market activity

Flashing Lights, Bells, and Whistles

photo shows a BNSF train going through Louisville, Nebraska

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.

Want content like this in your inbox each week? Leave your email here.

Play the audio version of this post below:

This text is available at

Every Share of Stock is Owned Every Day


Every share of stock in existence is owned every single day by somebody. But the market news often refers to “all the selling on Wall Street” on a down day, or “the buying on Wall Street” on an up day. In reality, every share sold was also bought.

This came to mind when we recently read the words of a supposed expert: “investors need to be protected from themselves.” Since “you can’t change people” then the right prescription is a 60/40 or 40/60 mix of stocks and bonds, because otherwise people would sell out at a bad time – in a down market. But every share sold gets bought! So we cannot all be selling at the same time.

The idea that nearly everyone should give up the potential returns of long term stock ownership on a large fraction of their wealth because they won’t behave properly seems wrong-headed to to us. Our actual experience with you over the years says that many people are either born with good investing instincts, or can be trained to invest effectively.

We believe you can handle the truth. Long term investing requires living with volatility, the ups and downs. This is not appropriate for your short term needs, of course, for which you need stability.

In these times when bonds pay so little, insistence on a significant allocation to a sector where returns are likely to be historically poor for many years seems short-sighted. Particularly when used to shield true long term money from normal stock market action.

Let’s be clear: our philosophy is not for everyone. History suggests that about one year in four, broad stock market averages are likely to go down. If you can’t stand that with some fraction of your wealth, our approach is not the right one for you.

Clients, if you would like to talk about this, or anything else, please email us or call.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.