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Searching For Meaning Where There Is None

Oh to be a talking head.  Get paid to say a bunch of stuff and not have to be accountable.  What a life!

Year after year dope after dope heaps BS upon BS.  We should ignore it but we don’t.  We are our own worst enemies.  (Go here and here to find out why.)

With the calendar page turning from January we’re past the annual forecasts (i.e. reasonable-sounding guesses) and moving into the market volatility of February.  New material for the talking heads to sink their collective teeth into.

Explanations (i.e. more reasonable-sounding guesses) have varied – rising interest rates, electronic program trading, inflation fears, tax reform, Treasury Secretary Mnuchin’s weak dollar comments, ETFs that track the VIX, an NFC team won the Super Bowl, etc.  (If you think that last one sounds silly how about blaming Hurricane Harvey on lesbians?)

And just like those infomercials where if you act quickly they’ll double the offer (just pay a separate fee) each market explanation comes with a teaser – here’s where the markets are going, here’s where to hide out during the volatility, here are 5 things you can do to ride out the storm, etc.  Each piece of advice (i.e. even more reasonable-sounding guesses) is filled with hedging.  Markets might do this, the Fed could do that, etc.  Really?

Here’s some truth:

  • In the short term markets can be unpredictable, unexplainable and, therefore, uncontrollable.  Don’t try to find order in the chaos.  It isn’t there.
  • In the long term markets are quite predictable – they go up.
  • No one likes market declines – particularly when sudden and dramatic.  But to act upon them is a coin flip.  It’s 50/50 whether markets head higher/lower after you sell/buy.  Don’t try to get out at the top and don’t try to get in at the bottom.  You can’t win with even probabilities.

Unless the investing public learns from its oft-repeated mistakes the cycle of buying high and selling low will continue – a surefire recipe for wealth destruction.

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