Investment risks come in many different flavors. Some risks grab our attention like biting into a jalapeno pepper. Other risks are much more subtle.
Market volatility risk is like the jalapeno. It evokes strong emotions and is so compelling that entire cable channels are dedicated to following the minute-by-minute swings in stock prices. But sometimes volatility can blind us to more subtle risks--risks that may be even more important to our long-term economic well-being.
More and more of my clients are concerned about the value of a university education. They don't wonder if their kids should go to college - they understand that those with college degrees are better off economically than those without. They also understand that providing our children with an education is still one of the greatest things we can do for them - not just to give them a better economic foundation, but to help them become better thinkers. But college expenses have soared, causing a squeeze for most families.
The comedian Brian Regan has a great sketch about going to see the doctor. He says doctors never talk about "pain." They use the word "pressure" instead, as in, "you might feel a little pressure" just before they hit you with something that really hurts. As Regan says, "If a doctor tells you you're about to feel some pressure--buckle up!"
Equity investors definitely felt pressure in the third quarter.
You know how a lot of book reviews say "This is a must read!" and of course it's usually hype? Well in this case, it isn't hype. With thousands of investment, business or economic books available, why read Irrational Exuberance? I have never referred to any investment book as "eerily accurate" before, but that's exactly how I'd describe this one. If you don't read the book, it would be worth reading this summary to get a brief overview.