Even during the most casual of client conversations, I can be struck by inspiration for my next PCN.
Take my latest conversation, for example: It began rather innocently – lighthearted in nature, just catching up on life since our last progress meeting with this client (we shall call them “client x”) for a few minutes; however, it quickly pivoted to a more serious concern – with the equity markets on a 4-year tear, client x wondered if now would be a good time to bet against equities advancing further.
The only thought that popped into my head was the immortal words of detective Harry Callahan (played by Clint Eastwood) in the 1983 action-thriller Sudden Impact – "Go ahead, make my day."
I would have imagined that if Mr. Callahan were a financial advisor, he would’ve uttered these words through gritted teeth: “Go ahead, make my day and bet against the markets.”
I can’t explain why my brain went into full nostalgia mode, but it did. I’m just hoping client x didn’t see the beads of sweat forming on my forehead.
Why would anyone, after all we’ve experienced through endless meetings, weekly PCNs, my blog, and a few of my podcasts, believe that “betting” against the great companies of America was a ticket to successful investing?
I knew that I had my work cut out for me.
“Perhaps I hadn’t done as good a job as I had thought, and what could I have done better?” was my second thought.
And so, I dove into my research soon after our meeting.
What I found was shocking.
It didn’t take me long to find a few stories about investors “betting“ against the markets:
· “Investors Laying Groundwork to Profit Massively When Economy Collapses”[1]
· “The Stock Market Just Hit a Record. ‘The Big Short’ Investor Michael Burry Says That’s a Warning Sign.”[2]
· “Ray Dalio on the AI Bubble Nearing 1929, 2000 Levels…”[3]
· “Investors Have Placed Record Short Bets Against the U.S. Stock Market”[4]
How prevalent is this “betting” against the equity markets anyway?
I have some thoughts.
First, if you’re in the public eye and manage a ton of money for your clients (think hedge fund manager), the best possible way to make your prediction come true is to get on every possible major media outlet and share your hypothesis of doom.
The idea is that, if they can spark enough fear through a mix of logic and emotion (mostly emotion), they might encourage people to act on their prediction, potentially turning it into a self-fulfilling prophecy.
And because these managers are incredibly smart, they can make any position, no matter how far-fetched, sound both obvious and inevitable. And, since the media relies on attention to earn advertising dollars, the bolder the prediction, the more airtime they’re willing to offer.
Chances are if they are pushing an idea or a fear, they’ve already positioned their portfolios accordingly. They figure the more lemmings they can get on board, the better.
What gets lost in all the glitz and glamour of having these so-called “experts” presenting their opinions as facts is just how often they are wrong.
Look no further than Michael Burry, who seems to have endless fame from his Big Short during the 2008 housing crisis.
What’s comical is that he’s been wrong much more than he’s been right[5].
And yet the financial media trot him out at every turn.
Only the most adept of stock market sages can admit that they don’t know what they don’t know and that betting against the great companies of America is a fool’s game:
“In the financial markets, hindsight is forever 20/20, but foresight is legally blind.”
– Ben Graham[6]
“In all my 60 years in the stock market, I never found anyone whose opinion of what the stock market would do next week or next month was worth heeding.”
– Sir John Templeton[7]
“I am certainly not going to predict what the stock market is going to do in the next year or two, since I don’t have the faintest idea.”
– Warren Buffett[8]
Here you have some of the most respected and successful investors in history openly admitting to anyone who dares listen that they certainly aren’t about to bet against the great companies of America.
Why would the average Joe investor bet against the equity markets and expect to reach their financial goals?
It’s a core belief here at our firm that discipline and patience are two primary keys in achieving long-term financial planning success.
There is no need to waste time or effort worrying, much less making investment policy, out of useless future forecasts.
Bet against the great companies of America at your own peril.
Stay the course, my friends.
[1]Futurism
[2]Inc.
[3]Fortune
[5]JW Cap
[6] Goodreads
[7] Novel Investor
[8] Morningstar