Markets

Markets are down big.  Wonder how Trump’s investments are doing? I have a few observations for anyone who is panicky.  I have had times I watched my nest egg plummet.  But then when you wake up the next morning, the kids still come pile on your lap, your wife still bakes your favorite comfort food, God’s still available for consultation. Not everything depends on the market. Worst worry is when you need the money for something right away.

Markets crash fast like falling off a cliff and go up slowly and nervously, climbing a wall of worry.  Presidents don’t make markets crash, people bid prices too high, then panic-- millions of people making billions of bad decisions financially.  Nor are recessions the fault of Presidents.  So when you hear some political hack say that it was Hoover’s fault or Bush’s fault, just smile because you are wiser than the President of the United States. 

Crashes often have precursors, but they are hard for most of us to discern. China’s stock market was bid to an unearthly average price/earnings ratio of 60 in May and has been falling for two months.  But most folks didn’t notice and what’s more, there are hundreds of these pessimistic scares each year.  Which ones will cause a real market response?  Sometimes you hear things people say or do that should have been a tip-off. But it only sounds idiotic in the aftermath.  “House prices will always go up!” (2007) or “The future is in the internet.” (2000). But then people have been saying that stupid saying about house prices for years (invented by an unknown realtor talking to the chamber of commerce in ancient Athens).  And sure the internet is important but evidently not enough to support a valuation larger than General Motors for a company that has yet to make any profit as happened in 2000.  There are also benchmarks.  When avg. P/E goes over 20 it usually doesn’t stay there for long.  But in the end, you usually are guessing a market top.

I guessed this market to be long in the tooth.  It is the 3^rd longest in US history (#3 out of 37). It was artificially stimulated by QE’s and historically low interest rates. All utterly ironic because Obama,loves to hate Wall Street, but has given us a Fed that is Wall Street’s biggest fan.  Tellingly, 95% of Goldman Sachs contributions going to Dems. 

So if a market seems high and you get nervous, stop buying and store up some cash.  Then swallow your pride as everybody brags about how they made 17% while you sat on a lot of cash.  Just wait and watch.  Comes the crash and it usually is a big emotional event, goes down fast and lasts for at least a week if not a year. (Only in rare instances does the market go down then up in rapid succession, like 1987)  In the end, all the psychology goes gloom and doom.  And it is usually accompanied by low volume and settled lows.  It is accompanied by lots of speculation that having dropped by half it might just drop by half again.  Nonsense.  Is business ownership worth nothing! That’s the time to start bottom fishing.  Console yourself, sitting on cash that now you can buy bargains to replace some of the losses you had in the crash. If you don’t catch the absolute bottom, no sweat.  Become the proud owner of a company that refuses to die.  Then you are ready for the next inevitable market rise. And by conserving some cash during a decline, you have consolation that your portfolio could have taken a worse hit.

To me the amazing thing was all those same people who extolled Clinton’s bull market then lost their ass in the crash from 2000-2002 and swore to never again invest in stocks.  So they bought houses which were never supposed to go down.  Both stocks and houses lost big in 2008-2009. So what now?  Bonds? Interest at historic lows is about to crash the bonds.   

Meanwhile I am waiting to ask the Joe Cool, Golfer-in-Chief, “Is this still Bush’s fault?  Can you rescue the economic damage? What are you going to do now, oh Great Majesty?” Make that arrogant sucker squirm a while. Teach a lesson to the general public in the process.