The Great Humiliator Revealed: The Stock Market

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Volatile Stock Market - Bull and Bear Markets
The Great Humiliator Revealed: The Stock Market

Oh, what’s this? The trade war might be getting better. So goes the vibe this morning. I’m confused. Last week it was getting worse.

Stocks are down one day. Then they’re up. When do you expect the story to end?

Here’s a little-acknowledged fact: Stocks are volatile! They go all over the place, at any time, and often for unfathomable reasons.

It’s easy to package the moves as to do with trade, interest rates or earnings.

These explanations are usually neat — and either wrong, or useless.

I got a good reminder of how to view all this yesterday. It was like a tonic for a dose of malaria.

It was a book called Markets Never Forget (But People Do).

Read on for some inspiration!

The man who penned this is called Ken Fisher. It’s from 2012.

I’ve never heard of him. But he’s been a bigwig over in the States for a long time.

Ken’s a billionaire — so we can presume he knows a thing or two about markets.

Here’s one takeaway from the book: Bull markets are not a smooth ride. Never have been, and never will be.

It means that it’s easy to look back in hindsight and say, ‘Oh, 2017, that finished up X%. What a great year in the stock market.’

But when you live it day by day, and week to week, there are always counter moves, worries and dips.

We saw this in the last quarter of 2018. Wall Street tanked. It was a little scary at the time, if you recall.

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However, for those with a cool head, you didn’t need to panic if you knew a little bit of history.

The Great Humiliator revealed

I’d like to think Profit Watch might have helped you there (if you were with us at the time).

We put together a report called ‘Three Wild Market Predictions for 2019’.

Two of those calls were for Aussie and US stocks to bounce back. And they have — so far.

If you bailed out of stocks at the end of 2018, you are now poorer as a result. But at the time, it would have felt like the natural and sensible thing to do.

Ken Fisher calls the stock market The Great Humiliator. That’s because it fools most of us, as often as possible.

It’s designed to make commentators and analysts look clueless regularly. And so it will always be.

Here’s a good quote to remember from Ken:

The market behaves normally all the time — and by that, I mean it’s wildly variable, and that’s normal.

But this isn’t what people mean when they say they want the market to behave “normally.”

They mean they want some sort of signal: “All clear! Everybody in!” Or, “Danger here! Time to exit!”

And smooth from there. They want returns to be less variable, more reliable. If you’re waiting for that, you will wait a very long time.

For all the ink spilled about the dangers of the share market, most of the time it rises.

My colleague, Jonathan Evans, showed this last week. Since 1900, the Aussie market has risen in 80% of the years since.

And yet, I’m sure 80% of what you read discusses why the world is going to the dumps, how the system is crooked, and why the good times are just about over.

You know the reasons: Consumers carry too much debt, governments can never balance the books, interest rates are either too high or too low, or China is going to collapse.

I have been reading a litany of these fears every day since 2012.

Here’s the indisputable fact: US stocks have roared up.

Because while these fears keep circulating — and Ken shows some of the same fears going back decades, even as far back as the 17th century — we must always remember good things keep coming too.

And in the case of the last 10 years, it was the explosive profits and growth of social media, streaming and US technology in general.

Why does all this matter?

There’ll be another bear market sometime soon enough.

It may even be next year. Anything is possible.

Lots of prognosticators will likely crow how clever they are, and why stocks are a fool’s game and how the economic goose is cooked.

But Ken’s book is one to keep close at hand. It will help you keep a cool head when this time comes.

People always think ‘this time is different’. But it never is.

History is unequivocal on this point: Fortune favours the optimists over time. Remember that.

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

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