There is a myriad of reasons why we are seeing weakness in the financial markets. We have been covering the inflation issue extensively over the past several years. We have also talked about the ridiculous easy money policies that were driven by excessive government spending. For all intents and purposes, the trillions of dollars in handouts and give-a-ways through various Covid relief programs is being paid back with what we call the inflation tax. Unfortunately, the Federal Reserve and current administration has lost what little credibility they had with the implausible transitory narrative that they tried to sell to the public. (Another, see I told you so where I wish I was wrong.) They all now look like deer caught in headlights and quite frankly, that lack of leadership will likely bring more volatility throughout the next few months.
I have worked through so many market sell-offs, panics, and crashes, that it is difficult to recall them all. My New York Yankees are currently on a tear and could compete with the record of the 1998 team. When thinking about 1998 I was reminded of another market panic that I had forgotten, Long Term Capital Management. That one was interesting. A bunch of wizards of smart Nobel Prize winning economists almost taking the global financial system down. A great premise for a James Bond movie.
I want to make clear that each and every market/economic panic is distinctly different despite the ongoing efforts of the media trying to compare them to one another, except for two points.
- Every single event is presented as a near death cataclysmic event, unprecedented in every way, and might take the world down.
- They are painful as hell if you have a crappy portfolio or have little faith in your process.
Question: Assuming of course you are working with a competent Registered Investment Advisor. Where was your portfolio five years ago, ten years ago, twenty, thirty?
I understand the suck. When one ponders where their portfolio was back at the highs to where it has traded down to during a selloff, for many investors they can’t handle it.
I should have done this; I should have sold that…etc.
Investors need to realize that this type of thought process is an exercise in futility and leads to short-term bad decisions that counter long-term plans and goals. In my opinion, stupid, emotion driven decisions have blown-up more portfolios than the Wolf on Wall Street.
Back when I was in High School, I played football in the Fall. Many of you may have done the same. Back when I played, it was much different than today. We would have double session practices three weeks before school started in August, five days a week, with an extra single session on Saturday. Practices were two and a half hours in the morning and two and a half in the afternoon. This was in upstate New York, August, temperatures in the 80s and 90s, and high humidity. Many of us also had jobs in the evening as well. I recall that at times we would commiserate with each other…Man, does this suck! Every year, dozens of kids couldn’t hack it and quit. The first sessions would have maybe fifty to sixty kids, through attrition we would end up with a team of about thirty.
I will never forget one thing my linebacker coach said to us…
“You are going to have to embrace the suck! Get through the suck and get through to the other side, and everything is going to be great. Because guess what? We’ve got football games coming up Friday night and it’s going to be packed and under the lights and it’s all going to be worth it.”
He was right!
Successful investors learn how to embrace the suck and reap the long-term rewards that are well worth it.