Happy Thanksgiving, merry Christmas, happy New Year, and that’s a wrap on 2018, it’s been a bit of a ride hasn’t it. It’s been quite a year over here to say the least, and December gave us a fun finish to be sure. December is typically a positive month for the markets and, fun fact, the Dow has only fallen in 25 Decembers going back to 1931. December 2018 though, as we look back through the lens of a few days, that was a ride wasn’t it, giving us the worst performance for the stock markets since the Great Depression.
Poor performance for sure, but were we looking at the start of a bear market, a recession, or simply a market correction? On this end, as rough as the ride was, the belief was mostly that the market was in correction and likely a lot of the movement was motivated by uncertainty which has a way of motivating panic selling. The yield curve was not inverted and there were many positive signs we were seeing with the economy as a whole that pushed the belief that it was a correction, but with worrisome headlines often focusing on trade issues and political dysfunction a certain type of investor gets panicky and sells. A lot of investors getting panicky and this drives some large sell offs, and a historic December.
“We humans are a fickle bunch. If there's one thing you can pretty much guarantee, it's that things are never really good enough. We seem to focus excessively on the negatives in our lives at all times… But a lot of the focus on the negative seems to be the result of a natural bias of ours - negativity basis. And it can be extremely destructive if it's not understood.”
Bull, bear, recession, correction, it doesn’t matter which, it is a top priority to come at the market with the knowledge that there will always be some level of uncertainty, that there will sometimes be turbulence, that there is always some amount of risk to be had. It’s not just watching the markets, and not just the news, and not just the economic indicators, it’s watching all of these and more for the whole picture. It’s also having the patience to watch and wait before making the decision to sell off or buy more with the understanding the turbulence in the market might need to settle some in order to see a clear direction.
“In the world we live in, few look at risk. Most only look at reward. The few who do look at risk (the educated, the Street savvy, etc.) make their money at the expense of the great unwashed majority who swallow the noise nonsense about getting rich quick. Investing is a get rich slowly process. You have to put your money at risk in the face of uncertainty. Emotions run rampant before the uncertainty of floating, fluctuating, often violent and volatile markets. Constantly discounting prices are fickle and full of surprises. Disorder is usually the norm.”
It’s pretty clear now that December was a correction and waiting it out was the correct path but what motivates the patience to achieve that path?
Part of the mindset that allows for the patience to weather these storms is investing as if all of us are already rich. That’s not to say that unnecessary risks are taken or that a the decisions aren’t hard because of an abundance of plenty, that’s to say that this is not living paycheck to paycheck and that the long game of investing allows the understanding that the lottery is rare but true value is always out there, you just have to be able to see it. That, finding the value, having to the ability and the patience to find the value amid the noise the risk and fly-by-nights is the rich mind set. It’s not a scheme, it’s the patience and vision to wait it out for the true value.
Happy Thanksgiving, merry Christmas, happy New Year, and that’s a wrap on 2018. Welcome to 2019 and thank you so very much for letting us be a part of your life.