Wealth Doesn’t Like Crowds

"In investing, what is comfortable is rarely profitable."
- Robert Arnott

It’s been a little choppy of late. 

That’s a good thing.

Last week we set new all-time highs.  

That’s a good thing too.

What’s even better is the impact of just two days of down closes:

That should tell you that there’s still a lot of investor fear out there.

And if we set the above image into context with the image below things look even better for long term investors.

The read at the close (at the time of writing) was 46 on the Index.  

Now, note the pink box (above) telling us what that number was one month ago (53).

You think because it was higher back then that folks were likely a tiny bit less afraid. But what was the price telling us?  

Well, the green arrow tells us where the price was on that "one month ago" mark.  

In other words, as the market moved up 4.87%, the crowd got more afraid.  

Go figure.

And it gets stranger still. 

Note the green arrow (above) showing us that one year ago, the reading was 41.

That’s still not what I would call a giant leap from the 46 earlier this week, right?

Here’s the shocker: A year ago we were in the middle of pandemic darkness, the future was even darker, fear was everywhere, and the S&P 500 was 1,260 points lower.

That’s over 43% below where it is now! 

Yet somehow we’ve only improved by about 5 points on the fear index?

Does any of that seem logical to you?

Me neither. But let’s pray for some more of it!

Incessant Chatter

As for the experts assuring us that every pause is a market top, well, here’s a bit of perspective:

If you look way up there in the top right-hand corner (above) that tells you where we are "now." 

And if you squint you can see the two-day pullback from the record high close last Friday just behind it.

This is what trade-ranges do.  

And it’s also what small setbacks from high levels do.  

The chop and concerns about corrections that loosen the weak hands to sell up create the bedrock for the next leg up this very long mountain trek that we’re on.

When I started in this industry, the Dow Jones was 950. 

In roughly 39 years the Dow has risen to roughly 34,000, despite every single terrible thing that has happened along the way.

Assuming we do only half as well in the next 39 years, the Dow will rest at roughly 500,000 in the 2060s.

So, grab your popcorn. 

The pace of change is going to be head-spinning, and with plenty of gut-wrenching interruptions along the way.

Get comfortable with it.

Remember, problems don't come to stay - they come to pass.