Aug

13

Trouble ahead?

August 13, 2021 |

Jeff Watson writes:
The market weathermen, self described sage like realists, always see trouble on the horizon and are compelled to give all knowing, logical reasons the market will get hit. Sometimes even invoking "science." To them the pressure is dropping hard, the seas are building, and we're about to get hit with sustained gale force winds. It's always doom and gloom to them. They want the little guy to get scared, pitch his position and make the broker money, rinse and repeat. Meanwhile, Steve provides some perspective and his chart lists 49 reasons for the market to get hit…while the S&P went up 35X during that time. Unfortunately the brokers don't want their clients looking at charts like this or reading Dimson.

James Lackey agrees:

Jeff says what we all learned the hard way. The market in stocks is an engine designed to go up. Any business decisions based otherwise are in between risk-based conservative - which in most cases is a good thing - and ruinous, as the vigorish will grind you to a long-term guaranteed loser.

Michael Cook responds:

I broadly agree with this but let’s not take it as written on tablets of stone.

One of the nastiest human failings in my opinion is recency bias and for investors in US stocks, an entire career (unless a very seasoned investor indeed) has been a basic bull market tempered by the bear markets of 1997, 2002 and 2008 and whatever the hell March last year qualifies as. Recency bias on steroids.

But it doesn’t mean it must always be like that. Just ask eg the investors in the Japanese stock market 40 years ago who pretty much are still waiting to be making money now…

Leo Jia adds:

Even if there is a sharp drop, it will only be shallow and short term. This is not a big bubble and there is no euphoria yet. If one suspects big money are selling, the question is what is the alternative to the US market. Perhaps the worry will be legitimate when Turkey and China become out of any concerns.

Nils Poertner writes:

what makes the difference between folks who are in the market - and trade successfully in the long-term and those who don't is often the acquisition of implicit knowledge. Things we know are true on some level, and that we need to experience personally many times to know that they are true - not in the absolute sense but more intuitively - and percentage-wise.

we live in a very explicit world now everything needs to be spelled out. but the "absense" of something is a better guide than the appearance of an event.

an example would be that SPX drops by 3pc one one day (after months of overheating) - AND the financial press is somwheat quiet aout the drop. as long as they are loud…one can normally relax a bit more.

not to be confused with long-term investing. eg, some of my English friends who bought prime real estate in the 90s in London, and levered up every year with new flats, are all fabulously rich now. was it being lucky or smart? who knows? implicit knowledge is underrated - was my point to say.

Leo Jia comments:

Even if there is a sharp drop, it will only be shallow and short term. This is not a big bubble and there is no euphoria yet. If one suspects big money are selling, the question is what is the alternative to the US market. Perhaps the worry will be legitimate when Turkey and China become out of any concerns.

Duncan Coker writes:

Agreed, it's worth noting that the 00's were the worst decade since the 30's for stocks. I'd propose there was a bearish recency bias going on during the 2010s.

I liked the video about carnival scams. I recall "winning" an album at age 13 from a darts game on the boardwalk at Asbury Park, NJ. No doubt I overpaid. It was a vinyl from a band I had never heard of at the time called the The Allman Brothers which forever changed my life in music.


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