Episode 38: Financial Inoculation Against Coronavirus Market Panic

Mar 2, 2020

This Episode

Solo Episode

You Will Learn

 You will learn:
– Why the media is trying to scare us
– The most reliable way to create wealth as a physician
– Two of my top resources for positive, valuable information
– The importance of “Insulating yourself from the noise”
– How to achieve financial positive outcome without the stress when it comes to investing

Resources & Links

Other show links:

In this episode, I want to answer the question “Should reports about pandemics in the media change how we invest financially?” The short answer, no! We should be focusing our attention on resources that will positively impact our financial future. You will hear some of my favorite people to learn from, as well as my 3 top tips for the most reliable way to create wealth as a physician. 

Justin (00:24):
What’s up everybody? Welcome to episode 38 of the anesthesia section success podcast. I’m your host, Justin Harvey. We have a solo episode today that I want to use as an opportunity to address a lot of the headlines that we’ve been seeing lately. A lot of them having to do with Corona virus and the global implications of potential global pandemic, and this is something that’s been pretty scary and unsettling. We, I was flying with my wife this past week. We were out on the West coast coming back and forth between there and Philly. We’re in the airports, a lot of people wearing masks, all the TVs and the airports tuned to, you know, CNN showing lots of very disturbing headlines having to do with the spread of this virus.

Justin (01:04):
Now from a medical and from a just a human perspective, there’s obviously a lot there to unpack and I don’t want to talk so much about that as I do want to talk about how do we think about global pandemic or the way that the media reports about the potential for that in light of our personal finances and especially should this impact the way that we invest, the way that a hiring physician invest their money and the way that they direct their attention to headlines like that. And what I’m going to propose to you is that it, it ought not, and in order to explore this a little further, I want to tell a quick story. This story is going to be extrapolated, adapt that I should say from a an author that I’m going to mention a little later in this episode. So I want to tell a story about an anesthesiologist who’s making about 375 K per year.

Justin (01:53):
They’re three or four years into practice as an attending physician. They’ve got a good system down. The anesthesiologist is good at numbers, understands the ratios and the math. They do this all day in the or and there because they’re hitting their stride, they’re pretty comfortable professionally. And so they’re starting to explore investing as a way to build wealth on the side. And so they’re directing a lot more of their attention to wealth building strategies. And this anesthesiologist goes from looking at his 401k once a year to now opening up a brokerage account and placing trades in between shifts and reading financial publications. And perhaps, you know, getting more tactically involved, placing buy, sell orders all the time based on the research that they’re doing, then they would have done previously. And so markets go up, markets go down. This physician is engaging with market movements as they unfold.

Justin (02:49):
And what’s happening is there’s an interesting principle here and it has to do with the psychology of felt loss. Meaning whenever your money goes down and you look at your portfolio, you have less than you did the day before. That registers as according to the way that behavioral psychologists classify this about twice as painful as a gain of similar magnitude. So if you’ve got half a million dollars in an investment account and your portfolio goes down to $400,000, that hurts twice as much as if it went from 500 to 600 a hundred thousand dollars gain. And so what this means is that this anesthesiologist who’s becoming more interested in investing, who opened the brokerage account, who’s doing all this wheeling and dealing and looking at their account multiple times per day, in some cases they’re finding that although, you know, their markets are generally going up, their experience as an investor is such that the downs are really magnified for them.

Justin (03:49):
And this anesthesiologist is, although they’re making money, they find that they’re increasing in anxiety, they’re not as happy, they’re a little bit more stressed out just because of how frequently they’re exposing themselves to financial information. This is all you know, empirically verified in a bunch of behavioral studies than some of which I will cite in the show notes here. Anesthesia, success.com/ 38 go there. I’m going to have a lot of good resources for this episode. But what this means is that this anesthesiologist is, as they expose themselves to more and more financial information, they’re, they’re becoming a little bit more high-strung, a little bit more irritable, a little bit more anxious. And that’s a problem because their anxiety is very much a part of their day to day existence. So the question that is sort of implied here is, is there a way for a physician who wants to have a positive financial outcome to have a reasonable likelihood of achieving that positive financial outcome without going through the stress inducing.

Justin (04:52):
And in addition, I would add not taking actions that aren’t going to improve through more and more trading that financial outcome, which they desire. And the purpose of this podcast, as you know, is to equip anesthesiologists and paint positions to be able to just live a life that they’re really happy with professionally, personally, financially with their family, with all of the pursuits to which they feel called. And part of that is pursuing financial independence. Because when you’re financially independent, when you’re no longer beholden to your employer, then you have the freedom to have a much greater degree of autonomy, not only with your job, meaning you can take it or leave it, but with your ability to be generous with your ability to do other things, to maybe ratchet down a little bit, the things that you need to do to earn income in order to spend more time with things that you value more.

Justin (05:42):
So the reason I’m telling this little story about this anesthesiologist who’s placing too many trades is for this reason, a lot of the places where investors today get information is the financial media. And there’s a bit of overlap between financial media and media at large. And in order to illustrate this and provide a little anecdote this morning and today is, let’s see, February 27th, 2020 the recording, the date of this recording, I went to two websites today just to see what was going on in the financial media. And here’s where I saw this overlap with this global pandemic content. I went to CNN business and what I saw, the big scary headline at the top was the Dow and S and P 500 are now in correction territory, which by the way, correction territory in air quotes is a totally artificial construct created by media to make these big scary headlines.

Justin (06:39):
It means there are about 10% off of their highs, meaning if the market was up to a hundred percent and came back down to 90%, this is correction territory. What this means is you know, you should be scared. You should be nervous. You’re an investor, you’re losing money. That’s what the media is trying to communicate to you. Now, I would argue you shouldn’t interpret it that way, but that’s beside the point. So that was the big scary headline at the top on CNN business. Underneath that are five other headlines. Remember, this is on the money page on CNN. I’m gonna read them real quick. Earnings may not grow at all. This year due to Corona virus outbreak, us companies say coronavirus outbreak could hit China revenues by 50%. Oil and energy stocks getting crushed by Corona virus fears how the Corona virus could spark a severe slowdown or recession in the United States.

Justin (07:27):
That’s CNN money. That’s what they’re telling you is that there’s 174 different ways in which this potential global health issue could harm your portfolio. Now, if you’re looking at the news every day, every hour, and taking in this information, and if you’re this anesthesiologist who’s in his office, you know, placing trades in between shifts, this is gonna make you do things to your portfolio to try to potentially avoid some sort of a financial catastrophe, which a whole pile of research papers would say is very, very, very difficult for you to do beyond just a buy and hold strategy. So that was CNN. You might think, Oh, that’s CNN, that’s the crazy left wing people. Let’s go to Fox news, which is going to be pretty much the opposite, you would think, but it seems that they would have this in common that they’re trying to make the reader freaked out about the headlines.

Justin (08:19):
So this morning on Fox business, the big scary headline, I’m looking at a picture. It’s a woman with a mask, like a personal protection droplet contamination protection type of mask. Like we should be scared about this pandemic. And then interposed on top of this woman’s face is a red stock chart going down all of this to produce anxiety and the reader, no doubt. And then the headline says stocks plunge into correction territory. Again, another artificial construct as virus crisis worsens around the globe. So whether or not there is going to be any longterm impact, and by that I mean 10 plus years from now, will your portfolio be harmed 10 plus years from now with what’s happening with coronavirus? We have no idea. We really have no idea. And any given day any headline could be the one that 10 years from now is the one that actually made a difference.

Justin (09:14):
But the point is it’s impossible to tell and these media outlets are really designed, they’re wired to just make you as freaked out as possible. The problem today is with the ubiquity of headlines, media, social media on our phones. Anybody who hasn’t has an Android, I just slide my thumb to the left and I get all these, you know, curated headlines of all the things going on out there for me. A lot of them have to do with healthcare and with finances and so the Corona virus thing is popping up all over the place. These companies can access our brain so directly. It’s as important as it’s ever been to recognize this relationship and the incentive of a of big media companies. They’re really incentivized and, and this is a theme that we’ve talked about in this show, follow the money. It’s true in advisor compensation, it’s true.

Justin (10:06):
And understanding how media companies make money, if we follow the money, what is a media company, whether they’re financial media, whether it’s Fox or CNN or some smaller publication, what are they incentivized to do? They’re incentivized to get you addicted to your phone and to find ways to monetize that addiction by creating outrage, creating engagement, making you overreact to things, making you anxious, making you feel like you need to be getting updates all the time to know what’s going on, as if that’s going to improve your situation. This is how media companies make money. This is how they maximize profits. It’s important to, if you want to build wealth over the longterm distance yourselves from this glut of information, because staying up on things like the coronavirus and how it may or may not impact your portfolio, it’s just not going to positively impact financial outcome.

Justin (11:01):
And so here’s what I would propose. The most reliable way to create wealth for a physician is to create a system which you can understand, a system that you can implement and a system which you can repeat in order to build wealth in investments. This is something that I do with my clients, but anybody listening can do this at any time. And I would also pause it that nothing that you read or an amount that’s so small to be indistinguishable from all the other screaming headlines, very little that you read is going to be beneficial on Fox money or MSN or CNN or any of these big outlets because they’re just trying to get you outraged and freaked out to keep on reading headlines so they can sell ad space. If you want to build wealth over time, what you need to do is insulate yourself from the noise and direct your limited attention.

Justin (11:52):
We all have only 24 hours in a day and we’ve got to sleep and we’ve got to work and if we want to think about how do we get educated in ways that we need to be educated to provide for our financial future, if that’s what you want, you need to be very intentional about the resources that you’re going to direct your attention to in order to build wealth. And so there are two people that I have developed my own personal philosophies from that I want to just briefly mention and point out to say maybe you should check out some of these resources. The first is NASA lab. Mr [inaudible] is a guy who, he has a background in wall street trading and he’s a PhD and an MBA and a really smart guy. He’s so smart that he sort of has gotten past the the finance stuff and is more into like philosophy, metaphysics, epistemology, things like that.

Justin (12:39):
But I love the way that he sees the world and that he’s very critical slash skeptical as am I of mainstream media. And he sees these, you know, these entities as frankly the the same way that I see them and I, I’ve adopted a lot of his views and he would even expand this not only financial journalism, but also economists is sort of this class, this second class citizen of business professional that he describes where he says, economists, they don’t need to be right in order to have an opinion. And in order to be able to continue to communicate that opinion, they just have to be charismatic and look good in front of the camera and they can continue to have a reasonably successful career. They’re not going to be judged based on their opinions. They’re just judged based on the way that they communicate.

Justin (13:27):
And the more that you, you know, he’s coming from wall street, the more that you expose yourself to these economists and their opinions and their, you know, making a bet on this economy or that economy or these relationships between currencies or this stock or that stock. All the ways that you can make bets in the stock market. If you allow them to carry you away, then you’re not going to be getting actionable information. You’re gonna be getting noise, just noise from economists who just get paid to say things or noise from news outlets that just try to capture your attention for as much as possible and you’re not going to get this understandable, implementable, repeatable system to build wealth. So to lab would say, definitely insulate yourself from sources of noise from distraction and expose yourself to sources of information which are going to be ultimately beneficial.

Justin (14:23):
Another guy really liked Tim Ferris, many of you have probably heard of, he’s a bit more popular. Mainstream has written a lot of different things on a variety of topics, but he has this idea that he’s developed called the low information diet. And this is again, it relates to the way that you relate to the news and mainstream media. And Ferris basically says, read as little as you can from any kind of mainstream publication because they don’t know you, they don’t have your best interest at heart. And it’s essentially just entertainment. And Taleb would agree with this assessment that most news, and there are some exceptions obviously, but a lot of journalism is just designed to drive clicks and there’s no room for nuance. There’s no room for adequate treatment of complex topics, and there’s certainly no room for describing how to maximize cash flows and how to be tax optimized and how to build a really robust asset allocation.

Justin (15:15):
Those are topics that are to the average consumer, pretty boring. You’re not going to drive clicks with headlines like you know, here’s how to reduce your taxes $3,000 this year through contributing to tax advantage accounts. That is a big yawn, right? But that’s real money in somebody’s pocket if they take the steps attached to that headline. So through a low information diet as it relates to the mainstream media, this is something where you can make it easier for yourself to create room in your life, to have time back in your day, to maybe read a book, maybe read some long form blogs from experts or have conversations with trusted friends or advisors or people who can help you make the financial progress which you seek. So the bottom line is, you know, to what extent are Corona virus headlines going to impact your portfolio? Like today, you know, in the last few days, markets have come down a few percent and Fox news and CNN have been more than happy to screen that from the rooftops.

Justin (16:18):
The fact is though, whether or not it’s going to have any longterm impact, we have no idea. If you’re only putting money at risk that you need 10 plus years from now in the stock market, then really you have no need for concern. If you don’t need your money for 10 years, then why are we worried about day to day fluctuations? If you’re looking, if you’re that anesthesiologist who’s hitting F five F five refreshing their portfolio every 15 minutes, you’re only going to increase your anxiety. You’re going to increase the amount of felt lost that you experience and you’re not going to improve your financial outcomes by bombarding yourself with information. You’re going to be trading more because you feel like you should buying and selling financial securities and that just adds to cost, decreases tax efficiency and it makes things worse. So coming up in a couple episodes, I’m going to talk with my friend, Dr. Aaron Lewis.

Justin (17:08):
We’re going to talk about what are some of the really practical systems you can put in place to be able to invest in a disciplined way on an ongoing basis that can be insulated from the noise of financial media. You can, you can be a successful investor, believe it or not, and never even pick up the wall street journal, never pick up CNN money or any of those. You can be a successful investor by understanding a couple of simple systems and a couple of key variables that we’re going to unpack in a couple of weeks. So that’s all I’ve got for this week. Thanks for tuning in. As always, hopefully you know this little bit of different content has been helpful for you because remember what I want with this podcast is to be able to equip physicians to be free financially as soon as possible, and a big part of that is successful investment, successful cashflow management, and when you understand that all the forces of media out there are really working against you, the sooner you understand that, the better off you’re going to be. So that’s all I’ve got for this week.