Forest Gump often quoted his wise mother, “stupid is as stupid does.”
The meaning: stupid is defined by what people do, not what they say. In investing there is a harsher saying:
“If you follow the herd, eventually you get slaughtered.”
With that I submit the media, its herd mentality, and the resulting devastation incurred by investors following it.
I’ve reported improving economic conditions for over a year. Until recently, most media argued these facts were meaningless, including stocks more than doubling on average during this time. As improving data continues to emerge, the S&P 500 just had its best January since 1997, and other indices here and abroad followed suit.
Suddenly I’m not hearing many stalwart projections that have become a hallmark since 2008. When I do they now contain disclaimers such as, “I’m waiting for a pullback before buying more stocks, though this might be as much pullback as we get.” (Morning CNBC interview 2/8/12).
Now that’s a heck of a forecast: “I think the market will go down, but if it doesn’t I just predicted that too.”
“Stupid is…”
For several years experts have proclaimed with certainty: globally encompassing recession risks were growing and the market would falter in the aftermath – tank, to be more accurate. The last few months the tune has changed – now pundits are singing about when is the best day to get into stocks.
I avoid the words always, never, anytime, etc. They are absolute the universe tends not to be. So mildly diluted -
Virtually anytime someone is trying to figure out the best day to buy stocks, he/she has already missed the best day.
Back at the ranch unemployment continues to decline, manufacturing is accelerating, and the service sector is ramping up.
"It's not hard to see how this recovery could become self-sustaining.” [Nobel Economist and notable policy pessimist Paul Krugman.] "The downside risks are evaporating." [Harm Bandholz,Chief U.S. Economist at Unicredit Research.] "Late last summer, I saw a 50-50 chance of recession. I have dialed that down quite a bit." [Robert Dye, Chief Economist at Comerica.]
Deutsche Bank, Morgan Stanley, Goldman Sachs and other institutions are re-adjusting growth forecasts for 2012 substantially higher than those just predicted.
“As Stupid Does…”
These are intelligent, experienced specialists and firms. They now, however, find themselves far behind the market…along with those acting on their previous predictions. Safety in numbers I suppose.
If you stopped investing when things were scarier, start. If you didn’t stop, keep going (and congratulations on capturing the 100% return when all the super geniuses are only now figuring out the best day to invest was in March of 2009).
In closing, another absolute word this time undiluted: I can’t tell you if the next 20% market move will be up or down. But I can tell you the next 100% move is
always up.
Run Forest, run.
I welcome your questions and comments.
becker@wiserfinancial.com
Golf Tip of the Week Beware of Over-Practicing Putting I've never believed that quantity of practice alone will make a golfer a good putter. Without feel, touch and timing, I would not have holed the ball when it mattered, regardless of how many hundreds of putts I'd hit on a practice putting green.
Consequently, I've never practiced putting beyond a point where I knew I was doing what I wanted to with my stroke. This goal has always been the product of constant rhythm or tempo, marked by the putterface making solid and square contact with the ball. The physical feel and the mind-picture this produces is one of great fluidity between my hands and the putterhead.
Once I attain these goals in a practice session, I quit, even if I have stroked only a handful of putts. By continuing beyond that point, I risk becoming too mechanical or losing my sense of touch. You, too, should beware of spoiling a good thing by overdoing it.
Source: http://www.nicklaus.com/nicklaus_golftips/
Trivia Time This week's question: What is the total amount expected to be spent for Valentine's Day in the US this year?
Do you know? E-mail your answer wendy@wiserfinancial.com and if you are correct, receive a free "Way to Go!", "You Rock!", or other congratulatory phrase. Then brag to all your friends about how smart you are.
The answers will be in next week's newsletter!
Last week's question: What is the maximum capacity of the largest passenger ship currently in service?
Answer: Royal Caribbean International's
Allure of the Seas is currently the world's largest passenger ship with a maximum capacity of 6,360 people.
Congratulations to David R. for getting the correct answer! Big applause!
Source: www.wikipedia.org
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