Markets are so awful right now that it’s feeling rather promising

Come back with me to Davos, 2018, for a minute.

If you’re not familiar with “Davos,” it’s an annual gathering of the world’s high-powered, beautiful, and richest at an expensive retreat in the Swiss Alps.  It’s an great opportunity to rub shoulders with movers and shakers who gather in a gorgeous winter wonderland to survey the world they seem to own. Membership at Davos confab is not to be applied for. One has to be invited. Then, depending on your level of participation, you’ll pay anywhere between $60,000 and $600,000 for the privilege of being there.

I haven’t been invited, and that’s OK with me.

This year’s meeting wound up on January 26th, 2018.  Hoold onto that date for a few paragraphs. What was surprising about this year’s meeting was, for a change, how good the world economy looked to the Davos folks. Oh yes, Trump was in office, that was troubling. Trade matters were of concern, too (and still are,  because of Trump), climate change also was a focus, since Trump, head of the world’s largest economy, was ignoring it. And Trump was also ignoring the Iran nuclear deal, which generally troubled the Davos people

But over all, the world looked good. Better than it had in years.

In fact, the International Monetary Fund raised its global growth forecasts for 2018 and 2019 to 3.9%, expecting the global economy to continue to recover on the back of buoyant trade and investment, as well as then-recent US tax reforms.

Christine Lagarde, the IMF’s Managing Director, presented a bright outlook during one of the week’s early sessions. About half of the global revision was attributed to the impact of the US tax package (Oh, that Trump guy) , which is expected to boost growth in the United States through 2020, and have a positive knock-on effect on its trading partners.

It all looked so good on that last day of meetings at Davos, Switzerland, Friday, January 26th, 2018.

Back in New York, the stock market closed at a new high – again! There had been 17 days of stock trading up to that point in 2018, and the market closed at a new high on 14 of those 17 days.


As the folks in Davos got on their planes, what could possibly go wrong?  Economies all over the world were humming.  Markets were up, up, and away.

Yet, when the markets opened on Monday, January 29th, they fell.  And they fell pretty hard and quickly for the next two weeks.  Since then there have been efforts to recover; several of them, in fact. But markets are still down about 10% from their 2018 highs.

Okay, folks, I have have given you a long introduction to a point I want to make, and I don’t want you to miss. Back in January, things were so good, and so many people were so convinced that they could only stay the same or get better that everyone who wanted to invest probably had already invested. So, with little money able to move into the market and lots already in it, moving money out became more likely.  And money powerfully moved out of stocks.

Lately, however – and this is part of the same point I want you to pay attention to – the “experts” in the media are again all preaching from the same gospel. Which is?  That the markets are ready to roar up again?


The group-think message now is that markets probably topped in January. That tech and finance – the prior leaders – are dead, especially given Facebook’s grilling in Congress and likely regulation coming. That inflation is beginning to come back and interest rates along with gas prices are set to slingshot up.

In other words, we’re all toast and the economy is, too.

If things looked too obliviously good in late January, today, they look too uniformly awful. That does not mean we will rocket back to new highs soon.  But right now, I’d be more concerned about the uniformity of negative voices shouting “Run for the hills” than I would be concerned about markets falling much further. There’s so much pessimism out there right now that it almost makes my mouth water for the opportunities that may unfold.

Posted in economic recovery, fear, gas prices, investment myths, investment wisdom, market corrections, Market falls, market volatility, Personal Finance, retirement investing, Successful living | 1 Comment

How are you doing with this volatility?

Take a look at the chart below. Take a good look.

A bit of study of that chart may help any who are having anxiety attacks this spring over market gyrations understand why they are they are experiencing discomfort. We have been spoiled. Spoiled by generally lower volatility and steadily higher returns over most of the last five years. Certainly, feast your eyes on the pair of nine quarters of successively higher quarterly returns.  Wow! How wonderful it all was for us prudent, retirement investors.

And then all of a sudden – very suddenly, this winter, vicious volatility returned to the market along with disappointing returns. The returns have not been terrible, but they have been negative, something we have not seen for quite some time. Having started the year by going up about seven percent, the market, by early February had fallen about 12% to be down about 5% year-to-date. Since then, we’ve been up a bit, down a bit, ending the quarter down a couple of points and, as of last Friday, still down about 1% for the year. Not too bad, but again, by looking at the chart below quite a come-uppance from the sweetly regular higher and higher returns we’ve experienced in the recent past along with their darling lack of volatility.

We’ve just finished a week during which, yet again, we all rode the roller coaster that has become the stock market of late. Up nicely the first two days of the week, a day off in the middle, and then two days that cancelled most of the gains from the first two days. A roller coaster, for sure. It’s what markets do from time to time. And of course, over time, markets do rise twice as often as they fall.

But – sh-zaam! – it’s so hard to know what to tell people who are not used to this kind of market volatility. Intraday swings of 50 or more S&P points or 500 or more Dow points leave a lot of sensible people scratching their heads, breathless, or reaching for a tranquilizer. Even cool-headed professionals who are in the business of managing other people’s money become “frozen” in place because, if they make a “big bet” and they are wrong, not only do they have bad performance to explain, but they also risk their bonus and maybe their job, too.

It’s just that kind of year. There’s so much confusion and unhappiness, though the market is not off much.

Economists are also unhappy because they don’t know what to think about what’s going on and what’s causing all this market mayhem. True, there appears to be a recent softening of global economic data, but U.S. data is still on track for 3% GDP growth from recent tax changes and ongoing deregulation.

Is this just a global pause or the start of a bigger issue? Is inflation coming back? Or, is it just a normal response to an increasingly robust economy? Are interest rates going through the roof, with the FED about to push them higher and higher? Or, is this just part of a healthy economic recovery that is still well contained?

We simply don’t know, none of us.

Market technicians are unhappy, too, because the market hasn’t tipped its hand – are we going much lower? Or, are we leveling off before a run to new highs?

So if all the pros are confused, the average investor is unhappy, too, because, for the most part, he or she has been spoiled. That recent, unrelenting upside performance momentum, with little or no givebacks, has given way to the daily roller coaster ride, instead of the sunny smoothness and profit from investing in stocks.

This is even more evident in the past five years – again, see the chart. Just about every calendar quarter since 2013 has generated a positive return. That was not the case prior to 2013, please note. Nor is it normal.  Investors may now just have to learn to deal with a more normal environment that will challenge their investment patience and strategies.

But rather than wring your hands over Washington’s political climate or from wondering what the Fed will do next or inflation, or a myriad of other concerns, the thought that I would like to suggest you play in your head over and over runs along the lines of “This is what stocks do.”

Stocks go up. Stocks go down. Sometimes, they do it quickly, and sometimes, it takes quite a while. Sometimes, they go down a little, and sometimes, they go down a lot. Sometimes, it’s because of a recession, and sometimes, it’s not. But rest assured, especially if you’re one of those who has the misfortune of watching cable financial news, that every time this process, up or down unfolds, someone will appear on air, someone you’ve never heard of will get credit for predicting it. And every time the market falls, someone who has been bearish for the entire bull market will be on air to pound their chest and claim they predicted it.

Still, for the patient investor, a time will come when stocks shake off whatever it is that ails them, and they will go up again. What’s going on now is one of those cautionary tales that serves to drive home to all investors that we need to stay with our plan. Things will come around.

During times like these with this maddening whipsaw action, investors seem to be easily swayed from their plan or their strategies. It is an ongoing battle for some to maintain their fortitude and calm their nerves. As I have written many times, the ultimate challenge for investors isn’t how brilliant your economic sense or your understanding of investments are or how much you need to find a great investment guru; no, it’s none of that. It’s much more often learning to control your own self-destructive, nervous emotions. The challenge for any investor, large or small, professional or newby, is to remain calm enough through the turbulence – as you should on a long distance flight – sticking to your strategy through thick and thin. The big mistake too many make is telling ourselves, amid the turmoil, that it’s time for a change our plan because of outside influences that affect our stock market judgment and patience.

Cable news, in particular, seems to feed its viewers an endless array of voices and stories, carefully constructed, to persuade us that our long-term, rational plan is no longer valid. Pessimism and doubts are stoked, and negative but intellectually seductive arguments suddenly sound smarter, especially when they dovetail with our own worries and insecurities.

In a sense, like it or not, ready or not, investors are always testing their market plans against current results. Market participants who are constantly looking for falsifying evidence are likely to find it – especially on cable financial news. So many can’t grasp the concept that a market has to climb “a wall of worry.”

We fall into this trap because our strategy undergoes a period of under-performance, or more broadly speaking, a draw down, a temporary loss of value – a loss on paper, not realized. That’s perfectly normal. But if one has a valid strategy to start with, then these draw-downs should be met with a strong dose of “do nothingism.”

The challenge for every investor, new or very experienced, is to know if his or her strategy is the correct one to employ. This is where the well-diversified, equity-oriented portfolio is particularly helpful. Most of the time, it is and will remain so; but all investors need to check their emotions at the door and exercise patience. Panic is not an investing strategy. Understand that all portfolios will go through periods of under performance.

The message you should repeat to yourself over and over again during a corrective period like this is to keep your focus on your strategy, your plan, and on what is important. And right now, what’s important is the earnings picture. Earnings are coming in now, and they look very good. So, maybe the sky isn’t falling. And you don’t need to do anything drastic, just have patience.

God bless you.

Posted in economic recovery, fear, investment myths, investment wisdom, market corrections, Market falls, market volatility, Personal Finance, retirement investing, stock rallies, Successful living | Leave a comment

Some things to ponder in a chaotic market

Why? Why? Why?

Why won’t – and when will – the markets stop the manic madness? It seems to be up big one day, then down big – or down bigger – the next.

It soars then drops. And this ruins our day, destroys our peace of mine, and may make us a loutish person to be around.

Why? Do we think we can control the volatility? Or even understand it, as if it had an answer to give to us? Well, we can’t control it, and we won’t understand it.

It’s a lot like life itself: we control far, far less than we think we do. And we need to face this. Fighting to control that which is uncontrollable is not just a market-based disorder that steals our peace of mind. It’s part of our humanity that leads so many of us to believe, if we do something well – say, we love our kids, we take our vitamins, we are kind to others, we help our wives or husbands – then we are owed a safe passage or a easy time or gratitude from our loved ones or from the universe.

It just ain’t so.

This is a fallen, broken world. Get used to it. That fallenness extends into every part of our existence on this earth, right down to our washing machines, our cars, our stomachs, our loved ones. No matter how well we care for any of them, they will still act up at unexpected times and in unsettling bad ways. And so, too, will the markets and our retirement portfolios, as well. In response, we can run away and hide our heads in the sand, or we can face them bravely, do our best, and have the patience and resilience to hang on when things – or people – don’t go well.

Truthfully, markets are NOT going well right now. The fear of a trade war – something that the world hasn’t experienced since the early 1930s – is spooking investors all over the world. This causes chaos because, when trouble or confusion or lack of clarity strikes, many investors sell first, then ask questions.

Again, dear friends, I do not think this is the end of the world or even the beginning of the end of the world. It is a correction to a market that was priced for lots of things to continue to go right – earnings, taxes, regulation, interest rates, global growth, employment and more – and all that good stuff is still in place. But trade has become a concern, as, also, has the tech sector, which has been the engine of the market’s recent enthusiasm.

I’ve written before that markets, in general, rise two-thirds of the time and fall one-third of the time. You probably know that. But when, on Monday, markets fell over two percent – the worse start to an April in history. And then rose over one percent yesterday, and then fell 500 points in the opening moments of today’s trading only to rise 900 points from its morning low, the thought that we are in one of those time of customary market weakness that comes a third of the time is overpowered by the primal fear that, “AHHHHH! I can’t take this. In a few days, I’ll have nothing left. And besides, my spouse thinks I’m an idiot to be in this market at all.”

So today may be the day you exit. And if you have to exit, then do it. But I believe you are making a mistake. A big mistake, too.

Market volatility in the last two months has exceeded the average market volatility during the fall of 2008. And you probably remember how awful 2008 was, when the world financial system was falling apart. Today’s volatility has been horrible for two months, and it still is. But the market has not fallen like it did in the fall of 2008. In the fall of 2008, earnings were plummeting, growth around the world turned negative, and employment was collapsing, along with the financial system. That’s not the case today. It just feels frightening because of the volatility. First quarter 2018 losses for US markets was a modest 1-2%.

Big market waterfall-like tumbles and high volatility are, face it, abnormal. Like insomnia that visits many of us sometimes in life, the longer it goes on, the more certain it will eradicate itself. An insomniac, if he (or she) stays awake long enough, will fall sleep. And markets that fall big are setting up conditions wherein bargains are being created. That’s happening right now. Yes, friends, right now. Investors, like shoppers, smell bargains, and there are more and more of them out there as each day goes on. Truth: over 60% of all stocks right now are trading below their 200-day-moving-average. That describes a cheap market.

But beyond markets – or including markets – why do some of us get so upset over this kind of thing? After all, markets rise. Markets fall. Investors make money over long periods of time. No 20-year period of investing in market averages has produced a loss. Hang in there. But more importantly, what do you do when a loved one gets seriously ill or a divorce strikes, or a child runs off? Life is full of heartaches that we cannot control, no matter how careful we are. What do you do then?

This is a real question, and as someone who writes a blog on retirement investment, I turn to this question because life, especially as we get older, is increasingly likely to break our hearts. Friends die. Loved ones die. We get sick. We lose the powers we once enjoyed. We ourselves face death. What do we do about these inevitabilities?

Some turn to drink. Others drugs. I have, I confess, like many others, turned to my faith. And while I’m not meaning to turn this blog into a church service – Trigger Warning! – I’d like to share a few final words with my readers about facing the unknown – markets included. This will take me into the terrain of my Christian faith. I want to warn any readers of this seeming detour. It is no rerouting to me, but it may seem so to the non-believer. I beg your pardon, but also entreat your sense of curiosity, for I see “retirement investment” as much more than money. It ultimately has to do with building a whole, ordered life of peace and grace, with, of course, some loot to provide a foundation for more important things in life.

One of my heroes or, I should say heroines, is Teresa of Avila. A 16th Century Catholic saint, Teresa grew up in central Spain, midway between Madrid and Salamanca. I’ve visited her home town. She grew up in a privileged home, her father was a Spanish knight. But her grandfather was condemned by the Spanish inquisition and her mother died when Teresa was 11. Her world fell apart. She joined a Carmelite convent, was found to be a “mystic,” brilliant, and was persecuted. Her intense faith carried her through the storms of her life. A favorite piece of hers, I have committed to memory and often recite to myself is:

“Let nothing disturb you,
Let nothing frighten you.
Everything passes. Patience gains all,
He [or she] who has God has everything.
God alone is a enough.”

Teresa of Avila ( 1515-1582)

Ponder her message, the importance of anticipating disturbances in our lives, the realization that everything is temporary – the good and the bad. Patience gains all, and that without faith in a God who is good, caring, competent, and present, we are in deep, deep yogurt.

Second, and last, today, I refer us to Paul the Apostle and a few words from his Letter to the Philippian Church in northern Greece, probably written about 62 A.D., perhaps ten years after Paul had first visited the church. The letter comes while Paul is under house arrest in Rome, knowing the end of his life is drawing near. Yet, the joy that fills his short letter is truly remarkable. It shines like the sun. He is worried only about his people and the progress of their souls. He knows he will be alright. In the short term, ahead, he may hit some bumps; but in the long run, all will be perfect. He wishes to convey his joy and hope to his readers who are going through some struggles of their own back in Philippi, and he does so in such beautiful words. He tells them:

“The Lord is near. Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus. Finally, brothers and sisters, whatever is true, whatever is noble, whatever is right, whatever is pure, whatever is lovely, whatever is admirable—if anything is excellent or praiseworthy—think about such things. Whatever you have learned or received or heard from me, or seen in me—put it into practice. And the God of peace will be with you.”

“Letter to the Philippians,” Chapter 4, verses 5-9

How much, dear readers, I would wish you to ponder this little gem, too. “Guard your hearts and your minds,” Paul writes. And, wow! Do we ever have to guard our hearts and minds today – from obsessions with social networks, how many “likes” we got, from fussing over celebrities’ lives or tweets, our hungering for more and more stuff in our lives when we already have too much – and so much more. How much we would all gain from dwelling on what is right and pure and lovely and admirable and less and less on what is trivial, nasty, cruel, or foolish.

Money, I have long found in working with so many who have it, adorns the wise and destroys the foolish.

Let me end this long, philosophical riff on money and character, set against today’s background of terrifying volatility, with a picture of “staying the course” with stocks and not being dissuaded from their long-term value to help you. Here’s a chart showing how stocks, and other asset classes, have done since 1802 – 2012 – that’s 210 years of data. (“Real Returns” are referenced in the chart. They are, by the way, returns after taxes.) Ponder that chart below, and then go back and look at an early Feb. 2018 blog of mine in which I offered a look at Albrecht Durer’s famous 1517 print of the “The Knight, Death, and the Devil,” and maybe read what I had to say about that engraving as a wise image to keep in your head as wise human being and a good long–term investor.

May God bless you with increasing patience and understanding.

Posted in economic recovery, fear, gold, investment myths, investment wisdom, market corrections, Market falls, market volatility, Personal Finance, retirement investing, saving, Successful living | Leave a comment

Some thoughts on the current volatility

Volatility has increased remarkably during the last two months after a year of uncommonly little volatility. The collateral damage of this upsurge in volatility is especially noticeable in people who have little experience with investing.

Of course, it’s not 2008 – far from it – but it is also far from last year. Sort of breathtaking, no? That the value of the universe of publicly-traded companies in the United States can vary three or four percent in an hour. It doesn’t make sense. There is still too much positive stuff that cannot be ignored (though it is) – earnings, interest rates (still very low) along with inflation, less regulation, lower taxes. Nonetheless, the market right now doesn’t buy any of that good stuff. It ignores it completely and seems to focus on Facebook and the still remote possibility of a trade war. To me, this does not make sense. But my confidence that the present mood is wrong doesn’t provide me with much pleasure. Being down is still being down.

As investors we are faced with the difficult task of making logical, disciplined decisions in this particular challenging moment in time. Our time. With our investments. I can’t explain the current mess. But markets can, and do, throw occasional hissy fits. Again, as an investor focusing on the long run, I have develop tolerance for this kind of cosmic emotion. What this is about or how we got here is simply less important than staying disciplined and getting out without hurting ourselves or our chances at seeing our investments grow in the future. In this regard, it is important NOT to catastrophize.

Let me close with a few general observations:

  • The stock market has been the most powerful wealth-generating machine in history and is a reflection of the fundamentals underlying our economic system.
  • With apologies for what must sound like a cliché: you don’t make money buying at the top and selling at the bottom.
  • Try to avoid projecting current conditions endlessly into the future – “catastrophizing,” in other words. Conditions will change and likely for the better soon enough.
  • I are not so naïve as to predict that whatever has caused this convulsion will clear up in a few days, but if I look out, say, several months or a year, I am of the opinion that things will be much improved. But timing when this sudden turbulence will be over and the air will be smooth again is impossible.
  • I am seeing businesses with great economic fundamentals being driven down, very quickly and unwarrantly, to unreasonable valuations
  • In this mess, stock markets around the world are creating opportunities for patient, long-term investors. Like you, I hope.
  • It may be hard for you to understand or see right now, but the more beaten down the market becomes, the sooner smart investors will see greater opportunities to deploy cash to buy good companies at sale prices- just like in retail stores. This kind of action seemed to happen on Monday when the market rose remarkably. In a deeply oversold market, stocks rose more than they had in years.

For those of you who have a personal faith in the unseen, this is a time to exercise that faith, to grow in resilience, strength, and character.

Like the beginning of Rudyard Kipling’s poem “If…” – a poem about character: “If you can keep your head when all about you are losing theirs…”

Well, if you can, then you are a very mature, solid soul, and of great potential help to many.

God bless you, and God bless all of us to do our parts, to help others, and not lose our equilibrium in this passing moment.

Posted in economic recovery, fear, investment myths, investment wisdom, market corrections, Market falls, market volatility, Personal Finance, retirement investing, stock rallies, Successful living | Leave a comment


According to Wikipedia, Incoming” is a warning or command to seek shelter from incoming artillery fire.

There’s more negative market “incoming” descending on us today.  Futures were down significantly over night, and the markets have followed through in delivering a bad opening and a worse trading session.  Sorry, folks.

As is my habit, I write especially at those times when I sense my readers, who I hope are investors (as opposed to savers) for the long term (think: retirement), may grow weak or discouraged.

Fear not, my friends.

I don’t write those last three words because I know what is immediately ahead. You must know that I don’t know. I just have more experience with “incoming” than many of you have.  And I do know that a lot of my less-experienced investor friends engage in an awful lot of “stinkin’ thinkin” when it comes to their investing. Maybe other things, too.  You know the kind of thing where you just think, “here we go again.  Why was I so stupid?”

Again, I don’t want to play the know-it-all nor to be too sanguine on the losses investors have suffered this winter, sometimes accompanied by great volatility and market violence. No, bad stuff is here, and there may be more coming. But it will not last. No, I know that we have experienced down markets and, God willing, if we live long enough, we will experience more of them in the future. I realize, too, that airplane passengers with little experience with turbulence can get very rattled, while more experienced, frequent-flyers merely tighten their seat belts and wait for smoother air. The same can be analogized for investors.

Fact and experience both tell me that to increase my wealth in retirement, and be a good steward of my long-term financial assets it is better to own stocks than CDs. Moreover, it is better to invest with discipline, a plan, a settled allocation strategy, and an eye for trends rather than basing your decisions on events. The effects of events are likely short-term, like air turbulence; the effects of trends tend to be much longer.

So what is the trend?  As Shakespeare’s Hamlet said to himself, “To be or not to be? – That is the question.”

Yes, what is the trend? That is the question.

Old Hamlet was contemplating suicide; of course, we’re not. But figuring the trend out is not easy. A great investment mind, Richard Russell, the author of Dow Theory Letters, opined that “The most important consideration when investing in the stock market is [discerning] the primary trend in the equity markets.”

Between Trump’s election in early November of 2016 and late January of this year, the stock market rose about 35%.  That trend was easy to ride and fun, too.  However, since late January of this year, things have been much more challenging. Why?

Lots of reasons, I think.

First, rising so long and so much in just 15 months has led many investors to think the markets are now highly-priced or overpriced. Then, there are trade and tariff negotiations, creeping inflation (or so it’s thought), upward lurching interest rates (The FED raised them yesterday and said they will raise them a bunch of times more in the next two years), and then there is the President himself. For all the good policy he has undertaken, he’s a wild man, unpredictable, childish at times, subject to Twitter tantrums and the making of needless enemies.  When the market was 30% lower, bets that all would work out were easier to make.  Now, less so. Many investors seem to want to take some money off the table, as they say.

But there is much good on the other side of the ledger in the dynamic tension that is ever and always present in investment markets.  Employment is good and getting better, which means consumer income is rising.  Not only are more people getting jobs, but people who have not participated in the workforce for a while are starting to come back.  Earnings of companies in America and Europe are doing well and getting better.  The tax reform changes, passed late last year, are still coming, still building in reported corporate revenue and earnings.

So back to the all-important trend. Where are we?  Everyone will assign a different probability as to where we are. I think the market is digesting a lot of gains over 15 months. I think we’ve hit some turbulence and have to ride it out. If you’re troubled, maybe you have too much of your longer-term finances in stock-oriented investments. Try not to think “all or nothing.”  Think in percentages of your overall investments in different asset classes. Take some money out of stocks and put them in something that will help you sleep at night – like cash or a CD – if you need to.  None of us should have 100% of our money in stock. In the long run, it is the right place to be. But none of us can probably stomach the gut-churning roller-coaster that is, at times, equity investing. Stocks, please never forget, do not provide passbook savings account returns. In fact, their returns are very lumpy, which is why it is crazy to try to time when to be in or out of the stock market.

Picking the bottom or the top of the market is way beyond my or anyone else’s pay grade or circle of competence.  Estimating whether stocks are a good value is something we all need to engage in.  Right now, with their dips down, stocks are becoming a better investment every blip lower. Tighten your seat belt, if you need to. Shifting metaphors back to my beginning, “incoming” artillery fire is never fun.  In war, it can be deadly. In investing, it just takes patience and fortitude to endure, knowing that this, too, shall pass away.

Patience, everyone.

Posted in economic recovery, employment, fear, investment myths, investment wisdom, market corrections, Market falls, market volatility, Personal Finance, retirement investing, saving, stock rallies, Successful living | Leave a comment