Others have called it Hopium, because it is based on Hope, and acts like opium, in that it has a powerful influence on our ability to deal with and sometimes disconnect from reality. Hopium is belief without specifics or clear analysis, so we can cling to our hopes and never actually test data for objective results.
Please understand, I’m not advocating against hope as a feeling or taking the cynical and materialistic view that hope is totally useless. What I want to explore is the devastating consequences of hope when it is used as an emotional drug to avoid a clear view of reality when dealing with investments, savings, and retirement planning. In simple terms, we must hope and believe in ourselves and our ability to create a better world for ourselves and our families, but we must avoid hoping for a positive outcome in the face of objective data and analysis to the contrary. Don’t take the emotional drug Hopium and allow yourself to discount all objective facts and data while stubbornly clinging to your hopeful beliefs.
It has been said in other ways, such as, “don’t confuse me with facts, I know what I believe.” Or, “doing the same thing the same way and expecting different results (hoping something will change) is the definition of insanity.” Hope can keep our lives going in a positive direction, while Hopium just directs us toward a large fall over a huge cliff, especially when it comes to investing.
Let’s examine a few instances of Hopium and how it appears in our personal and financial life. If this feels too close to your emotional home, perhaps you need to “kick the Hopium habit.”
What about after the NASDAQ stock market crash in early 2000? I know people who would not even open their 401(k) statements because they knew the information would be so depressing. All they could do was hope it would get better; but, in fact, it was just too late. Others held firmly to their personal hope that “the market will come back,” or “this is only a correction before it goes on to a new high,” or my financial advisor says “Invest for the long term” and wants me to ignore my 75% losses as just a blip in the market. And how is that working out for you? It is probably more Hopium!
I want to see objective data and hard analysis that confirms the actions that we have taken are demonstrating clear and measurable progress. When it comes to investing, I do not want to believe in something because it feels good or because I was told I should believe.
We have been told, over the years, things like:
• This is the war to end all wars.
• The war will make the world safe for democracy.
• Real estate always goes up in price.
• The sub-prime problem will be contained.
• Invest for the long term as stocks always go up.
• Gold produces no income so it is a bad investment.
• I’m from the government and I’m here to help you.
• A kinder and gentler IRS.
At one time or another we probably all hoped that the above were true. We probably now realize that most or all of the above are not true and that we were deluded by Hopium when we made investment choices based on any of the above ideas. How is that working for you? Probably not very well!
It would be better to define what we want to change in our lives (establish goals) and to clearly delineate the steps to achieve those goals. For example, we can say, I have 17 specific and measurable goals, I have made definite progress on six of them, achieved actual success on another five goals, and that I will be taking steps to achieve the other six goals within the next three months.
The above is how we should invest and plan for retirement without using Hopium. What is our goal? How long will it take? What specific steps will be necessary? How do we measure success for each step in the process? How do we determine if something is not working according to plan? Have we based our plan on assumptions about the investing world that might be inaccurate? Can we trust that stocks always go up, that the “Greenspan (or Bernanke) Put” will save our portfolio, that the sub-prime fiasco (or the current economic crisis) will be contained, that European economic structure will not implode, that Central Banks will not inflate their currencies into relative worthlessness, and so on?
Don’t rely on Hopium! Examine the data, your goals, the steps to achieve those goals, and the statements from Wall Street and government that you believe, and then create a “Plan B” in case some or all of your cherished beliefs turn out to be a little false, or maybe totally false. Think for yourself and make sensible choices based on objective facts, hard data, intelligent analysis, and all without the use of Hopium!
aka Deviant Investor
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