How to Lose Money and Be Influenced by Crowds
“I will love the light for it shows me the way, yet I will endure the darkness
for it shows me the stars.”
- Og Mandino
When we say markets don't care, it doesn’t mean we don’t.
We care about the impact of this virus and the crazy multitude of shutdowns going on.
But because it has taken on some spectacular political and media-driven twists, we’ve opted to focus more on the “black and white” nature of the markets.
That’s what will keep investors out of the abyss – like the tens of thousands who, out of fear and confusion cashed out of their long-term plan in March and April of this year.
They allowed fear to completely engulf their outlook.
And while it’s an understandable reaction, it’s also a lesson that has been repeating since market records began.
People think "now."
Markets think "next."
People think "good or bad."
Markets think "better or worse."
It’s a head-spinner at times. But if you want to acquire wealth through investing you need to know that:
- Time and patience permit the magical wealth effect of compounding to happen, and
- Fear drives actions that permanently interrupt that effect.
Folks, financial media headlines and political talking heads will leverage fear against you in order to gain your buy-in and support.
The system has been formed to demand that the next monster feel cataclysmic when compared to anything before it.
But the stage is set for more surprises - good ones - to the upside.
Now think about some of yesterday’s monsters that we were told to be afraid of.
Remember Brexit? You’d have thought someone had erased the entire European continent.
And before that it was the sheer terror associated with "China letting the yuan fall."
Then of course, it was the 2016 "election nightmare."
Don’t forget the China Tariff War.
It was always going to be the end. Until tomorrow’s monster was ushered in.
Which brings me on to today’s mother of all world-ending scenarios: A global pandemic.
Folks, we are going to get through this. In fact, you may have noticed that the market and the economy basically already have.
And for those whose reprise is that this is just the “Fed printing money again,” think back to the hundreds of thousands of investors back in March 2009 who were so incensed by that idea that they refused to support it by risking their money in the markets anymore.
That was back when the Dow Jones was roughly 6,700.
Now it’s about 29,500.
Talk about a wealth building decade-long opportunity missed!
Read 'em and Reap
Lots of things are showing us how the recovery is coming on strong.
Don't be surprised if we see a couple back-to-backers of annual returns in the double-digit realm – and maybe even more frequently than back-to-back:
Notice that as the annual return a year ahead tends to improve, the broader the rally gets - and we are seeing just that as November really lit the torch of seeing through the fog and into the new US economy ahead.
Let's Dig Under the Media Fear
We saw earlier in the week how strong Manufacturing is returning to the US with orders books and extremely positive backlogs.
Here’s another extreme we have been suggesting you count on for years – that we’re running out of houses to buy, and the builders are absolutely filled up with demand for many years to come:
The term "Off the Charts" really isn’t an overstatement here.
And this cycle is just getting started!
Oh, and keep in mind that back in March 2009 how real estate was the deemed the culprit of all our problems. The experts said: "We will never sell all the homes we have available...."
This isn't your Dad's housing market anymore:
Industrial output recovery is real.
Order backlogs are at record highs:
Don’t underestimate what’s unfolding in the US economy.
It can’t be hidden by rampant and terrifying media headlines.
Positive change is happening so fast it can be a blur.