Saying ‘The Sky is Falling’ is Always Great for Ratings
I’ve learned that waiting for the next shoe to drop creates self-fulfilling potholes.
And since the day I took my broken crystal ball to the shop back in July 1982 (and never managed to get a working version back), what I’ve done instead is study people, reactions, emotions and markets for about 38 years.
What I’ve found is that people generally do the same thing all the time - sure, there are some ripples and inconsistencies but mostly the behaviours are the same.
One of these key learnings is that we refuse to remember how not to behave with money during a panic.
Only time reveals that mistake, over and over again.
The passing of time separates us from the incendiary, fuse-lighting emotions and knee-jerk reactions that cause the damage. It helps us understand that the fog clears and washes away the toxic potion of fear that masks our ability to see clearly and/or act more appropriately.
Time allows our minds to ask more logical questions and a better perception of events and "facts" begins to unfold.
But without learning, time always arrives too late to fix the damage that’s been done.
The Future is Unclear...
Breathless chatter is flooding the airwaves from any number of "experts."
It’s amazing to watch; medical degrees earned seemingly overnight, 25 and 30-year-olds just out of the make-up booth before going on air, scripted and coiffured – a feast for the eyes and Amygdalas driving ratings and revenue at the expense of sanity and common sense.
Think I’m making it up?
Turn off your TV for 24 hours. See what happens.
We can’t see beyond now because the future was unclear:
- At the record all-time highs 10-days ago
- At the panic lows of December 24, 2018 at DOW 21,712
- During 2002-2003 when the Tech bubble bear market was washing people out of their future gains - and SARS spread across the world - infecting 8,000+ people - and making the future look even more bleak
- The month before Lehman went bust and the financial system unravelled - sending the DOW to 6,500 or so
- During 2009 and 2010, when the Swine Flu created the last pandemic. It killed 280,000++ worldwide (roughly 100 times more than the current COVID-19 toll) and nearly equal to the number of normal Flu deaths in the United States alone over the last 10-12 years. Yes, that is about 3,800 points lower than now. And no, the world was not ending then. It’s also 18,000 points lower than now.
Try very hard to control your emotions.
This too shall pass.
What they’re not saying in the media is:
- A vaccine is likely to be found - probably sooner than most think or expect, and
- The unprecedented reactions, closures, cancellations and lockdowns will make whatever it becomes much smaller than what it would have been.
Tim Cook's current perspective on China:
So, Here’s the Deal
If you buy into all the bullshit from those simply not experienced enough in what they’re espousing to be experts on, your investing future will seem bleak.
Think about it: Who do you think knows more about real-time impact than Tim Cook who’s running Apple, with millions of pieces moving through the supply chain at any one moment, or a reporter sitting at their producer's desk vying for air-time in a bustling NYC TV studio?
The short-term damage done to confidence and account balances via shallow, fear-driven reactions is set to be far greater than the long-term fundamental damage of this Flu will ever be.
The Larger Issue at Hand
We have overcome every single impediment in front of us economically right up until about 10 trade sessions ago when we were at record highs.
Do you think Warren Buffett is calling his broker to sell?
My bet is that he’s only looking to buy.
Above is the VIX (fear) indicator.
It only works these days at extremes, and I think we would all agree this is an extreme.
The week just past matches the sheer level of unmitigated fear driving actions in the markets has only one 3-week period beating it…IN ALL OF HISTORY - the last three weeks of the 2008-2009 panic during the Great Recession lows.
Now don't take this too harshly but if you truly believe that our future is as bleak as it appeared to us all at those lows, please liquidate your entire account and never, and I mean never, risk any capital for potential gain again.
The last time this indicator was 8 (or thereabouts) for several days was leading into the washout on Christmas Eve morning 2018.
There are only 7 more spots to ZERO. Who do you really think wins this game a year from now?
Back then there was a rally that immediately followed spanning up to about 10 days ago that added about 8,000 DOW points.
And I’m sharing this image (above) because, a) I am confident you won't see it elsewhere, and b) it is so stunning that it outshines all other panic indicators I have found.
It’s even better than the "8" reading on the Fear indicator above.
This image shows the internal technical pressure of ALL stocks.
So, why is this one important?
- It spans 20 years, incorporating plenty of other panics,
- It covers the entire stock universe, and
- It tells you now that less than 10% of the stock market remains above their respective 50-day moving averages.
In other words, it’s a way to show you that all the babies are being thrown out with the bathwater.
Don’t let yourself get washed down that drain.