Tactics

Rough Markets: When the Wisdom of the Crowd Becomes Herd Mentality

photo shows a mountain stream

Clients, some of you have reported that some people around you are finding it inexplicable that you haven’t yet sold out of the stock market, given its rough times. One of you even heard the prediction, “You’re going to lose it all!” These conversations are happening at coffee time, out to dinner in a group, at every kind of casual gathering.  

We often think of peer pressure in connection with children. But there are strong forces at work among not only children: it’s also retirees and everyone in between! 

In ambiguous situations, humans tend to copy what other people seem to be doing. If we don’t know what to do, we may assume that others do. So we emulate them. This type of behavior is sometimes referred to as “social proof”: we take our cues from others when we feel unsure what to do. 

In some social groups, people react to rough markets by selling out; in other groups, people cling to the long-held belief that investing is too dangerous for anyone. If everybody in your “group” seemed to be doing the same thing, you’d have lots of social proof to reassure you that, surely, you must be on the right path. 

But this social influence can hold more weight in our choices than it deserves. Yes, someone marching to a different drummer can seen as a rebuke. The contrary behavior—going against the crowd—is full of resistance. Sometimes it takes a big splashy effort to swim upstream! Hence the hectoring and lecturing. 

But we choose our own course, and it does not start or end with what others think about us. 

You can see the core principle at work: “avoid stampedes.” We believe this has kept us out of fads—and pointed us to bargains. We think going against the crowd may be profitable, though no guarantees of course. 

If your friends hassle you about your investing, be kind to them. You can always change the subject if you need to. Maybe in their mind, fear is in the driver’s seat right now. Or maybe they’re in the grips of peer pressure. 

Either way, we know what we’re about. And that’s enough. 

Clients, if you would like to talk about this or anything else, please email us or call. You are among the best clients in the world, a group where you may find all the proof you need that being contrary may be a great thing.


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Rough Markets: When the Wisdom of the Crowd Becomes Herd Mentality 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

The History of the Stock Market: A 5-Word Story

The entire history of the stock market fits into five simple words: it goes up and down. We can’t know the schedule ahead of time, and this can stir up some stress in the short term. But it seems reasonable to guess this whole “up and down” thing may persist.


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It Goes Up and Down: Some Questions for a Moment Like This

graphic shows "up" and "down" on a chalkboard with checkmarks next to them

The history of the stock market can be summed up pretty well: it goes up and down. As for the future, we cannot know for certain whether it will continue to go up and down—or on what schedule—but it seems reasonable to take the liberty of guessing this whole “up and down” thing may persist.

When things are down 20% from their most recent peak, and we recognize it goes up and down, this may well be as good a time as any to invest.

We might have a recession, but current lower prices already reflect a lower outlook. You could say sentiment is already in the mix, already baked into prices. And anyway, where there’s a recession, there’s surely a recovery to follow.

Do we know the timing? Nope. But we never do. (That’s where the whole up-down thing comes back into focus.)

There is much we do not know, but we have faith that perhaps our guesses may be good enough to get by. We believe, for example, that in the future there is money to be made by companies that meet our needs. We have a hunch we will continue to eat, shop, entertain ourselves, wear clothes, go places, communicate, create, and do all those other things humans tend to do. And we have an opportunity now to invest in companies that could provide those things then.

Clients, some things to consider at such a moment as this:

  • Is there room to start or add to a Roth or IRA?
  • Should some funds in a stable-but-stagnant form perhaps be invested for long-term growth?
  • Would a Roth conversion make sense given these lower prices?

It goes up and down. And when we invest for the long run, we commit to the ups and the downs both. One never knows when the trend will change, just that it very well may.

If it’s time for you to add to long-term holdings, please email us or call the shop—anytime.


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It Goes Up and Down: Some Questions for a Moment Like This 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

I. AM. EXCITED.

Maybe you’ve noticed… but I can be an enthusiastic fellow! But some believe emotions don’t have a role in investing… I’ve got some thoughts.


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Lessons from the Open Road: Just Change the Tire

photo shows a car with a flat tire on the side of the road

As spring fades and summer draws near, some of us are gearing up for road trips. (Although we know gas prices might affect our plans!) We’re thinking lately about life on the open road—and what lessons it might offer investors. 

Imagine you’re going along a winding road, and the car gets a flat tire. There are some choices available here. Some might hop out and swap the flat for the spare. Some might get a hold of a car service or a trusted friend in the area and have them change the tire. These approaches at least get you back on the road. Reasonable enough, right? 

But there are other choices available. We could, for instance, slash the other three tires. We could dump a can of gasoline on the whole darn thing and light it up! We could declare it a lost cause and walk away. We could take the flat as the confirmation we were looking for that this journey was a mistake after all.  

We can abandon the endeavor. 

It sounds outrageous, given the facts of the matter. The trip was your plan: you got in the car, loaded the supplies, and set out. Sure, this moment could be a fabulous excuse to turn back, but if that’s the case, it seems to be more about the driver’s relationship to the journey—and not their relationship to the setback. 

It’s not black and white, of course. There are approaches that we might employ along the way that we choose before we make the bigger, more crucial decisions. We might kick the flat tire. We might shake our fists at the sky. We might call someone to say that we are frustrated or scared or sad. Yes, you bet! Sometimes we need to vent stress out of our bodies before we make decisions. 

But how many endeavors do we deny a fighting chance when we refuse to just change the tire and get back on the road? 

You can go the whole journey this way. It will get you where you’re going. 

Clients, maybe you can already hear the lessons for managing a portfolio and working with downs as well as the ups. We let our resources carry us, for the long haul. 

Want to talk more about this—or anything else? Call or write, anytime. 


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Play the audio version of this post below:

Lessons from the Open Road: Just Change the Tire 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

The Impossible Journey to Normal


The novel coronavirus is two years on, so what’s the deal with “the return to normal”? Some historical context and a few reminders.

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The Dragon and the Hobbit

Do you remember The Hobbit? If you ever read J. R. R. Tolkien’s novel or watched the movies, you may remember the scene where the title character discovers the dragon Smaug sleeping atop an enormous pile of gold and treasure. 

It’s a striking image: the entire wealth of a once-prosperous kingdom, gathered up, a bed for a giant dragon. Tolkien uses this splendid scenery to good effect, exciting the reader’s imagination with his description of riches. In the story, after reclaiming the dragon’s hoard, the hero Bilbo Baggins is able to ransom an entire city with just a one-fourteenth share of the treasure. 

You have to wonder… what good did owning such unimaginable riches actually do for Smaug? After all, he was a dragon. It’s not like he had shopping to do or bills to pay. Piling it up to make a nest for naptime just seems like a poor use of the assets. 

What’s more, the misused treasure had become a burden over time. When Bilbo first encountered the dragon, he managed to steal a single gold cup from the hoard. The loss of even this smallest part of his holdings made Smaug miserable and furious. For all his vast wealth, Smaug spent all his time and energy worrying about it. 

We don’t know many dragons or hobbits, but wealth is certainly important to the humans we know.  

Money can buy a better bed than a pile of gold (for a lot less, too). But money can also be a source of stress and frustration, from unexpected home repairs to medical bills and car accidents. It can feel like life keeps sending hobbits to pilfer the hoard you worked so hard to accumulate.  

But these moments are precisely what we saved for in the first place. As stressful as paying bills might be, it is less stressful than having bills and not being able to pay them. 

A pile of money can make your life easier, but only if you let it.  

At the end of The Hobbit, Bilbo returns home only to find that his house and possessions have been auctioned off in his absence. He is forced to spend his remaining fraction of the treasure buying his own belongings back from greedy relatives. 

Where Smaug lost sleep over a single gold cup, Bilbo feels only relief at giving up his hard-earned treasure to secure the happy and comfortable hobbit life he wants for himself. 

It’s no burrow, and there’s no tea kettle over an open fire, but you’re always welcome to our office in beautiful downtown Louisville, where there’s always a pot of coffee going. 

Call or drop by anytime: we’re glad to share the adventure. 


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Research Team Q&A: Challenges and Opportunities in Rough Markets

Clients, what do we do when things get so churned up in the markets? We go bargain hunting, of course! In this special message, the team talks bargains, the long view, and keeping the faith through a downturn. Reach out with questions, anytime.


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Getting Stuck on the Ground Floor

“Getting in on the ground floor” may sound enticing. We humans like to be first, best, and on top of things. But just remember that the view is usually better from higher up.


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