This was the signature admonition of “Mr. T” (nee. Lawrence Tureaud) (reports of his demise having been greatly exagerated–by me in a previous version of this post} would give to anyone who would dare try to cross him. It brings to mind my own feelings about those stock market prognosticators who, albeit, are well paid and well intentioned, come-a-cropper…pity the fools!
Market predicting is very difficult. You may get it right once (a la Elaine Garzarelli, Joe Granville or Meredith Whitney) and never catch the magic again. Unfortunately for the average investor, getting it right once means years of shelf life in the media. I can attest to this in the case of all of the above. The media (portraying them as experts) kept going back to them for years after they had lost the magic, asking for their vaunted opinions (which were usually wrong and not at all helpful). Again, the average investor paying heed to the media fanfare must be weary of these one-shot-wonders. They are given credibility much beyond anything their overall track records would merit.
So, it is with great pity that I viewed the predictors in this weeks lead story in Barron’s: “Barron’s Survey: Say Beware The Bear.” (You need a subscription)—Stocks could tread water for the rest of the year –or even fall. Wall Street top strategists predict only modest gains in 2017.
The group of eight began the year forecasting the S&P 500 to close the year at 2138 (Friday Sept. 2, 2180). Some got very bearish during the January swoon and lowered their estimates. Right now two of the pros are holding to a year-end target of 2000 and one (the super-bull) is at 2300. I guess that’s what makes horse races (and noise). It has little to do with investing in good businesses for the long-term.
T’is the season for ugly markets
You know, ‘September is the cruelest month’. October has been problematic too. You will, no doubt hear more about this awful propensity over the next few weeks. In recent history September has been a month that on average has produce fractional negative returns (minuscule on average). According to Investopedia:
“Since 1950, the month of September has seen an average decline in the Dow Jones Industrial Average (DJIA) of 1.1%, while the S&P 500 has averaged a 0.7% decline during September. Since the Nasdaq was first established in 1971, its composite index has fallen an average of 1% during September trading. This is, of course, only an average exhibited over many years, and September is certainly not the worst month of stock-market trading every year.”
BTW, most other months of the year on average produce positive returns.
Finally, who can forget October 19,1987 or October 15, 1929? I will let 1929 stand without further explanation. However the more recent 1987 statistic was a dilly, a one-day 508 point (-22.61%) drop in the Dow Jones Industrials. Many are still around who were permanently scarred by by this event.
I can guarantee the specter of these events will be dredged up in the coming weeks … again more noise.
Let us not forget the opinions of successful investors
Because, they all have them and because many believe them to be the unfiltered wisdom of the money sages, people pay attention.
Someone, whose opinion I value, who publishes in Seeking Alpha, a Financial Consultant/Professional Investor who writes under the name “Fear and Greed Trader”, did a great job addressing this in his current post(I choose not to reinvent the wheel): “Bearish Views Are Everywhere, Will They Finally Be Right?”
“Not to be outdone by the barrage of negativism from many analysts, well known individual investors have joined the parade.
- Stan Druckenmiller (May 4, Sohn Investment Conference): “Get out of the stock market.”
- George Soros (June 9, Wall Street Journal): “The billionaire hedge-fund founder and philanthropist recently directed a series of big, bearish investments, according to people close to the matter.”
- Carl Icahn (June 9, CNBC): “I don’t think you can have near zero interest rates for much longer without having these bubbles explode on you“; he also said it’s difficult to assess when exactly that might occur.
- Jeff Gundlach (July 29 interview with Reuters): “Sell everything. Nothing here looks good.”
- Bill Gross (in his monthly investment outlook for August):”I don’t like bonds; I don’t like most stocks; I don’t like private equity.”
Finance history is replete with terrible market calls by very wealthy people. Most of the time they come with agendas.
Instead, it is better to consider your own goals and motivations, which are probably very different from those of billionaires. The average investor has goals of saving for retirement, buying a home or paying for their kids’ college education. Similarly they are not especially concerned with promoting a particular company or cementing their legacy.
Druckenmiller, Soros, Icahn, Gundlach and Gross are all legendary investors. Keep in mind that they are not trying to accomplish the same things with their portfolios that you are likely aiming for with yours. So it’s clear the goals are quite different and blindly following them into or out of a trade or portfolio is not the greatest of ideas.
The primary, and most important takeaway from all of the bearish viewpoints presented today; equity markets do NOT put in tops when the sentiment is so skeptical and at times outright bearish.”
I second, third and fourth FGT’s conclusion!!!
I pity those who rely heavily on the media, the experts and punditry, for investment advice. It is a fools game. The only exception is when you here (hear) the voice of someone preaching against the media-driven consensus.
What is your take?
The information presented in kortsessions.com represents my own opinions and does not contain recommendations for any particular investment or securities. I may, from time to time, mention certain securities for illustrative purpose, names where I personally hold positions. These are not meant to be construed as recommendations to BUY or SELL. All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.