The main line of the Burlington Northern Railroad parallels the Platte River through Nebraska, and it crosses Main Street in Louisville. Many times each day, bells sound, lights flash, and the crossarms come down to block traffic. The locomotive blows its whistle. When this collection of clues occurs, you can bet a train is near.
The warnings all make sense when you think about the damage a 200-ton locomotive would do to a car or pedestrian, should they meet at the crossing.
Another thing happens many times each day, with nearly as much noise. Dire warnings about the future of the stock market come from cable business news shows, internet business sites, people at the diner, and sometimes even friends and relatives.
But there are two important differences between train warnings and market warnings. No one profits by promoting phony train warnings, but there is a lot of money to be made by those promoting fear of stock market volatility. And often, the dire-sounding market warnings merit a yawn in response—not a slamming of the brakes.
For example, those who pretend to know that a 10% or 20% stock market decline is around the corner may well be right. A 10% decline is par for the course in any given year: they are routine. Of course a market decline is coming! They always are. It goes up and down, sometimes a lot, unpredictably.
I’ve followed the markets avidly for decades. One of the things that is ever-present is the prediction by someone, somewhere, that the market is about to get crushed. There are always reasons or rationales; the human mind is a marvel of creativity. History provides millions of snippets of data that can always be arranged to convince some people of anything.
We have found it worthwhile to ignore the noise and stick to our discipline. Search for bargains, avoid stampedes, and strive to own the orchard for the fruit crop. Clients, if you’d like to talk about any noise you’re hearing, or the fruits of our research, email us or call.
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