I believe that the Zen Masters of Investors, the Jedi Knights of Financial Advisors are namely those who have a unique talent at being “in the moment” in a rational an unemotional way. When I’ve talked to money managers and asked them about their mistakes they’ve generally told me that the ones that they should have known better came down to letting their emotions cloud their judgment.
On a broader note, sociology has always been my constant preoccupation. I love to see the order in which people file into an elevator and if you tell me how many people are in an elevator I can tell you with great probability where they are standing. If it’s one person, they’ll be by the buttons. If it’s two, the first person will stand by the buttons and the other person in the opposite corner. Person number three will be in front of person #2. I could go on. The same thing in traffic. The same with chit chatting about the weather. If you hear someone day how nice the weather’s been, wait for someone in the conversation to say that we’re supposed to get some rain – conversely if someone complains about the weather, listen for someone to say that it’s supposed to warm up. People are disturbingly predictable, particularly in mass.
When it comes to investing, the amazing psychology that I see going on right now is the absolute hate toward investment banks and Wall Street. In the late 90s I feel that Wall Street gurus were heralded in a nigh onto saintly manner. If you read the public internet comments from readers, the general sense was one of positiveness and a sense of “yes, I’m going to be buying in soon”.
And now, students, comes your homework. Read an article or interview, on the internet, that is with someone “from Wall Street”. This can be a money manager, analyst, investment bank head, bank CEO, chief investment officer, etc. Like a magician doing a trick I don’t want to steer you too much so that you know that I’m not working with a trick deck. But if you need a rough guidance, when I say “financial information website”, go there (as long as it has articles). Find one of these articles and read the comments.
What I predict you will find is not disagreement, but vitriolic hate toward stocks and the capital markets. I’m guessing that in the random article of your choosing, you will find people (1) suggesting lunatic conspiracy theories (2) cronyism (3) charging criminality to anyone and everyone. I am not aware of any time in history when people have been this anti-stock market. I would submit to you that from a sociological standpoint, as well as an investing standpoint that this is the contrarian buying indicator of the ages. In the same way that the positive comments during the dot com bubble were a selling indicator, to me, this tells investors to double-down so to speak.
It has also been my observation that people are speaking of the stock market in a different way. As I’ve talked to my colleagues who have been financial advisors for upwards of 50 years, they tell me that sentiment has never been this bad. Investors used to talk about when they should get back in the market, now they talk about if they should get back in at all. Again, I submit that this is a signal to buy.
But I do imagine that we have seen this vitriolic hate before. That is, during The Great Depression. I imagine that had the technology been around, people would be publicly commenting on various articles in the newspaper. The general sense would be “down with Wall Street”. And yet, when would have been the best time in the past 100 years to buy stock? For those of you who like Extra Credit, your assignment is to find out that answer. Aw shucks, I think I gave away the answer. The 1930s, but more specifically July 1932; which was 80 years ago to this month. My belief that is that the low of our times was in March 2009.
As a financial writer, a risk that I have is that I’m on record for all eternity. Years from now, people will be able to look up what I’ve said. That being said, I’m more bullish now than I’ve ever been in my lifetime – and if I were an 80 year old man I’d say the same thing.
On the other hand, I could have made a bullish statement in July 1932 and be 100% right on the market timing (which to note, would be nothing more than luck … my highest ambition is to be generally right). But for the remainder of the decade the Great Depression would have raged on leading right into World War II. There’s plenty to be scared of and at times the world feels like a powder keg, but when with the future ever be certain?
As a financial advisor, I seek to plan out the future. I can apply an assumed growth rate. I can assess your personal inflation rate. I can make sure that you are properly covered for various risks and contingencies. The world is always scary, the future will never be certain, the best one can do is plan for the possibilities and insure against the improbabilities.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Investing in securities, including stocks and bonds, is subject to market fluctuation and possible loss of principle. No strategy can assure success or protect against loss.