November 2018

In the short-term, the market is like Whose Line Is It Anyway, the show where everything’s made up and the points don’t matter.  Yes, the points don’t matter just like the nutrition facts on a Happy Meal.  If you’re looking for proof, check out October.  More than 80% of S&P 500 companies beat their earnings estimates, yet the index was down almost 7% for the month. Not only are earnings strong, but unemployment is incredibly low and the economy is doing much better than the experts told us was possible.   Just like the pictures of food on a Denny’s menu, that doesn’t matter.  Day-to-day, the markets are linked to the whims of an irrational crowd of humans.  There are already plenty of irrational reasons (ETFs, “trade wars”, and politics) for the October decline, but just like the Do Not Disturb sign on your hotel room door none of these really matter….

Investors must believe that investments will continue to rise in value.  There is no guarantee this will be the case.  It’s a leap of faith.  There is a rational reason why stocks should go up in the future – the objective of a business is to make money and that should create value for shareholders.  However, in the short-term stock price is based on the irrational passions of the market.  We can even cherry-pick cases like Japan or time periods like March 2009 to show that sometimes even the long-term isn’t a sure bet for stocks.  Why would you bet your hard-earned money on something that’s not guaranteed to work? Why do we date?  Get married?  Have friends?  Adopt pets?  In the short-term, all of these relationships can cause us stress.  Try explaining how cheeseburgers work to an 8 year-old who wants a cheeseburger for dinner, but “without meat”.  These…