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“If you’re after above average results over time, then you have to stop thinking and/or reacting like everyone else. Turn off the news, ignore the TV financial pundits, and focus instead on thinking differently than the crowd…”

Well, in case you missed it the first week of the new quarter sucked. 

Hallows Eve can't come too soon, right? 

Fear is rising, rates are rising, political unrest is rising and tensions in general are ratcheting upwards.

And if you look to the media rest assured they’ll tell you that something even worse is just around the corner.

Did You Know?

Since 1900, the median “up day” for the Dow Jones is +0.51%, and the median “down day” for the Index is -0.50%.

More importantly, the Dow is up 39,500% over since that time.

Idea Chart1

Now, if you can think of anything more black and white that clearly identifies why patience is still your very best friend in the wealth-building pathway ahead, please send it along to me so that I can share it with everyone else.

Investing Rule #612

“Every single thing that caused a setback in the markets and struck fear in your heart or concern in your mind - prior to this very moment - was an opportunity, not a threat.”

Time and patience was the only price that you were required to pay.

Ain't No Sunshine...

Idea Chart2

In general, people are still so terrified of stocks after the Great Recession of 2008-2009 that "if you show me a few weeks of red ink, I will show you a crowd who is as afraid today as they were back then; when the Dow Jones as below 7,000."

Today the Index is at about 26,000, give or take.

And yet after just a few ugly days of bad internals and red ink the place has been fire-hosed with fear.

The first graphic (above) shows sentiment falling to 33% as of last Friday's close (it was twice that high a month ago).

What’s even more interesting are the blue arrows on the second graphic above. In simplest terms there are not a lot of instances when the readings have been lower. And that includes the 16% correction at the beginning of 2016, which at the time was called "the worst start for the markets in 85 years."

Remember that?

Of course the not-so-terrible reason for last week's actions, other than anything Trump did, was rising in interest rates.

That shouldn’t be a surprise, folks. But as is always the case with investor "panic attacks" the front-runners get crushed; they get hurt the worst on setbacks but and run the highest on new rallies.

The snapshot below shows you that we are barely off the highs, and maybe more will unfold, but the good news is that we are seeing a very quick move by investors towards the sidelines. 

And the press? 

Well, they are eating this up!

Idea Chart3

The highlight stats in yellow (above) show the pullback percentages from what was then the most recent  highs - all perfectly normal I might add - but this goes all the way back to the March 2009 Armageddon era lows.

I added two red dots. Those dots correlate to the blue arrowed line on the Fear and Greed Index chart just above it, showing just how close current readings are compared to previous lows!

And yet, we are between just 2.00% and 2.50% off the most recent highs, and little more than one good day upwards erases all of that.

So I’ll repeat the quote above: “If you want above average returns, then stop thinking like everyone else. Turn off the news, financial pundits, and focus on thinking different and better.”

The “Hiker’s” Guide to the Financial Galaxy

Last week CNBC showed commentary from the reliably bearish Peter Boockvar. 

I have been side-by-side with him many a time over the years in interviews and he has never been positive…ever. 

So what was his big attention grabber last week? 

"The Fed Could Be Hiking Us Right Into a Recession!"

Sure Peter, and lightening could also strike me dead on Tuesday but I’m not going to sweat it. And the real purpose of this kind of hyped-up coverage was an “unscientific” poll at the end of the CNBC post asking if you thought there would be a recession next year. 

A staggering 61% answered “yes.”

Tune out the noise, folks. Wealth doesn’t like crowds.

Mike_williams
Author
Mike Williams
Founder and Managing Partner