July 7, 2025 • 17 mins
“Hey Mike, why did the market go up after Iran was bombed? I even the potential or war would crash the market.” Discover why war may not affect the market as you would expect and what to look for instead.
Text your questions to 913-363-1234.
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Episode Transcript
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Mike (00:05):
Welcome to How to Retire on Time, a show that answers
your retirement questions. Myname is Mike Decker along with
David Franson over here, andwe're gonna be taking your
questions. Just text them rightnow to (913) 363-1234, and we'll
take them one at a time. Again,that number, (913) 363-1234.
Let's begin.
David (00:22):
Hey, Mike. Why did the market go up after Iran was
bombed? I thought even thepotential for war would crash
the market.
Mike (00:29):
So this is a common idea, common belief, and it really
stems with markets don't likeuncertainty. But uncertainty of
what? So let me just kind ofbuild a little premise here, and
then I'll go through a historyof wars and how they've affected
the markets. K? If there's anissue with Iran and Israel and
The United States, and there's awar, and it's kinda like the the
(00:51):
Afghan war and all of that,these forever wars that seem to
be happening over and overagain, how does that affect
Facebook?
David (00:59):
Yeah. Good question.
Mike (01:00):
How does it affect Costco's ability to ship goods?
Now you might say, well, oilcould affect it, and that's
true. Oil could affect energy asa source of energy
infrastructure of traveling,shipping things out, and all of
that. There's that argument, butthat's not everything. So how
does a conflict affect themarket is really the
(01:22):
quantitative approach tounderstanding what could happen.
How does the Iran and Israelconflict affect ChatGPT and its
growth, and how NVIDIA isproducing chips over in Taiwan?
Do you see how sometimes we takefear generally speaking, pull it
out of context, overgeneralizeit, and then say the markets are
(01:45):
gonna crash because of that thatone thing? It has to be a
significant war where countriesare involved. And think of like
a world war situation wherewe're sending over troops, we're
losing our workforce. That'smaybe when it might be more
applicable.
But we associate all fear as inall reasons to hurt the market.
(02:07):
It's not as clear as is thatDavid, is that making sense? The
cause versus the potentialeffect in the market?
David (02:13):
Yeah. Sure. I think so. And talk a little bit more about
uncertainty. Like, what are someexamples of things that can
cause uncertainty in the market?
Mike (02:20):
Yeah. So different versions of uncertainty, you
might think political risk. Soif there's a significant new law
that's gonna disrupt theindustry, that might create an
effect. If there's a newpolitician with a new agenda
going with there with certaintax regulations or legal
regulations, If the FTC isoverhauled in certain things in
the insurance world, if there'sa significant update to how
(02:41):
insurance products are allowedto be constructed, those are
things that can infect specificindustries. From a economic
standpoint, so as large aspossible, you've really got the
four cornerstones.
I just wanna do a couple ofthem, but you've you've got free
speech. K? Free speech isessential for the capitalistic
society that anyone canessentially rebel and create
(03:03):
their own company and kind of goagainst the status quo. We have
to have that innovative,rebellious heart, which is
what's fostered a lot of theAmerican innovation and grown
our economy. We have to havecheap energy.
If you don't have cheap energy,it's more expensive to keep the
lights on the building, totransport goods, to drive to
work, I mean, to heat our homes,all that. Energy affects
(03:23):
everything that we do, and thatcould have been something that
the Iranian and Israeli conflictcreated a market crash. But as
of right now, Iran hasn't had asignificant strike back. They
haven't cut off the straight ofI forget the name, but it's
there's this passage where 40%or so of the global oil supply
(03:44):
comes through, and if they cutthat off, that would then have a
legitimate reason to createconcern in the markets, but they
haven't done that. And so itdoesn't matter until it matters.
The markets say it doesn'tmatter because they don't seem
to want to do that. You have tocreate all these other
considerations of this verycomplicated situation. So you've
got first free speech. You'vegot then second, the
(04:05):
understanding of cheap energy.The cheaper the energy is, the
more money can go into thecreation.
The more expensive it is, theless money you have to invest in
creation or business and so on.Then you have to have effective
money or money supply. When youthink about the cost of money,
there's a very delicate balancebetween inflation and affordable
(04:28):
lending. The American economy isbuilt on debt. Businesses borrow
money to grow.
That's what it is. That's whythe bond market is the largest
market. The bond market isbigger than the stock market,
the real estate market, theinsurance market, or any other
market. We are built on debt.Now despite what some would say,
(04:49):
for business, these arecalculated.
You borrow against it at areasonable rate, not credit card
rates, but at a reasonable ratefrom an institution like a big
bank, and then your endeavors totake that money and be
industrious with it and grow itat a better rate. That's called
positive arbitrage. That'sanother pillar of an established
growing economy. So if the Fedincreases interest rates too
(05:13):
much, that makes money moreexpensive, which makes it more
difficult to borrow. Now that'skind of a simple explanation
because you've got the Fed'sinterest rates.
So the Fed, when they increaseinterest rates, affects
overnight lending, which affectsbanks and what banks will do.
It's not the only metric thatwould affect the debt or bond
market. You've also got, like,the ten year treasury, for
(05:34):
example, and the Fed has nocontrol over that. That is based
on the market sentiment. What isthe market willing to give for
United States debt, for example?
So if the treasury comes out andsays, we're gonna issue ten year
treasuries today at 2%, themarket would probably say, nope.
We'll pass. And so then thetreasury would say, okay. Well,
how about 3%? Nope.
(05:55):
We'll pass. How about 4%? Themarket would say, can you do
like four and a half? Okay. Weneed the money, so we're gonna
issue this debt, so that has tobe the rate.
So that's there's multiplecomponents on here. But when you
have a healthy inflation, soit's not too much, not too
little, You have a healthy Fedrate, so banks can borrow money,
(06:16):
which then bleeds into smallbusiness and the other parts of
the economy, and you have astable debt rating system, so
that the ten year treasury andall that, that financial system
has to be stable for the economyto grow. When it doesn't, it
hurts. Look at the seventies.This is one of the biggest case
studies for what we need toreflect on right now with the
(06:36):
potential oil problem.
If Iran clogs up the oil, thatcould be an issue. It's not
necessarily an issue. It couldbe an issue because there are
other ways to generate oil orenergy. But the point being is
in the seventies, we had the oilembargo. Oil dried up from the
Arab countries.
They were playing hard to get,and it created hyperinflation.
(06:57):
That then hurt the economy,hyperinflation, then interest
rates had to go up, and it was avery difficult situation. When
you look at 1965 to 1975, therewas no growth in the market. But
even after 1975, we kinda limpedalong until 1990. So we need to
understand that it doesn'tmatter until it matters.
We wanna be aware that it couldmatter, but we don't wanna try
(07:19):
and time the market because whenwe try to time the market, we
might miss those moments wherethere's incredible growth.
David (07:25):
And we've had some good growth in the days after this
the bombing. Right?
Mike (07:29):
Well, yeah, the Monday after Iran was bombed, there was
incredible growth in the market.The next day, there was
incredible growth. The dayafter, there was incredible
growth. So what is your system?And here's a great expression
for everyone listening, whetheryou're managing on your own,
whether you work with afinancial adviser, whatever it
is, put it as close to yourheart as possible.
Investing is when you buy aninvestment, so think of a stock
(07:53):
or an ETF or a mutual fund, andyou forget about it for ten
years. Trading is when you'reconcerned about the little
changes, the ups and the downsin between. If you're not
trading, you're you'reinvesting. You're buying and
holding for an extended periodof time, then you should breeze
past all of these conflicts. Ifyou're trading, then, yeah, that
(08:14):
should probably be your fulltime job.
Hopefully, you have a researchteam behind you, and you have a
calculated principle basedsystem that's gonna help you
make decisions so you're notwinging it.
David (08:23):
That's really interesting. Trading versus
investing. I like that.
Mike (08:26):
I mean, how hard is it to buy a couple of stocks and then
say, well, I don't really careuntil ten years from today?
There's a good chance if you buygood quality companies that the
price will be higher in thefuture. Nothing guaranteed to
the market, but I have a listright here because I knew the
question was coming. Here aredifferent wars that are broken
out and how they affected themarket. Okay.
(08:47):
K. So first off, when Germanyinvaded France, 05/10/1940, that
was a big deal. Mhmm. So we hada 26% drop in the market, and
that drop roughly lasted twoweeks. So even though there was
a world war happening, we werestill industrious as a country,
and the, in this example, SPX orthe S and P five hundred still
was able to recover even thoughit was a time of war.
(09:09):
Now there are plenty of ups anddowns along the way. There was a
panic over the Axis expansion,but the sell off was really, two
weeks. That's a big deal. Lateron, Pearl Harbor happened. That
was a 17% drop in the market,and the drop extended about five
months or so, bottoming out inApril 1942.
But that was five months, andthen it started to recover. This
(09:31):
wasn't a multiyear market drop.This was a moment in time. When
North Korea invaded South Koreaon 06/25/1950, the market impact
is around 11% drop, and itlasted two to three weeks.
David, if the market dropped twoto three weeks and then it
started to recover, would you beokay with that?
David (09:50):
I think so.
Mike (09:51):
Yeah. Hopefully, this is putting some context from market
historical behavior and how itcan help people. When the Suez
crisis happened, 10/23/1956,there wasn't a significant
impact in the market. It was avery big deal, the geopolitical
ramifications of this, but themarket, there was no significant
(10:13):
impact. The Cuba missile crisis,that was a a big deal in
10/16/1962.
The market lost around 22 or sopercent. That was from August to
October of nineteen sixty two,eight weeks or so, peak to
trough, top to bottom, but thenit started to recover. Could you
say, yeah. I've lost some money,but I'm willing to hold out
(10:33):
until it recovers? Is yourretirement plan, when you do
need to take money out from yourassets to generate income, could
your long term investments, thestuff that's in the market,
could you let it be for a longenough period of time to let it
recover?
The Kennedy assassination, thatwas a two and a half, 3% drop
intraday, as in during the day,but it recovered the next day.
David (10:55):
Oh, wow.
Mike (10:57):
That was a horrible moment in our history. Yeah. Very scary
time.
David (11:01):
I think it's one of those touch points that some people
are like, I remember where I wason x date x date. That's one of
those Yeah. Days they remember.
Mike (11:08):
You would think that the assassination of a president
Yeah. Would create a lot morepanic than one day in the
market.
David (11:15):
I'm surprised.
Mike (11:16):
But you have to understand, okay. We have
systems if that happens. I hopeit never happens.
David (11:21):
Right.
Mike (11:21):
I don't care what political party you are. That's
not something that I thinkanyone really wants. No. But we
have the system where the vicepresident steps in, congress is
still intact. Like, thegovernment still functions.
It's a horrible moment, but thegovernment still functions, and
the companies in the Americaneconomy are still operating.
(11:41):
They're still having their doorsopen. So we need to have fear
given context. The Gulf ofTonkin incident in 08/02/1964,
no major impact in the market.The six day war that started in
06/05/1967, no significantmarket impact.
Global tensions were high, butthere wasn't much of a financial
(12:04):
contagion here. The TetOffensive, 01/30/1968, markets
declined moderately, you know,about 8% or so, lasted two
months, and then it came back.The Penn Central bankruptcy,
this is more of a geopoliticalevent, but that was a 30% crash,
massive railroad bankruptcies.When you think about your safe
stocks, isn't a railroad companysupposed to be the most boring
(12:25):
stock you buy?
David (12:26):
It would seem so. Yeah.
Mike (12:27):
So when a railroad company goes bankrupt, that can create
panic. 30% in the market, sevenmonths, but then it's able to
recover. The Munich OlympicTerrorist Attacks. For those
that remember this, 09/05/1972,no significant drop in the
market, though that was a terrormoment. Not ideal.
The Yom Kippur war or the oilcrisis, 10/06/1973, that was a
(12:52):
45% drop in the market. Nowconsider the oil crisis. You
know, earlier we were talkingabout how if Iran shuts off oil,
that's when it could trigger amarket sell off, because that
affects energy. One of the fourpillars of any great
capitalistic growth economy. Wehave to have cheap energy.
So that's why, in my opinion,that was a 45% top to bottom
(13:17):
around there or so, and twentythree months of difficulty. Wow.
So we don't know what's gonnahappen with Israel and Iran. We
don't know what's gonna happenin this geopolitically very
tense moment, but it doesn'tmatter until it matters. So
going to cash may not be yourbest interest.
It's saying, hey. If the marketswere gonna go down I talk about
(13:40):
this in my book. Everyone thathasn't read my book, go on
retireontime.com and download mybook. I talk about how to handle
these situations. You need tohave a reservoir, some assets
that are principal protected sothat if the markets do go down
45% for twenty three months,you're able to bridge that gap
by taking income out of aprincipal protected source so
your other accounts have time torecover.
(14:01):
That's why we talk about thereservoir so much, is because we
don't know, but we don't need toknow. We just need to have a
strategy for moment a and astrategy for moment b. Plan a,
plan b. They're both focused ongrowth, but you can alternate
between the two freely. Theinvasion of Panama, there's the
Gulf War, the nine eleventerrorist attack, Iraq war
(14:21):
begins February.
A lot of these, they happened,but they didn't lead to maybe as
big of a market drop as youwould expect and last as long as
you would expect. When we talkabout fear in the market, when
we talk about, oh, I I was sure.Why are you sure? Take a step
back and say, how does itactually affect the business
(14:44):
that you're invested in? Manypeople are invested in Apple and
Microsoft in one way or theother, whether it's in your ETF,
whether it's in your mutualfund, whether it's you just
bought the stock.
That's why they're some of thebiggest companies in the world
is because most people seem tohave some exposure to them. How
does this war or potential waror potential peace, and I hope
(15:05):
it's peaceful from this pointon, how does that affect their
business, really? This is whereyou have to take a step back,
remove emotions, and startmeasuring the impact from an
inflationary standpoint. Is thegovernment still intact? And
does the business still have theability to operate with free
speech?
As in, they can still say whatthey want. They can still rebel
(15:28):
against the status quo. They canstill innovate. They can still
challenge things. They can stillbe industrious in that sense.
So as we enter into a verypolitically tense moment, not
just with Iran and Israel, butalso with Russia and Ukraine.
That's still a conflict. Andother conflicts maybe aren't as
big of a deal. I shouldn't saythat. That aren't as common on
(15:50):
the headlines.
They're still a big deal. Thereare many conflicts in Africa.
There are many conflicts allover the world that are a big
deal, but they're not gettingthe headlines that we see today.
You have to ask yourself andremove that emotion. How does it
affect the companies that you'reinvested in in your portfolio?
And hopefully, allows people tohave a little bit more stability
emotionally as we go throughthese difficult times. There
(16:13):
will always be difficult times.Evil always exists. There's
always conflict. That's just howthe world is, unfortunately.
So we have to keep that straighthead on our shoulders and
understand how to proceed.That's all the time we've got
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(16:35):
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(16:56):
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to learn more and get started.
Welcome to How to Retire on Time, a show that answers
your retirement questions. Myname is Mike Decker along with
David Franson over here, andwe're gonna be taking your
questions. Just text them rightnow to (913) 363-1234, and we'll
take them one at a time. Again,that number, (913) 363-1234.
Let's begin.
David (00:22):
Hey, Mike. Why did the market go up after Iran was
bombed? I thought even thepotential for war would crash
the market.
Mike (00:29):
So this is a common idea, common belief, and it really
stems with markets don't likeuncertainty. But uncertainty of
what? So let me just kind ofbuild a little premise here, and
then I'll go through a historyof wars and how they've affected
the markets. K? If there's anissue with Iran and Israel and
The United States, and there's awar, and it's kinda like the the
(00:51):
Afghan war and all of that,these forever wars that seem to
be happening over and overagain, how does that affect
Facebook?
David (00:59):
Yeah. Good question.
Mike (01:00):
How does it affect Costco's ability to ship goods?
Now you might say, well, oilcould affect it, and that's
true. Oil could affect energy asa source of energy
infrastructure of traveling,shipping things out, and all of
that. There's that argument, butthat's not everything. So how
does a conflict affect themarket is really the
(01:22):
quantitative approach tounderstanding what could happen.
How does the Iran and Israelconflict affect ChatGPT and its
growth, and how NVIDIA isproducing chips over in Taiwan?
Do you see how sometimes we takefear generally speaking, pull it
out of context, overgeneralizeit, and then say the markets are
(01:45):
gonna crash because of that thatone thing? It has to be a
significant war where countriesare involved. And think of like
a world war situation wherewe're sending over troops, we're
losing our workforce. That'smaybe when it might be more
applicable.
But we associate all fear as inall reasons to hurt the market.
(02:07):
It's not as clear as is thatDavid, is that making sense? The
cause versus the potentialeffect in the market?
David (02:13):
Yeah. Sure. I think so. And talk a little bit more about
uncertainty. Like, what are someexamples of things that can
cause uncertainty in the market?
Mike (02:20):
Yeah. So different versions of uncertainty, you
might think political risk. Soif there's a significant new law
that's gonna disrupt theindustry, that might create an
effect. If there's a newpolitician with a new agenda
going with there with certaintax regulations or legal
regulations, If the FTC isoverhauled in certain things in
the insurance world, if there'sa significant update to how
(02:41):
insurance products are allowedto be constructed, those are
things that can infect specificindustries. From a economic
standpoint, so as large aspossible, you've really got the
four cornerstones.
I just wanna do a couple ofthem, but you've you've got free
speech. K? Free speech isessential for the capitalistic
society that anyone canessentially rebel and create
(03:03):
their own company and kind of goagainst the status quo. We have
to have that innovative,rebellious heart, which is
what's fostered a lot of theAmerican innovation and grown
our economy. We have to havecheap energy.
If you don't have cheap energy,it's more expensive to keep the
lights on the building, totransport goods, to drive to
work, I mean, to heat our homes,all that. Energy affects
(03:23):
everything that we do, and thatcould have been something that
the Iranian and Israeli conflictcreated a market crash. But as
of right now, Iran hasn't had asignificant strike back. They
haven't cut off the straight ofI forget the name, but it's
there's this passage where 40%or so of the global oil supply
(03:44):
comes through, and if they cutthat off, that would then have a
legitimate reason to createconcern in the markets, but they
haven't done that. And so itdoesn't matter until it matters.
The markets say it doesn'tmatter because they don't seem
to want to do that. You have tocreate all these other
considerations of this verycomplicated situation. So you've
got first free speech. You'vegot then second, the
(04:05):
understanding of cheap energy.The cheaper the energy is, the
more money can go into thecreation.
The more expensive it is, theless money you have to invest in
creation or business and so on.Then you have to have effective
money or money supply. When youthink about the cost of money,
there's a very delicate balancebetween inflation and affordable
(04:28):
lending. The American economy isbuilt on debt. Businesses borrow
money to grow.
That's what it is. That's whythe bond market is the largest
market. The bond market isbigger than the stock market,
the real estate market, theinsurance market, or any other
market. We are built on debt.Now despite what some would say,
(04:49):
for business, these arecalculated.
You borrow against it at areasonable rate, not credit card
rates, but at a reasonable ratefrom an institution like a big
bank, and then your endeavors totake that money and be
industrious with it and grow itat a better rate. That's called
positive arbitrage. That'sanother pillar of an established
growing economy. So if the Fedincreases interest rates too
(05:13):
much, that makes money moreexpensive, which makes it more
difficult to borrow. Now that'skind of a simple explanation
because you've got the Fed'sinterest rates.
So the Fed, when they increaseinterest rates, affects
overnight lending, which affectsbanks and what banks will do.
It's not the only metric thatwould affect the debt or bond
market. You've also got, like,the ten year treasury, for
(05:34):
example, and the Fed has nocontrol over that. That is based
on the market sentiment. What isthe market willing to give for
United States debt, for example?
So if the treasury comes out andsays, we're gonna issue ten year
treasuries today at 2%, themarket would probably say, nope.
We'll pass. And so then thetreasury would say, okay. Well,
how about 3%? Nope.
(05:55):
We'll pass. How about 4%? Themarket would say, can you do
like four and a half? Okay. Weneed the money, so we're gonna
issue this debt, so that has tobe the rate.
So that's there's multiplecomponents on here. But when you
have a healthy inflation, soit's not too much, not too
little, You have a healthy Fedrate, so banks can borrow money,
(06:16):
which then bleeds into smallbusiness and the other parts of
the economy, and you have astable debt rating system, so
that the ten year treasury andall that, that financial system
has to be stable for the economyto grow. When it doesn't, it
hurts. Look at the seventies.This is one of the biggest case
studies for what we need toreflect on right now with the
(06:36):
potential oil problem.
If Iran clogs up the oil, thatcould be an issue. It's not
necessarily an issue. It couldbe an issue because there are
other ways to generate oil orenergy. But the point being is
in the seventies, we had the oilembargo. Oil dried up from the
Arab countries.
They were playing hard to get,and it created hyperinflation.
(06:57):
That then hurt the economy,hyperinflation, then interest
rates had to go up, and it was avery difficult situation. When
you look at 1965 to 1975, therewas no growth in the market. But
even after 1975, we kinda limpedalong until 1990. So we need to
understand that it doesn'tmatter until it matters.
We wanna be aware that it couldmatter, but we don't wanna try
(07:19):
and time the market because whenwe try to time the market, we
might miss those moments wherethere's incredible growth.
David (07:25):
And we've had some good growth in the days after this
the bombing. Right?
Mike (07:29):
Well, yeah, the Monday after Iran was bombed, there was
incredible growth in the market.The next day, there was
incredible growth. The dayafter, there was incredible
growth. So what is your system?And here's a great expression
for everyone listening, whetheryou're managing on your own,
whether you work with afinancial adviser, whatever it
is, put it as close to yourheart as possible.
Investing is when you buy aninvestment, so think of a stock
(07:53):
or an ETF or a mutual fund, andyou forget about it for ten
years. Trading is when you'reconcerned about the little
changes, the ups and the downsin between. If you're not
trading, you're you'reinvesting. You're buying and
holding for an extended periodof time, then you should breeze
past all of these conflicts. Ifyou're trading, then, yeah, that
(08:14):
should probably be your fulltime job.
Hopefully, you have a researchteam behind you, and you have a
calculated principle basedsystem that's gonna help you
make decisions so you're notwinging it.
David (08:23):
That's really interesting. Trading versus
investing. I like that.
Mike (08:26):
I mean, how hard is it to buy a couple of stocks and then
say, well, I don't really careuntil ten years from today?
There's a good chance if you buygood quality companies that the
price will be higher in thefuture. Nothing guaranteed to
the market, but I have a listright here because I knew the
question was coming. Here aredifferent wars that are broken
out and how they affected themarket. Okay.
(08:47):
K. So first off, when Germanyinvaded France, 05/10/1940, that
was a big deal. Mhmm. So we hada 26% drop in the market, and
that drop roughly lasted twoweeks. So even though there was
a world war happening, we werestill industrious as a country,
and the, in this example, SPX orthe S and P five hundred still
was able to recover even thoughit was a time of war.
(09:09):
Now there are plenty of ups anddowns along the way. There was a
panic over the Axis expansion,but the sell off was really, two
weeks. That's a big deal. Lateron, Pearl Harbor happened. That
was a 17% drop in the market,and the drop extended about five
months or so, bottoming out inApril 1942.
But that was five months, andthen it started to recover. This
(09:31):
wasn't a multiyear market drop.This was a moment in time. When
North Korea invaded South Koreaon 06/25/1950, the market impact
is around 11% drop, and itlasted two to three weeks.
David, if the market dropped twoto three weeks and then it
started to recover, would you beokay with that?
David (09:50):
I think so.
Mike (09:51):
Yeah. Hopefully, this is putting some context from market
historical behavior and how itcan help people. When the Suez
crisis happened, 10/23/1956,there wasn't a significant
impact in the market. It was avery big deal, the geopolitical
ramifications of this, but themarket, there was no significant
(10:13):
impact. The Cuba missile crisis,that was a a big deal in
10/16/1962.
The market lost around 22 or sopercent. That was from August to
October of nineteen sixty two,eight weeks or so, peak to
trough, top to bottom, but thenit started to recover. Could you
say, yeah. I've lost some money,but I'm willing to hold out
(10:33):
until it recovers? Is yourretirement plan, when you do
need to take money out from yourassets to generate income, could
your long term investments, thestuff that's in the market,
could you let it be for a longenough period of time to let it
recover?
The Kennedy assassination, thatwas a two and a half, 3% drop
intraday, as in during the day,but it recovered the next day.
David (10:55):
Oh, wow.
Mike (10:57):
That was a horrible moment in our history. Yeah. Very scary
time.
David (11:01):
I think it's one of those touch points that some people
are like, I remember where I wason x date x date. That's one of
those Yeah. Days they remember.
Mike (11:08):
You would think that the assassination of a president
Yeah. Would create a lot morepanic than one day in the
market.
David (11:15):
I'm surprised.
Mike (11:16):
But you have to understand, okay. We have
systems if that happens. I hopeit never happens.
David (11:21):
Right.
Mike (11:21):
I don't care what political party you are. That's
not something that I thinkanyone really wants. No. But we
have the system where the vicepresident steps in, congress is
still intact. Like, thegovernment still functions.
It's a horrible moment, but thegovernment still functions, and
the companies in the Americaneconomy are still operating.
(11:41):
They're still having their doorsopen. So we need to have fear
given context. The Gulf ofTonkin incident in 08/02/1964,
no major impact in the market.The six day war that started in
06/05/1967, no significantmarket impact.
Global tensions were high, butthere wasn't much of a financial
(12:04):
contagion here. The TetOffensive, 01/30/1968, markets
declined moderately, you know,about 8% or so, lasted two
months, and then it came back.The Penn Central bankruptcy,
this is more of a geopoliticalevent, but that was a 30% crash,
massive railroad bankruptcies.When you think about your safe
stocks, isn't a railroad companysupposed to be the most boring
(12:25):
stock you buy?
David (12:26):
It would seem so. Yeah.
Mike (12:27):
So when a railroad company goes bankrupt, that can create
panic. 30% in the market, sevenmonths, but then it's able to
recover. The Munich OlympicTerrorist Attacks. For those
that remember this, 09/05/1972,no significant drop in the
market, though that was a terrormoment. Not ideal.
The Yom Kippur war or the oilcrisis, 10/06/1973, that was a
(12:52):
45% drop in the market. Nowconsider the oil crisis. You
know, earlier we were talkingabout how if Iran shuts off oil,
that's when it could trigger amarket sell off, because that
affects energy. One of the fourpillars of any great
capitalistic growth economy. Wehave to have cheap energy.
So that's why, in my opinion,that was a 45% top to bottom
(13:17):
around there or so, and twentythree months of difficulty. Wow.
So we don't know what's gonnahappen with Israel and Iran. We
don't know what's gonna happenin this geopolitically very
tense moment, but it doesn'tmatter until it matters. So
going to cash may not be yourbest interest.
It's saying, hey. If the marketswere gonna go down I talk about
(13:40):
this in my book. Everyone thathasn't read my book, go on
retireontime.com and download mybook. I talk about how to handle
these situations. You need tohave a reservoir, some assets
that are principal protected sothat if the markets do go down
45% for twenty three months,you're able to bridge that gap
by taking income out of aprincipal protected source so
your other accounts have time torecover.
(14:01):
That's why we talk about thereservoir so much, is because we
don't know, but we don't need toknow. We just need to have a
strategy for moment a and astrategy for moment b. Plan a,
plan b. They're both focused ongrowth, but you can alternate
between the two freely. Theinvasion of Panama, there's the
Gulf War, the nine eleventerrorist attack, Iraq war
(14:21):
begins February.
A lot of these, they happened,but they didn't lead to maybe as
big of a market drop as youwould expect and last as long as
you would expect. When we talkabout fear in the market, when
we talk about, oh, I I was sure.Why are you sure? Take a step
back and say, how does itactually affect the business
(14:44):
that you're invested in? Manypeople are invested in Apple and
Microsoft in one way or theother, whether it's in your ETF,
whether it's in your mutualfund, whether it's you just
bought the stock.
That's why they're some of thebiggest companies in the world
is because most people seem tohave some exposure to them. How
does this war or potential waror potential peace, and I hope
(15:05):
it's peaceful from this pointon, how does that affect their
business, really? This is whereyou have to take a step back,
remove emotions, and startmeasuring the impact from an
inflationary standpoint. Is thegovernment still intact? And
does the business still have theability to operate with free
speech?
As in, they can still say whatthey want. They can still rebel
(15:28):
against the status quo. They canstill innovate. They can still
challenge things. They can stillbe industrious in that sense.
So as we enter into a verypolitically tense moment, not
just with Iran and Israel, butalso with Russia and Ukraine.
That's still a conflict. Andother conflicts maybe aren't as
big of a deal. I shouldn't saythat. That aren't as common on
(15:50):
the headlines.
They're still a big deal. Thereare many conflicts in Africa.
There are many conflicts allover the world that are a big
deal, but they're not gettingthe headlines that we see today.
You have to ask yourself andremove that emotion. How does it
affect the companies that you'reinvested in in your portfolio?
And hopefully, allows people tohave a little bit more stability
emotionally as we go throughthese difficult times. There
(16:13):
will always be difficult times.Evil always exists. There's
always conflict. That's just howthe world is, unfortunately.
So we have to keep that straighthead on our shoulders and
understand how to proceed.That's all the time we've got
for the show today. If youenjoyed the show, consider
subscribing to it wherever youget your podcast. Just search
for how to retire on time.Discover if your portfolio is
(16:35):
built to weather flat marketcycles if you're missing tax
minimization opportunities thatyou may not even know exist.
Explore strategies that may beable to help you lower your
overall risk while potentiallyincreasing your overall growth
and lifestyle flexibility. Thisis not your ordinary financial
analysis. Learn more about YourWealth Analysis and what it
(16:56):
could do for you regardless ofyour age, asset, or target
retirement date. Go towww.yourwealthanalysis.com today
to learn more and get started.
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