Investing is difficult; theoretically it should be intellectual but it usually becomes behavioral.
SEPTEMBER 2020 Newsletter
Investing is difficult; theoretically it should be intellectual but it usually becomes behavioral. Fear enters in, logic moves out. I miss the wise counsel of John Templeton in particular. On occasion I note someone new like James Mackintosh who writes Streetwise for the Wall Street Journal. I quote largely from his article of August 10, 2020 the following: “Market bubbles involve rapidly rising prices that suck in buyers hoping to make money quickly, who carry out little due diligence and don’t worry much about the long-term prospects of what they are buying. Standard valuations are always dismissed as no longer relevant. And the bubble is usually inflated by cheap money. Sound familiar?” Have you been worried we are in a bubble?
And then he reminds us, “oil stocks are in a terrible place, retailers are going bust in droves, banks are still down 30% this year in the U.S. and worse in Europe. Travel and tourism stocks are in a hole. Smaller company stocks have rebounded but only back to where they stood in January 2018. The worst rated junk bonds have missed out on easy money entirely with their yields rising this year. This isn’t indiscriminate buying of everything.”
I remember indiscriminate buying, I remember the heady times of 1999-2000 and people owning items we were afraid to own, I remember talking to a woman who was almost where she wanted to be but wanted a little more. She did not become a client and I am not sure why she talked with me but I always wondered how she came out as the market started its severe decline shortly thereafter and she owned all the popular items.
For many people who do not understand the market separate from the mantras they hear, the market runs based on these kind of bubble ideas. For others, there is a huge amount of research and understanding of the underlying values of an investment. That is what we are interested in. The media is not reporting volume, only direction. I study the volume daily and do not find great volume in either direction. In other words, when the market goes up or down, the daily volume simply falls around the averages of the day. If volume changes significantly, it can be important.
While people wonder about the market and the election, the markets wake up each day and trade. If it is political, it seems a balanced contest.
In the meantime, we are happy with recovered accounts and know this is not the frothy markets of the late 1990’s. As hard as it sometimes is, holding good accounts through volatility does work out well.
We are hugely appreciative of the support we have had since the loss of Karl Kuelthau. We have talked with some of you and we would like to talk with more of you when you see a need or wish for a review. Zoom is a great new invention and the phone works just fine also. As John Templeton always said, “You invest when you have the money.” The rest takes care of itself.
Louise Googins, Author