Why Pessimists Never Make Money

Keith Fitz-Gerald Jan 27, 2017

The Dow Jones Hit 20,000 on Wednesday and seconds after it broke through, the nay-sayers made their appearance, citing everything from “rich prices” to “low earnings” as justification.

I could only shake my head in amazement for one simple reason…

…pessimists never make money.

Today I want to talk about why that’s the case, and how you can set yourself up for profits.

It all comes down to understanding the subtle differences between a threat to your money and an opportunity you can capitalize on.

Humans Are Hard-Wired Towards Pessimism

You’re not imagining things if you think pessimists sound smart.

There’s actually an evolutionary reason for this.

According to social scientists, pessimism is a tendency born out of millions of years of evolution. That’s understandable given how dangerous the world was. (And still is.)

From an early age, we’re taught to view things skeptically because it helps us avoid loss. Harvard psychologist Steven Pinker says this is because the asymmetry of payoffs which come from overreacting to a threat is less than the cost of underreacting.

In plain English, you don’t touch a hot stove today anymore than you would have stuck your head out of the cave to look for a sabre tooth tiger millions of years ago.

Yet, that’s exactly what we need to do if we are to survive – and profit.

The markets are no different at 20,155 than they were at 8,245.

What’s changed is investor psychology.

We like to believe that all the things that have gotten us here in fact now threaten our very existence. In reality, though, what they’re doing is creating our next opportunity.

Case in point, many people believe that the Panic of 1907 (also known as the Knickerbocker Crisis) was actually worse than the Great Depression, but there’s nobody alive to tell us this today.

So, by virtue of having just survived the financial crisis, we’re left wondering if the Dow at 20,000 is a sign of better things to come, or a market that’s about to break down.

Yet, what’s happening now is no different than any other point in history.

Let me prove it to you.

Take a good, hard look at this chart.

(Click to Enlarge)
Every time the markets hit new peaks, there are corresponding headlines about why this is the end of the financial universe as we know it. But when you flip them around, each of those very same concerns turns out to be nothing more than a speed bump.

What’s more – and this is the really important part today – is that every single one turned out to be an opportunity for savvy investors who were able to poke their head out of the proverbial cave and go hunting.

Instead of being hunted.

So if you’re one of millions of investors who are fearful about the markets being at new highs, you’re not alone. The emotion you’re sensing is absolutely normal.

It’s what you do about it that matters most.

Until next time,


4 Responses to Why Pessimists Never Make Money

  1. Robert F. Pacione says:

    */Optimism is a skill within human existence. Deprived of years of encouragement through the years for most. A frightened Rabbit that knows how to run and run and maneuver fluentenly. Trained by memory. Paths that ensure possible safety. That clairvoyant thought process. Originates from a beginning of encouragement and shown the positive enlightened side of possibilities through courage and strength. Most do not see this within themselves. Adapting to there enviroments. Lined up as ducks in a row. Whispering to the one following behind what the next one told. And the seed has been planted in the hard drive of there brains. Filtering. Processing negatively through channels of the cognitive brain. Splitting and dividing equations intp a balanced train of thought until recognized overtime. These patterns of people in action and everyday life. Demonstrate every understanding of repetitive motion and thought. No real indifferences in a heard of sheep following the sounds of there repetitive thought. As “One” I believe the power of persuasion in a heard mentality and trained action often absorbed by those seeking a truth and meaning.

    In life and even the market. We progress. We rise. We stand and deal before us a unit. In times of crisis. The separation factor through classes. With the exception to the elite who have there own everything. Oh! Unfortunately there will always be those. Just hope those who cherish there own presence for us. Self trained in thought of being chosen to lead the world. Blinded by there own self glory. Fail to realize that they are the ponds in a game they do not know there playing. My opinion there.

    Also! Present time. Those leading the way to the fallen and the lost. Are also subject to any direction and easily convinced with the disered hope needed to reclaim losses or reclaim self worth. Desperation may have sent them there or the fears created through bad choices. Now have come to face in a source for an answer. Notibally. The wrong choice is made in those state of minds. Questions will rise. Now! Adding the market with these asses out there that mislead those lost and desperate. End up. Living a new kind of fear. The fear that tells you exactly what to do. But being so use to not making decisions for yourself. You choose to listen to someone who does not care about your well being.

    This is why. You Keith and the entire Money Morning Team. Inspire those wanting to break out there shells they have been cocooned in for there entire lives. Just need to rewire there own thoughts and process the optimism you guys encourage people to do. Don’t get your head blown up. lmbo. I just appreciate the encouragement and the outstanding honesty. More people have to adjust to and just become tired of there own actions and definitely there own stories. Like drunk Uncle Dan. lol

    • Keith says:

      Good morning Mr. Pacione.

      Thank you so much for such a thoughtful, well reasoned and informative comment. Everybody at Total Wealth – including myself – can learn something from what you have written. And, of course, thank you for the kind words too.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  2. Edward(Ted) Oliver says:

    Ted Oliver here.I am Canadian.Does a similar program exist in Canada?

    • Keith says:

      Good morning Mr. Oliver.

      That’s a great question. There are Canadian alternatives to the 26f program (which is what I presume you are asking).
      Obviously I’m dealing with the US specific choices but I’ll see what i can do to bring more of a “northern” flavor to things if there’s enough interest.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

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