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Post Hoc Ergo Propter Hoc

By Dr. Gerald House

FRI FEB 11, 2022

Post hoc ergo propter hoc is a Latin phrase that means “after this, therefore because of this.” It is best described as a fallacious attempt to suggest a correlation between events, even when there are no facts to substantiate a causality. The rooster crows in the morning welcoming the dawn—the dawn does not happen because the rooster crows. We often fall into this trap when we follow the herd mentality and attempt to define our present situation by blaming others. For instance, we hear on the news that the stock market is down because of the tensions between Russia and Ukraine, or the freedom convoys in Canada and France are disrupting the supply chains. How much influence will these random events have on the stock market? Are these types of events signaling a severe downfall in the stock markets or is it just noise causing the financial markets to binge on volatility? The long-term effects of our reactionary decisions, such as selling off our stocks and moving our money in more liquid assets because we think the stock market is on the verge of collapse, may be hazardous to our financial well-being. Because of our short-sightedness, we sell our stocks when the market dips down and then later get back into the market when stocks have risen higher. Of course, these decisions run contrary to the buy low and sell high advice. Welcome to behavioral economics.

Contrarily, perhaps we should consider more substantial events, such as high inflation or the fact that the stock market is currently overpriced compared to their valuations. More importantly, we may want to take notice the Federal Reserve is suggesting several hikes this year to the federal funds rate—the rate of interest member banks charge to lend their excess cash to other member banks to meet their reserve requirements. When the Federal Reserve works to control inflation or deflation, there is always a reaction. Rate hikes push government bond rates down, which has an immediate effect on retirees depending on the modest income from these secure products. Additionally, the cost to borrow money goes up in a rising interest rate economy. Have you ever thought about how the economy would survive without the government’s intervention? I digress. This question is best left for another discussion.

We can talk about probabilities and statistics of the current investment markets all day and never obtain a consensus on the best course of action to remedy the situation. Listening to the economic and financial pundits will only frustrate the average investor. Instead, work out your individual economic and financial game plan with your financial advisor and monitor it throughout the year. Additionally, stay the course until your situation warrants changes. Do not expose yourself to the reactionary news talking points that do not consider your personal plan objectives. Ask yourself this question: does that news commentator know your financial situation and goals?

The prayer of Jabez is always appropriate when I am confronted with conflicting materialistic thinking. Jabez was a wise man. He knew that the source of all blessings comes from God. As he prayed this prayer, Jabez is acknowledging the almighty power of the Lord as the resource in providing all his needs.

“Jabez cried out to the God of Israel, “Oh, that you would bless me and enlarge my territory! Let your hand be with me, and keep me from harm so that I will be free from pain.” And God granted his request” (1 Chronicle 4:10 NIV).

As I grow older, and hopefully wiser, I find the simple things in life have more value to me than the more complicated worldly maneuvering to keep up with the Joneses. The truck I drive is a prime example. This old truck, a gift from my father, still gets me around, just like the shiny new ones I pass every day. Sure, I may need to repair it occasionally when it breaks down, but I do not have to worry about a monthly payment to add stress to my life. However, like me, the old truck still proudly wears the dents and dings of life. I have begun to show my love for this truck by repairing the damaged areas and improving its looks with a fresh coat of paint. However, the old Dodge, uniquely named Birddog, does not need to impress me or anyone else. It has weathered the storms of the past and is aptly suited to meet my demands in the foreseeable future.

“For I know the plans I have for you, declares the Lord, plans to prosper you and not to harm you, plans to give you hope and a future” (Jeremiah 29:11 NIV).

Your faithful servant

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