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.