Oakland, CA | Piedmont; Planning Today for Market Bubbles and Corrections

Hi, I’m Erik Wolfers. I’m the managing member of First & Main Financial. We’ve been helping people with financial plans and wealth management for almost 20 years now—we help people get a great understanding of where they are and where they might be and what the impacts would be from choices that they might make now or in the future, with their finances and job choices and housing. Today I want to talk just a little bit about bubbles.

I don’t know if the stock market is in a bubble right now; there are certainly some kind of crazy things happening with some stocks going up unreasonable amounts of money and in short periods of time—there are then people wanting to short those stocks, and stocks seemingly going up without any resistance. Of course, we’ve been through times like this before and we have no way of knowing exactly how this is going to turn out. In the past when things don’t make sense, then eventually consensus in the market does step in and brings some sort of a correction. I don’t know if we’re going to have a broad correction or if it’s just the valuations of some of the stocks that have been going sky-high that will eventually have to be brought down.

The market as a whole doesn’t have to go into a corrective phase just because some parts of the market are frothy or over purchased. Generally there has to be some clouds on the horizon with the economy or the outlook for the economy or global tension that would create a correction. Corrections are normal—a twenty-percent correction that last 9 months or so. It’s healthy for the market to sometimes sweep away people that are more speculative than the folks who are buying and holding for the long-term in order to build wealth.

Sometimes when it’s easy to make money in the market, it feels like it can last for a long time and it’s hard to know when to get out. But, if you’ve made a lot of money in the market, maybe now it’s not a bad time to get out and see what happens, if you’re more inclined to trade.

We’re not doing trades. We invest money in a means where it’s extremely likely that you’d never have losses so long as you don’t sell when things are ugly and scary. It’s extremely likely that long-term returns will be healthy in the stock market with the means of investing that we employ.

We’ll see what happens—it’s interesting to watch people ask me about stocks and what I think of cryptocurrency—it’s not really my job. At most, I’m just trying to make sure that our clients get the best chance of succeeding for whatever their goals and future looks like when taking into account their current circumstances.

If you are looking for some financial guidance; whether for a one time financial plan or continuing advice on your investments, we invite you to meet with a First & Main Financial planner for a free consultation. We would be more than happy to sit down with you, assess your situation and review our services to help navigate your financial future.