It has been over four decades since my discharge from the US Army. During the short time I spent in service to our country, I had the privilege of becoming friends with a number of battle hardened veterans. These were special people who had the ability to face fear, adjust plans and, most importantly, lead others when needed in hopes that all would survive. 

Little did I know that these long lost friends would have such an impact on my life. I find that I think of them when I need a little push to overcome my own fear, adjust plans, and do what I can to survive the battles of my career. Although the fear these veterans faced cannot be compared to the investment battles we face in the day to day management of your portfolio, the memories of their ability to make decisions during times of stress have helped me as we attempt to protect you from a permanent loss of capital.

When we are facing a massive sell-off, there is a desperate search to find the reason. Most of these “reasons” have some rationality to them, but when markets decline as rapidly as they have during the past couple of weeks, the cause usually has far more to do with our fear of losing all of our savings than with the words of commentators. I have been through these battles many times over the decades and have survived. Yet even with this experience, fear still finds its way into my mind. However, past survival gives me strength to step back and realize that this time is not much different, and there is no need to give up the fight and run for the hills.

Reason Number One: Oil Prices

The current round of “reasons” for the decline are interesting. First, we have oil prices.  While it is true they have declined over 70% from their peak, do you really believe that low oil prices are destroying the world’s economy? If so, the next time you head to the gas station, you should add a couple of dollars per gallon to the selling price in order to do your part in saving the world. It is true that lower oil prices will impact the energy industry and the countries who rely on the sale of oil and gas to survive. But those industries and countries pale in comparison with the billions of people and industries around the world who benefit from lower prices. Enjoy the low price while you can, because as with any absolutely necessary commodity, the supply will adjust to demand in time and prices will rise to reflect that change. 

Reason Number Two: The Middle East

The problems concerning the Middle East are another reason given for the decline. If this was truly a major driver of the current sell-off, oil prices could not be at the prices they are. After all, the two countries making the most noise, Saudi Arabia and Iran, are two of the largest oil producers in the world. While the Middle East is a breeding ground of terrorism which creates fear in mankind and conflicts between governments, these fears have little to do with the ability of companies to manufacture and create products needed for all.

Reason Number Three: North Korea

The actions of North Korea and the great lie of setting off a hydrogen bomb are also blamed for some of the decline. If North Korea did set off the big one, I believe their neighbors China and Japan would have a little more to say about it. As far as the economy is concerned, North Korea is broke with a population living in a state of poverty, and they have no impact on world commerce.