The recent global economic crisis makes people especially skittish about their investments. They wonder how to predict trends and be safe regardless of the overall economy, especially with the threat of a potential “black swan dive” in the market.

Nassim Nicholas Taleb, author of the best-selling book The Black Swan, said the current global market turmoil is worse than it was in 2008, because countries such as the U.S. have larger sovereign-debt loads, according to Bloomberg News. Taleb popularized the term “black swan.” His point is that unforeseen events with a large impact on markets occur more frequently than statistical analysis predicts, thus justifying the high cost of hedging against disasters.

Taleb and a growing list of other financial experts and wealth advisors believe that the economy is about to undergo a black swan dive in which it will undergo a 40-percent decline in the next three years. Mark Spitznagel corroborates the black swan theory by analyzing the Q ratio – the market ratio divided by total assets over 110 years of market history. Spitznagel concludes that Standard & Poor’s stocks are significantly overvalued, suggesting a 20 percent chance of more than a 40-percent correction.

There are reasons to believe that the stock market is nearing the top. Earnings are peaking, the price-to-earnings ratio is 13.4 and exports are strong because of the weak dollar. There is high productivity because of weak hiring, with national unemployment figures at around 9 percent. Other factors include rising dividends, low interest rates and active merger/acquisition activity.

Experts were bullish about 2008, predicting a 13-percent advancement until the global economic crisis. Other patterns can predict economic growth, but circumstances may change it to create the black swan effect. Regardless of whether or should we say, when a black swan event happens, there are patterns well underway that should be factored into what might contribute to this period of decline.

·In the decennial pattern, the Dow rises and falls during a 10-year period. Because of the economic stimulus, there was a double-digit advance in 2010.

·A pattern based on the Presidential cycle has shown lower growth in the first 3 years of a U.S. President’s term and higher growth afterwards.

·In the Kondratieff Wave pattern, there are 60-year cycles of growth and decline. Other analysts measure the Standard & Poor’s Index against the Nikkei.

When all of the cycle data are combined, a drop and then an increase in economic growth can be predicted.

During this time, if President Obama were to repeat President Roosevelt’s actions – massive tax hikes, severe money tightening and business bashing, there could be a depression. If the federal government tightens lending and increases interest rates because of inflation, there could be a market correction. Another major economic indicator in southern California is housing. Prices are down to 2002 levels, contracts to buy homes are down 7 percent and there is no end in sight.

Realistically, the market is always volatile. People need to take specific actions to protect their wealth.

Probability is a way of expressing knowledge or belief that an event will occur or has occurred. Financial advisors talk about what might occur or happen in terms of probability. Equanimity, having an evenness of mind especially under stress, is possible when it comes to building a secure financial future for the average investor. In fact, the careful management and planning of financial assets can go beyond probability to certainty – even when so-called experts are predicting gloom and doom.

Circumstances change daily and working with a proactive financial management professional is advised. To hedge against inflation and uncertainty, investors need to consider their goals, assess where they are now and take action. There is every reason to be cautious in the short term but optimistic in the long term.

Paul’s 21 years of experience as a Financial Advisor gives him a unique perspective and expertise in leading Wealth Management practices. As an IRA Advisor (part of Ed Slott’s national IRA advisor network) and with access to world-class training and experience, Paul regularly collaborates with some of the best financial minds including forecaster Harry S. Dent and Asset Preservation Guru Jay Mitton. Paul is the founding partner of Logos Wealth Advisors, a boutique wealth services firm based in Southern California that specializes in a multi-disciplined approach that optimizes wealth preservation and wealth building.