Hello fellow Fools, this is my first post on the Motley Fool Discussion Board. Please feel free to comment or critique. I would appreciate the feedback.
I am just as guilty of listening to all the respected stock market prognosticators such as Howard Marks, Jeremy Grantham, Michael Wilson etc. but I think it is important to separate the “noise” from what truly may happen in the coming months or years. Marks predicts a “sea change” with interest rates not going back to levels seen since the Great Recession, suggesting that the option to invest in credit rather than stocks may lead to better returns for investors. Grantham recently mentioned that he wouldn’t be surprised to see the S&P 500 drop to 2,000 and stated, “Don’t invest in the U.S.” (Bloomberg’s Merryn Talks Money 10/5/23). And Wilson seeing “tepid forecast for the 4th quarter and 2024 growth and supports our (Morgan Stanley’s) view that the earnings recession is not yet over” (Thoughts on the Market 11/6/23).
Though I respect all of the above tremendously, it is probably best not to allow what they say affect your investment decisions, especially if you are a long-term investor. I have fallen victim to this, as recently as this year and will probably fall victim to it again in the future. They may be right… but if you are holding over a number of years or especially decades, it doesn’t really matter. In that moment, it is just noise and can influence your mental psyche, cause undue stress, and result in poor investment decisions.
The amount you want to hold in stocks or fixed income or cash is dependent on your comfort level and not on what nobody else says. If you are comfortable with all your money in equities then the risk should be accepted. If it helps you sleep better at night to have a larger amount set aside in cash or fixed income (CD’s, annuities, government securities) then do that. If you are okay with the risk that comes with whatever happens in the market over the next year or longer then it is best to stick with your plan. If you have an investment thesis built around what you think will happen in the near term and long term and it remains sound then stay the course. If your thesis gets upended then change course. I know it sounds simple but things become less simple when you let outside voices affect you.
I would tend to heavily discount any analyst that would encourage investors to avoid the US. Not that our economy or politics are perfect and all that and a bag of chips. Far from it. However, as burdensome as it is on the US economy and its citizens to carry so much of the peace-keeping (***) freight around the world, existing trade dynamics would COLLAPSE for all economies if the US precipitously backs away from those efforts. The US economy did objectively better at recovering from the “covid collapse” than any other industrial democracy, despite some of our flawed financial strategies for propping up the economy (which only fed cash to the financial markets and less so to the actual economy).
As an investor (and citizen), I would pay the most attention to industries facing “square wave inputs” to their supplies and demands. This board has devoted megabytes of prose debating how the shift from internal combustion engines to various alternatives will impact key automakers and their supplier networks. We’ve talked about how smart cars require smart grids which requires re-engineering and modernizing power generation and distribtion networks and advances in software to optimize demand for power for charging, etc.
WTH
*** And I state that with a LARGE amount of cynicism, fully recognizing the “peace” America has attempted to maintain through its alliances and independent actions often merely preserves a status quo helpful to American business interests and certainly does not maintain a just peace in the interest of locals.
HI MikeKaneko, and welcome to METAR, which comes pretty close to being anti-talking heads central, and so I expect your post will mostly be met with quiet approval and then moving right along…
When we are down to our brass tacks, pondering:
Wendy’s Sunday METAR report followed by discussion,
Fed intentions and bond interest rate curves, and
cataloging black swans we imagine will be hissing most terrifyingly
(maybe, in the next year or so)
we chew carefully and long.
Mostly we kill time by talking, mostly congenially, about human stupidities in their various forms, travel, governmental messes, and weird random stuff. Captain Denny has a very interesting gig explaining his use of ferociously calculated options moves, Hohum is invaluable on shipping data as a very reliable indicator of hard core economic realities no matter what the talking heads say, and Wendy is the most consistently sane prudent investor I have the pleasure of reading regulary.
And well they shouldn’t. Rates during the Great Recession were 0%. We hopefully never have rates go that low again as it either means we are in another Great Recession, another Covid-19 like pandemic, or worse.
With the prospect of falling rates and current yields being high, core bonds may indeed do as well as or better than stocks for a few years. That is entirely possible. Rates on fixed income have not been this good in about two decades and you can buy those yields at discounted prices. Conservative investors have probably not had it this good since the 70s.
Grantham recently mentioned that he wouldn’t be surprised to see the S&P 500 drop to 2,000 and stated, “Don’t invest in the U.S.”
That’s just dumb, frankly. With GDP growing, and forecasted to continue to grow (but be slower), it would take a massive black swan event to cause the S&P 500 to lose over 50% of its value. It is click bait. If he said it might lose 17%, no one would pay attention but because he made a ridiculous claim, it is now newsworthy. Dumb.
And don’t invest in the US? Has anyone paid attention to just how lousy non-US developed markets have performed for the last decade? Europe is on the cusp of yet another recession (GDP was just 0.1% YOY).
The divergence from US stock performance and developed non-US equity is massive over the last 10 years. It is so massive that you can afford to be wrong for a long time before you would really miss out on any change or need to go overseas for returns.
Compare VTIAX and VFIAX for the last 10+ years. I know both which I would rather have owned, and which I would rather own right now, even if I end up being wrong a few months later.
Investing is the most difficult endeavor I have ever tried. Once I got my Covered Call Selector working I’m dedicating 2/3rds of the port to selling Covered Calls.
As for talking heads, the problem is information overload. I’ve stopped listening to them. What I find much more interesting is reading books by and about successful investors and traders, people who put their money where their mouth is and make money doing so.
Lol, thanks for response. I will check out Captain Denny’s option plays. I dedicate a portion of my IRA to covered calls on positions that I don’t mind losing if their dividend yield slips below a certain threshold. I also dedicate a portion of my “cash account” to options strategies learned from Beat The Market (Thorpe). Those have worked out decently so far. Hohum shipping data seems to be a reliable indicator. Haven’t looked into it but will give it a “go”. Need to check out what Wendy has to say. I think it is important to always have perspective when the market moves in the direction you don’t anticipate. A lot of it, and the meaning behind my post, was to don’t forget the thesis of why you bought something. It is easy to get distracted and want to make an unnecessary move but most times, it is best to “sit on your hands”.
The only economic advice I follow is that of Sir Francis Bacon. Francis Bacon was an Englishman who achieved high office in England in the Seventeenth Century. He said:
Money, like manure, does no good till it is spread
(Of Seditions and Troubles)
Will always listen to what Buffet has to say. Lynch is a legend and you really can’t knock his performance, though I think his portfolio was a little large. Jesse Livermore’s “How to Trade in Stocks” is on my Amazon List. I have already read “Reminiscences of a Stock Operator”. It is one of my all time favorites. Any other book recommendations are welcome.
Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The World’s Most Famous Investor by Mary Buffett
One Up on Wall Street by Peter Lynch
Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers by Geoffrey A. Moore
Reinventing the Bazaar: A Natural History of Markets by John McMillan
Where Are the Customers’ Yachts?: or A Good Hard Look at Wall Street by Fred Schwed
Complexity: The Emerging Science at the Edge of Order and Chaos by M. Mitchell Waldrop
While not about investing it is a very interesting and entertaining book about how the world works. If interested, look for books and lectures by Stuart Kauffman, my favorite Complexity scientist
At Home in the Universe: The Search for the Laws of Self-Organization and Complexity by Stuart Kauffman
To read the Brian Arthur’ article turn off javascript
That should keep you busy!
The Captain
o o o o o o o o o o o o o o o o o o o o o o o o o o
Thanks, I can knock one of the list as I already read Mary Buffet’s book. I owned One Up on Wall Street in college but never finished it. I will check out the rest. Have you read The Signal and Noise (Nate Silver), Thinking Fast and Slow (Kahneman), or Mastering the Market Cycles (Howard Marks)? All great reads.
