They say the great banana peel of every stock market is always on the floor somewhere.
The volatility. The market jolts. The fickle financial headlines that build consensus on impending financial Armageddon.
It’s not only bananas, but a slippery slope to losing money.
In fact, it reminds me of the story of the engineer who was arguing with a politician and a financial journalist about whose was the first profession in the world. The engineer said, “We were definitely the first, because we created order out of chaos, to which the politician and journalist replied, “And who do you think joined forces to create the chaos?”
Yet some folks get so caught up trying to avoid these “peels,” real or imagined, that trying to predict when they’ll next be underfoot becomes their focus and strategy.
It doesn’t work, of course.
History tells us that if you tried to time the market and managed to miss just the best 30 days of the last 30 years in the US Index, the S&P 500, then you would have only earned about 2.07% on your money instead of an average of 7.61% per year.
The lesson is that the slip-ups are as necessary as the consensus that reacts to avoid them. It’s the Yin and Yang that drives the markets - the importance of fear and greed.
You’re better off outside that herd.
How we respond to things grew up with us from our humble beginnings just two million short years ago, when humanity was living and thriving on open grassland in Africa. Stone tools in hand. Fires in caves. Unwitting pin-striped zebras as fast food. It was literally a hand-to-mouth existence that we managed to click, grunt, and whistle our way through, inventing luxuries as we went that slowly grew into necessities, and ultimately new obligations.
From tall bushes to flush toilets. Cave-dwelling to central heating. We ran screaming from shadows because we learned that what lurked there often viewed us as a quick meal. And avoiding those banana peels became tantamount to survival. We were safer in numbers, and quick to heed whatever pricked our ears. It was a lesson that served us well in the Savannah Grasslands. But in the world of money management it shackles your shekels to the paranoia of crowds, where almost every knee-jerk reaction is a transfer of wealth from the impatient to the patient. And from the paranoid to the chilled.
It’s little wonder investors get distracted. The Bad News at Ten financial media mayhem is built on driving us bananas; morphing content into chilling headlines to meet commercial imperatives – like a 24/7 rustling in the tall grass of a distinctly anti-social media.
Some might say it took us a long time to get here – about two million years, give or take – but a wee dose of perspective reveals how relatively insignificant our journey has been in the broader scheme of things. For instance, if you took the four billion years of earth’s history and tried to put it on a full calendar year, you’d see bacteria had the planet to themselves until mid-October, the Dinosaurs went extinct by Christmas Day, the first humans didn’t appear until about 11pm on Hogmanay, and agriculture didn’t turn up until two minutes to midnight. As Rutter Bregman reminds us, everything we call “History” happened in the final sixty seconds of the year. How’s that for perspective?
We’re the newbies here, and we’re very much still rooted and guided by the urge for immediate survival (and gratification) because of our hunter-gatherer ways and thinking, which can make too much monkey business of investor behaviour.
in the words of Yuval Noah Harari, “You could never convince a monkey to give you a banana by promising him limitless bananas after death in monkey heaven,” which is strange, given that monkeys are 99% genetically similar to us.
Mind you, bananas are 60% similar, genetically. No wonder investors slip up.
Try to avoid the noise folks. It’ll drive you bananas.
And if you like what you read, and you’re interested in having a chat, feel free to give us a call.