OK, I was going to use the word ‘stupid’. But I did not want to hurt the feelings of Mr. Market. So we’ll just say that you are ridiculous. For quite some time you’ve been somewhat sensible. I’ll have to give you that. But yesterday, you were out of control. It was silly. You didn’t know which way to turn. Yes, the stock markets are ridiculous.
Once again, you were behaving like a little kid. First too much excitement, and then you threw a little tantrum.
Before we introduce the evidence or your behaviour yesterday this is a good time to remind readers that bonds are the adult in the room. And those bonds have certainly had their eye on you for the last month. Ever since you got all panicky around the coronavirus (COVID-19) and more.
But here’s what you did yesterday. And my commentary on Twitter.
I’m at 67Dodge, and yes you need to follow me 🙂
I also tagged ‘Mr. Bloomberg’, but I guess he’s busy.
Now to my understanding when we buy a stock or stock market fund we should have a long term perspective. Many will write that the time horizon should be 10 years or more. So what the heck were you thinking? Yesterday you reacted to a desperate rate cut by the US federal reserve. You thought it was great. How is a rate cut (financial) going to cure a virus (biological)? Never mind that this is a short term event. Do you know how this .50% rate cut is going to affect stock markets over the next 10 or 20 years?
I’ll answer that for you. No you don’t. So why are you reacting? And then you changed your mind.
Hey if the Fed’s scared, I’m scared.
Silliness upon some silliness. That’s some interesting bad-behaviour-compounding.
But wait, there’s more. Here’s what the futures are saying about the opening today.
OK so now you’re all excited about Super Tuesday?
Yes, good grief. Thank you Charlie Brown.
What’s it going to be tomorrow. You know March 5th is a wonderful anniversary.
Did you know that in years after an NHL legend scored 50 goals in 8 consecutive seasons, the S&P 500 went on to deliver over 17% annual over the next 15 years?
Sorry I don’t mean to give you any bright ideas. And yes, the above analogy is silly. Fittingly.
How can investors behave if you don’t?
The irony is that we ask investors to behave. And yet you can’t behave yourself. You do yourself no favours. You’re scaring off your customers. Most of them don’t have the stomach for that kind of stock market silliness.
We should remember that the markets are priced by the active managers. Those in ‘passive’ index funds merely follow along and go for the ride. Of course it should not be such a wild ride at all. If we are investing based on long term prospects, we should not react to short term events, and guesswork.
It’s no wonder that simple buy and hold beats Mr. Market. How do you ‘out-think’ Mr. Market, uh, don’t think. Don’t guess.
We have no idea how President Joe Biden might affect the performance of Walmart and Amazon over the next 10 years. But (ironically) I can guarantee you that Joe Biden will not be President in 10 years. You can connect the dots of silliness on that one.
Ignore the market. Ignore the noise.
And of course there’s nothing wrong at all with buying the market, if you can ignore the market. The cap weighted indices that most of use are not perfect, but they’re still great over longer periods. Benjamin Graham (Mr. Buffett’s teacher) perhaps framed it best when he wrote …
Those market makers like to vote most every day. That’s their job. They’re paid to be ‘smart’. And they perform a needed function for passive investors. And over the long run the markets will weigh the success of the economies and the companies that profit from, and drive the economies.
You just need to hang on through all the silliness. It’s worth it.
As per this recent post, keep investing.
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Dale
Thanks very kindly Dale for your thoughtfully written words of wisdom, penned in plain speak, with just enough humour to keep the message light and simple. Your wise counsel provides an anchor for us nervous investors treading water in some rough seas.
Hi Scott, so glad to read you’re finding value in the posts and messages. Stay the course with a good plan that you know you can stick to like glue. Market corrections are all normal and expected behaviour.
Dale
Thank you Sir. To say I find value in your work is truly an understatement. I must tell you that as a direct result of reading one of your articles a few months ago (bonds are the shock absorbers) I rebalanced and completely rebuilt the RSP portfolio. 70 % FI, balance in dividend equites, all ETFs (formerly high cost mutual funds). Following your thinking I used a combination of ZAG & ZTL for the FI side; as a direct result not only has the portfolio not lost any value in the last month it’s actually made a few $. Being in the final prep stage for retirement (5ish years), I simply can’t thank you enough. You are now my “go to” source for financial and investment related guidance. Please keep up the good work and invaluable service you provide. I’m sure there are many others out there that feel as I do. Thank you again.
Hey Scott, thanks so much for sharing. That honestly makes my day. Glad to hear that you prepared in advance of your retirement as you’re in that retirement risk zone. Feel free to reach out at any time.
Dale
Great style of writing. 10 years ago could I have imagined the 10yr yield would be less than 1%? I just hope 10 years from now it’s not ar 10%.
By the way, I think I have a Mike Bossy card at my mother’s house somewhere.
Thanks for that. Good luck finding the card. I know I have a few Bossy’s. I most of the league from 68-70 and a few other years, partially covered. I’ll find and post on Twitter.
Dale