Trick of the Trade: Predict Disaster
The recent unpleasantness in the U.S. and global stock markets has once again uncovered a winning marketing strategy in the financial services world. Normally, people get paid millions for their marketing secrets, but as a public service, I’m going to share this four-step secret with you for free.
Step 1: At some random time during the year, call up a local or national financial services reporter and predict disaster. Go big! Tell them all signs point to a catastrophic bear market the likes of which we’ve never seen before. Tell them this will be the first time in history the markets will go down and never recover to their previous highs. Ever.
As a great example, Royal Bank of Scotland economist Andrew Roberts called his press contacts in June 2010 and told them: “We cannot stress enough how strongly we believe that a cliff edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable.”
Is that big enough for you? If not, follow the lead of Marc Faber (known to some as Dr. Doom) who in August 2013 predicted a 1987-like stock market meltdown later that year. (This followed his wonderfully apocalyptic 2009 prediction: “I am 100% sure the U.S. will go into hyperinflation.”)
Or maybe you can emulate Michael Lombardi of Profit Confidential, who predicted “the Great Crash of 2013.”
The goal here is twofold. First, you want to get a lot of attention in a hurry, and this is the fastest, easiest way to become a household name. The human brain is wired to pay sharp attention at any sign of danger, and some journalists in the consumer press understand that a scary prediction gets attention. If the market will bleed, it will lead.
Second, think of the positioning. You are the only person who is truly concerned about protecting people’s portfolios from negative returns. Clients will certainly edge away from those advisors who preach calm and a long-term investment approach when we’ve just been told that an unthinkable catastrophe, a 1987-style meltdown, lurks just around the corner.
They’ll arrive at your door like refugees, frightened out of their wits, and you’ll reassure them and take them out of those risky stocks and protect them from those normal market returns.
Step 2: Alas, the market probably won’t cooperate with your marketing scheme by going to hell in a handbasket at your convenience and on your timetable.
In hindsight, there was no Great Crash of 2013. Roberts’ prediction happened to be a particularly unfortunate call, given that the markets were actually in the early stages of a remarkable five-year bull run.
Faber’s 2013 prediction was spectacularly wrong. Instead of dropping 25% as it did in the last quarter of 1987, the S&P 500 actually ended 2013 up 32.4%. Oops.
But relax, relax; this is entirely normal. After all, positive market years tend to outnumber negative ones by a 4:1 ratio. Not to worry. Nobody will ever check up on your track record — including most of the reporters who credulously passed your alarmist views on to their loyal readers or viewers.
Step 3: Wait a little while, and then predict doom all over again. Roberts got another dose of media attention in July 2012, saying, “People talk about recovery, but to me, we are in much worse shape than the Great Depression.” Of course, his predictions were wildly off the mark once again.
Faber didn’t wait a whole six months before, in December 2013, he predicted that the stock market would decline the next year. His recommendation: Investors should sell their stocks and buy gold instead.
This might not have been the greatest advice for those who heeded it. While the S&P 500 rose 11.4% that year, gold prices were down 2.2%.
Lombardi also predicted “the Great Crash of 2015.” What great crash of 2015, I ask you?
So what? Don’t worry! By then, your track record for predicting the future has already safely vanished in the great babbling sea of punditry.
Step 4: Make your prediction all over again. Be creative! Be bold! There will be plenty of negative headlines to seize on. Maybe this time artificial intelligence will wreak havoc on humanity, which means this is the perfect time for smart investors to retreat to bonds so their portfolios will be safe while they’re being eviscerated by their smartphones and robotic vacuum cleaners.
If you keep this up, sooner or later the law of averages says you’re going to actually come out with your doomsday pronouncement plausibly in advance of an actual bear market. At some point, if you keep saying the same thing over and over, you’re going to be right.
And, sure enough, right before the downturn this year, Faber predicted that this would be a down year for stocks. Uncanny!
Roberts predicted, at the start of this year, that the global markets would “look similar to 2008.” Amazing! Lombardi predicted a U.S. recession in 2016.
Rejoice! This is the jackpot you’ve been working so hard for all these years. You’re now a certified genius. You predicted (as it happens, many times, but never mind that) the current downturn, when so many others were caught flat-footed.
This is the time to publicize your one accurate prediction and forget to mention the others. Get reprints! Go on TV. Rake in all those clients who are fleeing more-responsible advisors who foolishly told their clients to hold tight while the markets did their normal thing. Only you have the key to the future.
At this point, you pretty much have it made as far as marketing is concerned, but for the rest of your career, I would recommend that you continue making wild market predictions just to make sure your name doesn’t slip away from the public consciousness in the same way your track record did.
From now on, you’re so famous that it no longer matters whether your predictions are up or down; they’re news! They’re the latest from the person who foresaw that last market downturn, the only one among us who has a working crystal ball.
If you’re into the science of forecasting, then you can let a random number generator tell you whether to predict a bullish or bearish cycle is coming up. If not, try a dartboard. Just don’t let anybody in on your methodology, and meanwhile, start allowing reporters to refer to you as a guru.
Oh, and remember one other thing: Whatever you do, don’t invest your own money according to your predictions.
It would definitely be counterproductive if your marketing plan happened to bankrupt your personal retirement portfolio. If anybody’s going to have to wait a few extra years before they can retire, let it be all those nervous investors whose darkest fears you stoked along the way.
Bob Veres, a Financial Planning columnist in San Diego, is publisher of Inside Information, an information service for financial advisors. Follow him on Twitter at @BobVeres.