The Enemy is Emotion
“The business schools reward difficult complex behaviour more than simple behaviour, but simple behaviour is more effective.”
“There seems to be some perverse human characteristic that likes to make easy things difficult.”
Those are two brilliant quotes from Warren Buffett (above).
And while we never set out to do so, much of what Demogronomics teaches about investing patterns and positioning for the long-term can be seen in the habits Warren has espoused for decades.
It should be noted that "simple" and "easy" are not two words normally used in investing these days.
After all, Wall Street would prefer the masses think the opposite.
Constant movement, chatter on the airwaves and unmerciful angst over every syllable a CEO or CFO utters on a conference call seems to be the preferred route.
Put that approach to bed, because if it really worked don't you think everyone would be rich by now?
Are You Late…?
We’ve heard months of references to the stock market as being "late in the game," "last of the cycle," and in the proverbial "9th inning."
Heck, even the bulls are starting to say things like "Well, 2018 may bring a top...."
That’s true enough, of course - 2018 could also be the year Earth is struck by a meteor, caves in on itself or vanishes into a black hole.
These things are ineffable – you can never know in advance what’s going to happen tomorrow.
But rest assured that everyone predicting market tops will line up to take credit once it finally arrives.
It will come, it will be painful and it will cause some folks to lose money.
And then, just like every other time before now, the markets will once again continue on the upward track that it has been on since markets began.
Long-term investors know this.
You plan time, not the market.
Your enemy is emotion, not the market.
And you have to think about demographics, not economics.
That’s because when we overlay the generational waves of Generation Y onto the Baby Boomers who powered the 80's and 90’s, Gen Y is just edging into the time slot where the Boomers were in at roughly 1979-80.
In terms of the powerful economic forces still to be unleashed by the record-setting events ahead, well, the game has really yet to begin.
In fact, the economic data continues to suggest a slow and steady rise ahead.
Synchronized global growth is a powerful self-fulfilling force, yet we still have masses lining up to buy bonds for "safety" just because of a three-day down close in the S&P 500:
Well, guess what folks?
The world is not ending.
But I would sure like everyone to think it is for another, oh, say, 35 to 40 years.
Note as well the 2.3% 10-year yield is down 8 basis points this week as we’re seeing:
- Continued jobs growth
- record JOLTS
- Record personal incomes
- Record retail sales
- Record earnings, and
- Record GDP.
And there’s this as well:
Now at first glance, new highs in productivity seem boring.
But they’re not.
It is the mother's milk of earnings and margin growth.
Remember that we’ve said repeatedly that “the deeper Gen Y gets into the corporate structure of America, the higher those margins will rise.”
And the game hasn’t really started yet.
The Latest ISM Data
Summarised in a few words: Strong and hurricanes.
Here are the internal comments from the report (which are often more valuable than the number):
We can get caught up in the fear about that idiot in North Korea, become riddled with angst over the next person to be accused of harassment, and fret over the tax bill, the debt ceiling or even the coming New Year.
Or, we can keep our eye on the ball.
I suggest you let all of this sink in, remember that things are solid and getting better, and that the Barbell Economy is set to unfold for the next 30+ years.
So sit back and fasten your seat belts.
It’s going to be a wild ride.