“Don’t take it serious, it’s too mysterious.” –Life is Just a Bowl of Cherries, lyrics by Lew Brown
“Prophecy is the most gratuitous form of error.” –
George Eliot

If I remember the old maxim for making money on Wall Street, it goes “Buy low, sell high.” Well, I’m with the maxim so far, but notice that it doesn’t say “Buy at the absolute bottom, sell at the absolute top.” I think that is because even the pontificators realize that such exquisite timing is unlikely for all but the luckiest of investors. Moreover, I think a lot of money gets lost or not made because investors think they’ve missed the bottom or the top and wait for a new one to occur. Perfection, as the old saying goes, is the enemy of the good.

What I have learned over the years is that it is far better to react to the news that creates a bottom or top than it is to try to anticipate it. I have seen many a career destroyed or curtailed because the guru thought that that he or she could pinpoint an inflection point in the market with almost preternatural precision. Expressions like “It’s up too much to buy (and it’s time to sell)” or “It’s down too much to sell (and I have to buy)” are notoriously treacherous.

Sure, there’s always a seller at the top and a buyer at the bottom (it’s a trade, and a trade requires both a buyer and seller). However, I tend to think that the person who benefited from trades in these instances was more lucky than smart, and luck can turn in an instant.

It’s important to remember that a bull market or a bear market is nothing more than a sequential change of mind. It is investors realizing, one after the other, that something has changed: e.g. a stock that really wasn’t worth six dollars a few months ago is now worth over $20. When facts change, people realize this at different times. To be a successful investor, you don’t necessarily have to be the first one to get it, but you certainly don’t want to be the last one.

That no one has a crystal ball is unquestionable. Don’t try to predict unless you have to. No one can be consistently accurate in his or her prognostications, but investors can be amongst the first to notice change if they keep their eyes and minds open.

That’s the lesson for today and for today’s market. Right now, in my opinion, the environment for stocks is still pretty good. Valuations are high but not prohibitively so. The Federal Reserve seems to be in the process or raising rates but (to me, at least) not with an intent to stifle the economy. Finally, forward earnings expectations have been rising for eight months after stagnating for two years. If these things change, then the environment will likely change and our attitude toward equities should change.

This stock market reevaluation will probably happen one day, but it doesn’t seem to be today. I would suggest that we enjoy the good times while we have them. Try not to let the anticipation of bad times interfere with a portfolio in the present, but be ready to react to them when they occur. I think that will make our lives and our investments a lot easier.

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