middle East tensions. Contentious politics. But are politics truly more contentious now? Political rhetoric has always been heated—anyone who tells you we’re more divided now doesn’t know a shred of US history. Political infighting is a constant. (And if you think US politics are heated, you should watch a UK parliamentary session. Heck, in 2012, a male Greek politician punched a female ...