Second verse, same as the first! Well, maybe you’ve been hearing this from me for a few years now. What’s the market outlook for 2022? I’ve got a hot take for you in this week’s video.
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It is that time of year! Prognosticators and pundits issue their forecasts for the year ahead. Wouldn’t it be nice to know what the future holds? Some forecasts are hedged, don’t really say much.
But our prediction is quite specific.
For those who have visited our offices, you know that we actually do have a crystal ball. It forecasts the direction of the stock market for the coming year. It does not say how far the market will go, but it always predicts the direction.
If you knew which way the stock market was going to go, could you make money investing?
Here’s the catch: our crystal ball has only been 74% accurate. So perhaps the question should be, “If you knew which way the stock market was going to go 74% of the time, could you make money investing?”
Without further ado, here is what our crystal ball says about the direction of the stock market for the year beginning January 1: it will go up.
Long-time observers will not be surprised. The crystal ball always says the market is going up. It has never predicted a down year. And checking back over the past hundred years, according to Standard & Poor’s, this prediction has been right 74% of the time.
We can’t know how well the track record will hold up, but we believe this presents a favorable backdrop against which to buy bargains, to avoid stampedes in the markets, and to seek to own the orchard for the fruit crop. In other words, to keep on keeping on, following our principles and plans and strategies. And remember the long haul sets its sights beyond the coming year.
It is tempting here to include a discussion of the economy, the strengths and weaknesses we perceive at this moment. We’ll leave that to people with more time on their hands.
But if your plans are evolving and deserve some attention in the new year, please email us or call.
Cheers to 2022, friends.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.
Investing involves risks including possible loss of principal. All performance referenced is historical and is no guarantee of future results.
Any economic forecasts set forth may not develop as predicted and are subject to change.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
All indices are unmanaged and cannot be invested into directly.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
It is that time of year! Prognosticators and pundits issue their forecasts for the year ahead. Wouldn’t it be nice to know what the future holds? Some forecasts are hedged and don’t really say much. Our prediction is quite specific.
For those who have visited our offices, you know that we actually do have a crystal ball. It forecasts the direction of the stock market for the coming year. It does not say how far the market will go, but it always predicts the direction.
If you knew which way the stock market was going to go, could you make money investing?
Here’s the catch: our crystal ball has only been 74% accurate. So perhaps the question should be, “If you knew which way the stock market was going to go 74% of the time, could you make money investing?”
Without further ado, here is what our crystal ball says about the direction of the stock market for the year beginning January 1: it will go up.
Long-time observers will not be surprised. The crystal ball always says the market is going up. It has never predicted a down year. And checking back over the past hundred years, according to Standard & Poor’s, it has been right 74% of the time.
We don’t know how well its track record will hold up, but we believe this presents a favorable backdrop to buy bargains, avoid stampedes in the markets, and seek to own the orchard for the fruit crop. In other words, to keep on keeping on, following our principles and plans and strategies. And remember the long haul sets its sights beyond the coming year.
It is tempting here to include a discussion of the economy, the strengths and weaknesses we perceive. We’ll leave that to people with more time on their hands. If your plans are evolving and deserve some attention in the new year, please email us or call.
Cheers to 2021, friends.
Want content like this in your inbox each week? Leave your email here.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.
Investing involves risks including possible loss of principal. All performance referenced is historical and is no guarantee of future results.
Any economic forecasts set forth may not develop as predicted and are subject to change.
Quantum physicist Erwin Schrödinger once came up with a thought experiment to illustrate a difficult conceptual problem. Suppose you have an opaque box with a cat inside. In the box is a mechanism that is designed to release a poison gas based on the random actions of subatomic particles on a quantum level.
Now according to quantum theory, it is literally impossible to know what these particles will do in advance. You cannot even accurately measure what they are currently doing beyond general probabilities. In fact, until you observe them they act as though they are doing multiple mutually exclusive things—including behaving as though they are two places at once!
Hence Schrödinger’s box. Without observing the contents of the box you have no way of knowing if quantum action triggered the poison or not. Thus, until you open the box and look the cat is simultaneously alive and dead: a surprising conclusion, and a difficult paradox for physicists!
You and I can leave that problem to the scientists, but Schrödinger’s box can be a useful metaphor for other unknowable states. The actions of financial markets are theoretically not as complicated as quantum mechanics. But predicting market action is so far beyond our current mathematical understanding that they might as well be.
Like quantum particles, the value of a market cannot accurately be measured without interacting with it. This leads to a great deal of uncertainty and can sometimes make it feel like multiple conflicting realities are true at once.
Reading the financial press you will often be presented with competing headlines declaring that we are simultaneously in the midst of a great bull market and a terrible bear market.
As with the box, we prefer to leave these paradoxes to people with more time on their hands. Instead of trying to time the market, we believe in sticking to timeless principles like avoiding stampedes and finding bargains in the hopes of finding quality companies. We cannot predict what market prices will do from moment to moment, but we can guess at general probabilities.
Clients, if you would like to talk about this or anything else, please email us or call.
After a long and snowy winter, spring has finally arrived in Nebraska, and it is wasting no time. The weather may be nicer, but the sudden thaw and ensuing floods have turned much of our state into a disaster zone.
While tragic, this was a long time coming. Most folks saw how much snow had accumulated through March and knew that it would be trouble when the weather warmed up. We all know how the cycle of the seasons work, and it should be no surprise that winter is followed by spring.
The markets, like the seasons, are cyclical. After a certain point, a bull market turns into a bear market, and vice versa. Summer turns into winter; winter turns into spring. But investor behavior can sometimes overlook this important fact.
Imagine if someone looked around at how cold and snowy it was at the beginning of the month and said “There’s even more snow than there was last month! At this rate there will be two feet of snow on the ground by May!” Obviously, they would sound quite foolish.
But is this really any different than investors who, late in a market rally, say “The market is higher than ever! At this rate it will be even higher in a few months!”
We know how market cycles work. Like the weather, we are not able to predict exactly when the turning point will come. But we know that it will happen eventually, and as contrarians the stronger the trend is the harder we expect the turning point will be.
Sometimes we temporarily look foolish—a bubble may persist for years after we expect it to burst. The fellow predicting snow in May probably would have felt vindicated by how much snow got dumped on us the first half of March, after all. We would rather miss out in the short term than miss a key turn in the markets altogether, though.
To everything there is a season: a time to buy, a time to sell. Clients, if you want to talk about the markets (or the weather), please email us or call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Stock investing involves risk including loss of principal.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
It is that time of year. Prognosticators and pundits issue their forecasts for the year ahead. Wouldn’t it be nice to know what the future holds! Some forecasts are hedged, and don’t really say much. Our prediction is quite specific.
Many of those who have visited our offices know that we actually do have a crystal ball. It forecasts the direction of the stock market for the coming year. It does not say how far the market will go, but it always predicts the direction.
If you knew which way the stock market was going to go, could you make money investing?
Here’s the catch: our crystal ball has only been 74% accurate1. So perhaps the question should be, if you knew which way the stock market was going to go 74% of the time1, could you make money investing?
Without further ado, here is what my crystal ball says about the direction of the stock market for the year beginning January 1: it will go up.
Long-time observers will not be surprised. The crystal ball always says the market is going up. It has never predicted a down year. And checking back over the past hundred years, according to Standard & Poor’s, it has been right 74%1 of the time.
We don’t know how well its track record will hold up, but we believe this presents a favorable backdrop to buy bargains, avoid stampedes in the markets, and seek to own the orchard for the fruit crop. In other words, to keep on keeping on, following our plans and strategies.
It is tempting to include a discussion of the economy, the strengths we perceive, and the faint possibility of recession. We’ll leave that to people with more time on their hands. If your plans or planning will be evolving in the new year and require our attention, please call.
1. Online Data, Dr. Robert J. Shiller: http://www.econ.yale.edu/~shiller/data.htm. Accessed December 31st, 2018.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
Many of you may remember the classic Warner Brothers roadrunner cartoons. Wile E. Coyote continually schemes to catch the roadrunner only for his plans to backfire. Often he winds up sailing haplessly over the edge of a cliff, hovering in midair. Only once his predicament finally dawns on him does he plummet to the canyon floor below.
Sometimes he falls almost immediately. Other times he may remain hanging in the air, oblivious, for an extended time before gravity kicks in. You know as soon as he goes off the cliff that he is in for a fall. You can probably even figure out what will happen as soon as he puts his plan together. But sometimes his physics-defying act winds up dragging things out.
The market, much like the cartoon coyote, does not obey the laws of physics. Sometimes it seems obvious that something may be due for a big market move. A company may seem like it is absolutely set to take off, or due for a fall. But no matter how obvious it seems that a price is unsustainably high (or low), the market can stubbornly defy gravity for a long time before reality finally sets in.
Sometimes a prediction may pan out quickly. Sometimes they may pan out later, or not at all. We have enough experience to come to terms with this and take the long view. We do not believe in trying to time the market: we cannot claim to know what will happen in the market, and we certainly cannot claim to know exactly when.
We think we may be able to make a pretty good guess about what will happen—eventually. But we would rather stick to our core investment principles than try to predict the immediate actions of a market that sometimes seems to have more in common with slapstick cartoons than the real world.
Clients, if you have any questions or concerns, please email or give us a call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
The broad stock market indicators like the Dow Jones Average and the S&P 500 Stock Index reached a low point in March 2009, near the end of the financial crisis. Looking back a year or four years or seven years later, hindsight showed that the crisis was potentially a great buying opportunity.
Many investors missed out on the multi-year rise, however. (Or should they be called former investors?) In real time, nobody ever knows what will happen next, particularly in the short term. And rising markets, or ‘bull markets’ as they are known, seem to have many disguises.
After a rebound begins from a long decline, inevitably some pundits label the rise with an overly colorful phrase, “dead cat bounce.” The implication is that, while there might be a bounce, it certainly won’t go very high or last very long—the market is going nowhere.
Next comes the idea that if buying has produced a slight turnaround, it is just “short-covering.” This means that speculators who profited from the drop are now booking their profits, reversing their positions. Supposedly, there are no ‘real’ buyers.
When the market persists in the upward trend, the next excuse might be that “the market got oversold.” Therefore a temporary bounce is to be expected, before the market slumps again.
Then when the next slump fails to show, pessimists start saying things like, “We can’t know we are in a new uptrend unless the market reaches new all-time highs.” Or “It has gone up too far, too fast.”
When you take a step back and look at the big picture, those poor pessimists never could get back into the stock market. They had one rationale after another to doubt the recovery; meanwhile the market went up and up.
Do not worry about the bears, however: they have a new story. “The market is too expensive.”
Fortunately, we don’t buy the whole market anyway—we seek the bargains. You can read about our current strategies in this article. If you would like to talk about your portfolio or situation, please write or call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
It is that time of year. Prognosticators and pundits issue their forecasts for the year ahead. Wouldn’t it be nice to know what the future holds! Some forecasts are hedged, and don’t really say much. Our prediction is quite specific.
Many of those who have visited our offices know that we actually do have a crystal ball. It forecasts the direction of the stock market for the coming year. It does not say how far the market will go, but it always predicts the direction.
If you knew which way the stock market was going to go, could you make money investing?
Here’s the catch: our crystal ball has only been 76% accurate. So perhaps the question should be, if you knew which way the stock market was going to go 76% of the time, could you make money investing?
Without further ado, here is what my crystal ball says about the direction of the stock market for the year beginning January 1: it will go up.
Long-time observers will not be surprised. The crystal ball always says the market is going up. It has never predicted a down year. And checking back over the past hundred years, according to Standard & Poor’s, it has been right 76% of the time.
We don’t know how well its track record will hold up, but we believe this presents a favorable backdrop to buy bargains, avoid stampedes in the markets, and seek to own the orchard for the fruit crop. In other words, to keep on keeping on, following our plans and strategies.
It is tempting to include a discussion of the economy, the strengths we perceive, and the faint possibility of recession. We’ll leave that to people with more time on their hands. If your plans or planning will be evolving in the new year and require our attention, please call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
We’re fairly certain we will meet one of our communication goals with this essay: to educate. We did not know the big word in the title until we went looking for it. If you knew it already, you are some kind of scholar.
Haruspication is one of many ways in which humans have attempted to divine the future. The practice came to ancient Rome from the Hittites via the Etruscans. It involved examining the entrails of animals that had been sacrificed to the gods for signs and portents. Perhaps it didn’t work that well, since the Hittites and the Etruscans haven’t been heard from for millennia.
In our day, technical analysts purport to be able to learn the future direction of investments by examining charts of various kinds. At the extreme, some say that fundamentals like earnings or financial statements or economic factors do not apply: everything one needs is supposed to be in the charts.
Our view is that facts matter, that understanding financial statements is important to investment analysis, that economic research has its place. By far the most important thing is to choose the questions you want to answer.
For a long term investor, the direction of the stock market or of any particular investment next week or next month or even next year is not all that pertinent. We already know that markets and investments go up and down; we also know what the underlying long term trend has been for many decades.
The questions we most want to answer are, where are the biggest bargains in today’s environment? Are there market stampedes we should avoid, or perhaps even go against? How can we own durable sources of investment income so we can live on our capital?
Neither haruspication nor technical chart analysis is likely to help you reach your goals. You may rely on us to do the work of reviewing quarterly reports, analyzing financial statements, studying economic developments, and thinking about trends in business and society—so that we can help you answer the important questions.
Please call if you would like to discuss your situation, and how our work might apply to it.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
No strategy assures success or protects against loss.
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