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Raise your hand if you got a brand new 65 or 70-inch HD-TV for Christmas…

Now, let’s just say you’ve been stalking said digital prize for six months or so when one day your better half, with whom you’ve shared your intentions on more than one occasion, arrives at your side with a stack of mail in hand, saying: "Honey! That TV you like is on sale. It’s 50% off! But wait, it says here we’ve got to buy it TODAY!"

And, having heard more than enough about comparable digital sound systems, she then pleads: "Let's go and finally get this done!"

But instead of jumping out of your recliner and raking pockets and drawers for your car keys, you lean back and say: "You know, honey, if they have that thing at 50% off then I’m thinking there has GOT to be something wrong with it."

Your wife nearly passes out, of course. And then you add in this little idea:

"Hey, why don't we wait for it to go back to its regular price, then we’ll go buy one?"

And that, my friends is how 95% of the crowd handles stock sell-offs.

Here’s Some More…

We are suffering through the sixth correction of 10% or more in the nearly-10-year history of this recovery / new bull market.

The last correction of this magnitude struck in January-February, 2016. 

That was back when cheap oil was said to be bad for us, terrible in fact, and that correction was also caused by the fear of a coming global slowdown. 

Sound familiar?  Well, it should. Have a look at some of the headlines of that time were:

Gift Hourse Chart1

So, What Happened Next?

The world never stopped growing.

Quietly, and with little media coverage of the correction, stories about global growth slowdowns were replaced by articles on coordinated global growth in 2017.

In fact, the fear back then was so misplaced it missed out how every nation among the top 50 (except Venezuela) was growing!

Here’s Another Flashback

Anyone remember the following? It’s from 1981, which reveals a rough overlap of where we stand right now as part of the next largest generation to ever impact the US economy.

This "correction" was a tad bit over 22% back in 1981.  And fears about 1982 abounded. But what the media forgot to herald during all their bad news coverage was the approaching 18-year secular bull market - and a quadrupling of our GDP - driven by the Baby Boomer generation.

It started quietly at first, but then about 9 months later it gave birth to this: 

Gift Hourse Chart2

The chart above shows the Dow Jones during the 1970s and 1980s. Note the pink arrow inside the red box - that was the lows felt back in 1981 - when the world was certain things were heading off track.

However, by the summer of 1982 we kicked off the biggest bull market of our time.  And yes, that low in 1981 was just above 775 points on the Dow Jones.

Just remember that "good deals" in stocks for the long haul investor never feel good when they are unfolding.

And that’s why so few ever take advantage of them.

Mike_williams
Author
Mike Williams
Founder and Managing Partner of Genesis Asset Management, New York