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Why every pessimist is right (often to their cost)

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You have to be very, very careful not to get sucked into pessimism. It can be very, very hard to shake.

Here’s a (fake) pessimist’s Twitter feed: (a story in 7 parts, that also never ends!)

First tweet:

#1 “Things are terrible, and will get worse”

A few months later, recovery starts:

#2 “Yeah, some of those data points look okay, but they’re misleading. Things aren’t getting any better”

A few months after that, the recovery takes hold:

#3 “Okay, I guess things are looking better, but a lot of it is still bad”

A year later, the economy is in good health. GDP growth is picking up, and unemployment is falling:

#4 “Sure, that’s okay, but growth could be even better, and unemployment could be lower”

Fast forward another year. GDP and unemployment look great. Things are going well for the country.

#5 “Mark my words, there are bad times ahead”

Then, at some point, the economy naturally slows/stalls/falls

#6 “See, I told you. Things are bad!”

(Cue celebrations and said pessimist being quoted in the paper)

Then, the economy bottoms, and shows faint signs of recovery

#7 “Things are terrible and will get worse”

I was going to write ‘The End’, but it isn’t.

Unfortunately.

See, if you were paying attention, you’ll note that the 7th tweet is the same as the first.

And so the cycle starts again. And again.

Ever pessimistic, our old friend misses the boom entirely, never failing to see danger around the next corner.

Meanwhile?

Our GDP goes on to set higher and higher benchmarks.

Our stock markets regain and surpass previous highs.

Wealth is created. So are jobs.

But our old friend only sees the downside.

Be careful of listening to those people.

And don’t become one, yourself.

Your long term wealth might depend on it.

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Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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