Maybe It’s different this time in the market? Or Maybe not…

Dec 23, 2018 | Blog, Investment


“…But something that can never be learnt too thoroughly can never be said too often. With some people you only need to point to a remedy; others need to have it rammed into them…”

“…Nothing hinders a cure so much as the frequent changes of treatment; a wound will not heal over if it is being made the subject of experiments with different ointments; a plant which is frequently moved never grows strong…”

– Seneca, Letters from a Stoic

But first, just the facts

Year-to-date performance, as of 12/21/2018:

U.S. Large-Cap Stocks (Standard and Poor’s 500 Index) = (9.6%)

U.S. Small-Cap Stocks (Russell 2000 Index) = (15.9%)

U.S. Bonds (Bloomberg Barclays Aggregate) = (0.44%)

International Stocks (MSCI EAFE Index) = (16.81%)

Emerging Markets Stocks (MSCI Emerging Markets Index) = ( 8.64%)

U.S. Real Estate (Dow Jones U.S. Select REIT Index) =  (7.48%)

Gold = (5.92%)

Oil (WTI Crude) = (20.87%)

After nine straight years of positive calendar returns in the S&P 500, these last six months have awakened many investors, but before you jump, put down that parachute, take your hand off the emergency exit door, and stop hugging that smelly flotation device.

Do you really remember 2008?

Perspective. Is it 2008 again? Comparing performance. Not. Even. Close.

Taking 2008 annual returns versus year-to-date performance this year (we have about 5 days left):

Emerging markets were down 54.5%. More than 6X than now.

U.S. Large stocks were down 37%. Almost 4X more than now.

International stocks were down 43%. Almost 3X more than now.

U.S. small stocks were down 33.8%. More than 2X than now.

Remember September and October 2008? A take-no-prisoners market. Every major equity index was down 20% to 40%.

Over. Those. Two. Months!

But maybe you really still believe…

It’s different this time, right?

Since 1980, the S&P 500 has been down on average inside of a year almost 14%. And 29 of the 38 years still closed positive.

This year, the S&P 500 has already fell 10%, and then made it up, to fall another 10% again.

While we need a serious rally for Santa to bring in the new year with positive returns, you’re thinking everything is on sale, so now you’re ready to buy.

Wait…What? Right?

When everything goes on sale, expect everyone to run out of the store

In October 2008, Warren Buffett wrote an Op-ed piece called

“Buy American. I Am.” Here are some gems from one of the worst months in investor history:

“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.”

“Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now.”

“Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”

Currently, the most-ever put options are being traded relative to calls on the CBOE for the S&P 500. (More people are betting the market will go down then up in the options market).

According to the latest American Association of Individual Investors survey, the pessimistic attitude is the highest it’s been since April 11, 2013; this is a contrarian signal historically.

So, many are fearful? But. You are not still scared…Are you?

To understand is to know what to do. Period!

Einstein argued for five ascending levels of intelligence:

Simple (Simplicity)

In desperation, investors can hatch secret get-rich-schemes of fantasy and complication instead of following well-planned long-term investment strategies.

Let’s start here:

Do you have a written rules-based asset allocation that fits your risk ability and willingness? What your asset allocation is? Why you pick certain investments? If yes, why not just rebalance your allocation? [Read Seneca Above]

Why complicate it?

But of course, I’m telling you what you don’t want to hear.

You might be looking for the almighty silver bullet.

There is no silver bullet.

Investing is emotionally difficult. That’s the price of admission. Forever a game of perception. It calls for long-term rational optimism.

You have to pick your own pain. There are no shortcuts. Risk is tied to potential long-term return, and there’s a tradeoff–even when it doesn’t show up right away. Remember, the greatest source of all human suffering are the lies we tell ourselves.

Maybe something like…

This is easy.

I don’t need a plan.

It’s different this time?


Newsletter Signup

Recent Posts