Morning Mojo: Capitulation

It was March 6, 2009 and the Dow Jones Industrial Average dropped 54% to 6,469 from its peak of 14,164 on October 9, 2007 - a span of 17 months. Everyone’s stomach was in their throat as they watched their 401K’s and personal wealth vanish before their eyes. I can’t tell you how many people I know who cashed out at or near the bottom of the market because they could not take the pain and fear anymore. Unfortunately for them, it was at that exact moment, when the pain and fear was at its height, that instead of pulling their money out, they should have put more in. If you watch a financial news channel like CNBC, you have heard them using the word capitulation a lot over the last few years. Capitulation is a term mostly used in finance and it simply means to surrender or give up. This term indicates the point in time when investors decide to give up as a result of falling stock prices in the market. Basically it is the time when the pain is so bad that no one can take it anymore and everyone throws in the towel and gives up.

Unfortunately for most, at capitulation in the financial market, or really capitulation at almost anything in life, is EXACTLY the moment when you should not give up. It is the point when you need to dig deep and push through the pain and fear. It is the point when most massively successful people in life and savvy investors like Warren Buffett make all of their money and grow their fortune. They have confidence and jump in to capitalize on everyone else’s fear and the fact that they have given up. It sure is easy to score when the other team walks off the field. Candidly, that is the point I think we are at today in the housing market, but that is for a different conversation.

You know what would have happened to those who panicked, gave up, and cashed out of the market on March 6, 2009 if they would have stayed the course on their long term plan and kept their money in? Instead of sitting back today looking at a 54% loss they would have experienced a 75% gain from the bottom, from the capitulation point. And that is as of today after the market has pulled back over 1,000 points in the last 4 weeks.

So, what does this capitulation have to do with a Monday Morning MOJO? We all struggle with different areas of our life at times - our F-5: Faith, Family, Friends, Fitness, and Finance. We may even reach capitulation in one or more areas. My challenge to you, is don’t give up. Dig deep when all hope seems lost and push through the pain and fear. If you can do this, instead of experiencing a significant loss you will experience a monumental gain only very few will ever experience. Just remember, capitulation is God’s way of seeing how committed we are and how bad we really want it.

Capitalize…don’t Capitulate!!