Following market predictions is useless. Before Trump’s election, the consensus was that he will never be president. After his victory, the consensus was that the market will crash. And what happened? He won the election despite the “machine” working around the clock to stop him from winning, and once he took office the market actually started a dramatic rise. Now the Wu Flu is the bringer of uncertainty.
Market Predictions Serve No One
Since the beginning of time we’ve had seers, oracles and shamans of all kinds giving guidance to their tribe and predicting the future. Today, you may laugh at the idea of having an oracle foreseeing rainfall if the tribe dances, chants and bangs drums.
Actually, we are not always more sophisticated than our ancestors. Instead of calling them shamans, today we call them analysts, economists and experts. These seers are the developed world’s equivalent of shamans. The truth is that their predictions are as good as yours and mine. It’s really quite baffling that despite leaps in human knowledge and understanding, we still crave our shamans of old. To give us hope, or confirm our doom.
“There are two kinds of forecasters. Those who don’t know, and those who don’t know they don’t know” – Howards Marks
Human nature is not built for the stock market. We are herd animals. We get greedy in groups, and fearful in groups. Our nature craves certainty. The uncertain greatly discomforts us. Our shamans tap right into our nature and gives us the feeling of certainty. Keyword: feeling. Not reality.
Trumponomics
I am somewhat agnostic on presidents abilities to control the general market. Perhaps some legislation may help, but ultimately in the long-run, valuations will be according to completely different factors. Indeed, it is arguable that Trump has boosted the American economy through deregulation. Unemployment is also historically low. Knowing where we are in the cycle is more important than trying to guess its heading.
“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria” – John Templeton
Having a businessman as a president may tilt the needle in favor of boosting economic activity. However, Trump’s ridiculous overconfidence is a double edged sword: It can create hype, but too much of it may have negative consequences. High confidence is what elevates the human spirit, but keeping your head cool is easier said than done.
Corona – Limeless Reality Check
Most of us know that a market correction at minimum is long overdue. We’ve merely been delaying the inevitable. If not the Corona Virus, the catalyst would have been something else.
The market has now been dropping, and uncertainty has come in full force. At the time of writing, this uncertainty has not devolved into panic (at least for now). If you bought stocks intelligently and you took price into account, these are times you thank yourself. Remember, the best bargains are always to be found during big panics. Once the dust has settled, and optimism sets in, the bargains are gone. Trying to predict the market is useless, but understanding its behavior and how it relates to our nature is key. Mark Twain said that history doesn’t repeat, but it rhymes. Indeed, the cause of swings may change, but the behavior and emotions behind them don’t.
Will the Corona Virus be the catalyst for a bigger recession? I don’t know. And neither does anyone else.
Conclusion
- Do not confuse forecasters’ market predictions, opinions and feelings with reality.
- Understand that the future is unknowable by design.
- In markets, focus on what you can control: Your emotions. Not fluctuations.
-IGTSKasimir
Further Reading
Warren Buffett – The Partnership Days (1956 – 1969)
Philip A. Fisher – Lessons From The 15% Man
The Best of Ben Graham – Security Analysis
Phil Town – The Compounding River Guide
Margin of Safety – The Most Important Thing
Intelligent Investing = Thinking In Probabilities
The Emotional Stages of a Value Investor
If you wan’t to support my writing endeavours, click the green “Subscribe” link below to be notified on all my future posts. It’s completely free, and you’ll be richer, wiser and happier. Cheers!
