The Spinning ‘Talking Heads’
Watching the ‘market’ squeeze the “false credibility” out the “experts” these past few weeks has been entertaining if nothing else. The end of the 3rd quarter proved annoying, with bouts of anxiety and frustration. It almost feels like 2008 again! In late August, the message was that “everyone should have seen the correction coming”. Even the lead story in the New York Times read “Signs, Long Unheeded, Now Point to Risks in U.S. Economy.” OOPS!
Dan Wheeler, Director of Financial Services at Dimensional Fund Advisors till 2010 has some things to say about this situation:
“I never have liked the term ‘correction’ to explain a move in the market indices. By definition it implies that the market ‘got it wrong,’ being under or overvalued. So looking at the market, I guess in the past weeks the market “over corrected” and has now “corrected” the “correction.” You can see how this starts to become a bit silly, but it also shows how little credibility should be given to the “talking heads” and journalists posing as “experts”.
But alas, they are not the problem. As Pogo once said, “we have found the enemy and it is us!” Investors, both large and small, demand an explanation regarding what has happened in the past, but more importantly, a forecast of what to expect in the future. The first demand – an explanation of what has already happened – that’s not worth much.
The second demand, a forecast of what the market will do in the future – that would be invaluable – if only it was accurate! Anyone who could make accurate forecasts consistently, would have unlimited wealth and not be spending their time on CNBC or Fox Business News sharing their forecast with us!”
State Street analysts have concluded this year to be most volatile year since 2008, blaming low interest rates worldwide. There’ve been 42 days of volatility, which puts it within the top 10% of all time. Last year, we had 11 days.
This is the greatest buying opportunity in years!
Why? History demonstrates that every time we’ve had a 10% decline such as this, the market rises for an extended period of time afterwards. In fact, many economists are predicting an economic resurgence over the next 5 years. (“Many economists” is a little like saying “The Department of They…”, but we do know that markets turn upwards fast after a significant downturn.)
Opening quarterly statements this month may not result in a ‘happy dance’ because the numbers may be lower than the second quarter. For investors, not speculators, you are in it for the long run, so don’t waste valuable time stressing about the market over short term results. Remember, we are global and institutional – a big difference from the retail experience, especially for those on the wrong side of the market.