I sense a little hesitation among some clients these days — that is, a hesitant feeling about global markets. This, frankly, I welcome, especially during a bull market. It speaks to our clients’ understanding that stock prices forever fluctuate. It says that they’re not the typical bleary-eyed individual investors who tend to embrace the prevailing emotion of the crowd.
While they all may not be aware of the specifics — that we’re now experiencing the second longest (8 years) bull market in history — perhaps our clients are sensing the sheer old age of the present trend. The good news is that there’s no evidence that bull markets die of old age. They do, however, tend to die from obesity and high blood pressure — and, alas, from the denial of their bloaty condition.
We’ve been spending some time herein lately taking the market’s temperature and the economy’s blood pressure, and, as you’ve noticed, conventional diagnostics aren’t flashing those telltale signs of danger — danger of an impending recession/bear market, that is. Corrections (10-20% dips), on the other hand, are common during even the healthiest of bull markets.
As for sentiment (read denial) Sir John Templeton coined what I believe to be one of the most prescient market adages of all time:
Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.
I.e., good if you’re a little gloomy over the market.
So you’ve discovered that you have a condition that needs professional attention. It’s a subtle, slow developing ailment that sneaks up on you over — depending on your age — a few years to a few decades. You’ve concluded that, to avoid intense future pain, you need to address it now.
Basically, we’ll say it’s money. Yes, we could say it’s lifestyle, it’s retirement, it’s college for the grandkids, etc., but you’ve got dollar signs in your head.
Let’s say you’ve already saved a large chunk, which you’d have to if you’re to hire a helper with experience. And you’ve figured out that it has to either grow even larger, or yield you more income (depending on your stage in life) if you’re going to “make it”, by your standards. So you call your CPA and he explains that you need to see a specialist and hands you my card.
After a minute or two on the phone with Gladys you’re on the calendar for a week from next Thursday.
You show up prepared: tax return, pension, 401(k), IRA, Schwab, bank account and social security statements — along with the one for that XYZ Life of Temecula annuity you wish you’d never got talked into 5 years ago — in hand, and you proceed to tell me your story.
Two-weeks later you’re back to endure 90 minutes of charts, theory and stories that you pretend to find fascinating, and you receive your prescription. I explain that if you’re to become our patient you’ll have to take the medicine we prescribe and submit to thorough in-person (or over the phone, depending on your location) checkups every 6 months.
The tricky part, initially, is the prescription, it could have immediate side effects — sometimes severe. One factor determines the “if” of the side effects, while it and one other determines their severity. The “if” factor is the timing of the medicine (will the positions we take fall in price during the ensuing days, weeks and months?), the accompanying factor determining severity will be your emotional reaction.
It’s like you have a treatable medical condition and your doctor prescribes some regimen. She tells you that you may feel amazing right from the get-go, or that you may feel utterly miserable — only time will tell. Although she assures you (as best she can without guaranteeing anything) that the evidence/research is on your side, and that the initial reaction bears little on the long-term odds that you’ll do well following her protocol…
We virtually always have an inventory of cash that needs investing and, yes, we do rely on our shorter-term trend analyses to aid us in the timing of the injections. However, as you’ve read countless times herein, charts notwithstanding, near-term market conditions are as uncertain as the wind; calm one day, gales the next. The unavoidable fact is that one must expose his/her money/emotions to — and endure — the winds that forever blow through the world’s markets if one is to achieve long-term investment success. This of course applies to existing as well as fresh capital entering the market.
My friend Bob says to me yesterday (about he and his wife talking new cars):
“I told my wife, honey, here’s what I know about good deals; they come and they go… and they come and they go… and they come and they go…”
Folks, here’s what I know about market rallies and corrections; they come and they go… and they come and they go… and they come and they go…
As do weekends 🙂
Have a great one!