Weekly Update — AND — Whilst you were sweating…

Let’s say you’re you, and you watch Fox News, and you keep hearing from those “in the know” that the market has peaked (it did last May actually), the Fed’s brain-dead, Washington’s broken and you better get out of stocks while the gettin’s good!

You wake up in the morning, you check that stock app that came with your mobile phone and it tells you the Dow’s down 150 points. The sensation borders on desperation, you knew it! Shoulda sold, like the guy on TV said! Then comes that voice in your head — you’re a long-term investor, don’t panic. You feel better, but not great. Next day you wake up, the Dow’s up a hundred, you feel really good! You get the email from your investment adviser, he confuses you with a chart and says that the near-term risk is likely to the downside, then he says “but don’t sweat it, you’re a long-term investor”. You say to yourself “whatever”. Next day you wake up, Dow’s up another hundred, you wonder if your adviser knows what he’s talking about, but you feel good. Next day you wake up, Dow’s down 250, you feel awful and you completely forgot what your adviser said two days earlier about near-term risk—and about you being a long-term investor. Next day you wake up, you don’t look at your phone. Mail comes, your monthly statement’s in it. You open it, the first page tells you that your account moved a fraction one way or the other and you say to yourself, “geeze! I think that’s roughly what I had two years ago!” You’re thinking what’s the use, I coulda done that at the bank and never stressed about the market!

Hmm…

Let’s say you’re a stock trader (as opposed to “investor”), and you’re short (betting on the downside) the market. You wake up and the Dow’s down 150 points. The sensation borders on elation, you knew it! Next day you wake up, the Dow’s up a hundred, you feel like crap! But you know that that’s the market. Next day you wake up, Dow’s up another hundred, you really feel like crap! You know the market, which means you know it can burn you. So you take a quick look at the New York Stock Exchange’s (NYSE) put/call ratio, it’s at 1.1, which means options volume points to pessimism among options traders. You check NYSE short interest and you see that the short interest ratio is 8.6 (which means it would take nearly 9 days for all the shorts to cover their positions [buy] based on recent volume)—and that’s kinda high. You’re thinking if stocks keep rallying there are a lot of bearish bets that could panic—i.e., buy—and push this market way up, and utterly destroy your put positions (costing you a bundle). Now you’re freaking out. Next day you wake up, Dow’s down 250, your puts ran all the way back from the previous two-day drubbing and you’re a little in the black. But you’re nervous as hell!

So why would I chronicle the hell (for some) that is short-term trading? Good question! I did it simply to have you appreciate why you aren’t, and/or your adviser (assuming that’s us) isn’t (on your behalf), a short-term trader.

So back to you being you. Whilst you were (despite what your adviser advised) sweating over the day-to-day volatility—and grousing over the past two years of market flatness—the last thing on your mind was that miraculous machine you hold in the palm of your hand every morning that houses the stock app that drives you batty. You’re not thinking about the recent upgrade and the two-year commitment to the service provider—or the fact that you’ve provided the same, or similar, for every member of your family above the age of, I’m guessing, 12. Or the fact that at some point today you, or a member or two of your family, and millions of other folks, will swing through Starbucks and pay north of ten bucks for something drinkable and the Thai chicken wrap. Or that Howard Schultz (Starbucks’ CEO) was just in China preparing to open 2,500 new stores. Or that Tim Cook (Apple’s CEO) just injected a billion bucks into China’s answer to Uber, then jetted over to India to powwow with Modi and to announce plans to open a new office in Hyderabad that will focus on the development of maps for Apple products, as well as a  “design and development accelerator” in Bangalore.

Of course, as you can now imagine, I could fill a very large book with the potential for the dozens upon dozens of global enterprises that occupy the equity exposure within your portfolio.

Yep, while you’re thinking you’d have been just as well off the past two years adding capital to your bank’s war chest—capital that it would’ve used to help fund businesses venturing into the still untapped markets of the emerging world (while paying you virtually nothing for the use of your funds)—the companies whose stocks are prominently featured in the equity vehicles whose symbols occupy your monthly statement are providing their wares to you and yours (and looking to do the same the world over).

Now that ought to hold you over — at least till the next 250-point down day…

As for the weekly update, being that this week was much about the Fed, I’m thinking yesterday’s video covered it pretty well:

Have a wonderful weekend!

Marty

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