Beware the Lucky Guesser...

Last weekend I posted a brief note on the week to come. Which---being a long-term thinker and wanting clients to be the same---is not an exercise I perform often. But since I was going to be out of town, and less connected, I thought I'd offer up my thoughts on what might inspire a little downward action during the coming week. And while three intraday triple-digit Dow declines (what actually happened) is no disaster, it's action we hadn't seen for a couple of months. I mentioned that I wasn't as certain that the Fed would begin the dreaded (by traders) QE taper in September as I had been a few weeks earlier. But now---based on last week's public comments by a few Fed officials (which seems to have sparked the volatility)---it looks like the September taper is back on. And that's a good thing in my estimation.

I know, we all love to make money (on paper) in the stock market. Those monthly statements can be heavenly as we reach certain milestones ("I'll relax when we hit a million [or three, or a half]"). Folks tend to think they've arrived when their portfolios arrive at some number (which often results in a new what-if-it-drops-back-below-the-number? sort of anxiety). My greatest challenge of the past 29 years has been to get my clients thinking differently than your average investor. To help them understand that the market is like nature. That bear markets and recessions are as essential to our economy as winter is to our planet.

As much as any other advisor with an ego I enjoy sounding smart as I discuss stocks, bonds, silver, gold and the Fed with clients. Sure, I need to make intelligent asset class and sector recommendations (therefore much of my time is spent pondering prospects and weighing risk/reward scenarios), but at the end of the day---smart asset allocation notwithstanding---I know that intermittent bear markets will forever ride in on the tailwinds of black swans (unpredictable happenings) and wreak havoc onto the lives of all but a few enlightened long-term investors. I know that the short-term can make mockeries out of sound long-term strategies, but that short-term investors have shorter lifespans. Well, I actually don't know the latter---I just know that short-term investors are a nervous bunch, and that calm (a long-term investor trait) people tend to live longer, happier lives.

Licked-fingered forecasters are foolishly gauging market winds, then selling their prognostications on CNBC. "The market's toppy" says the Fast Money show trader to a famed moneyman some thirty years his senior. "Come on fella", says the arrogant elder analyst, "I've been in this game too long. You simply don't understand what we've been through the past five years. Buy high, the market's going higher. A lot higher!" Me? I sit alone at my desk, smile, scratch my head and think you gotta love it. The market will offer up enough over the balance of the year to allow both these blokes to spin their respective I-told-you-sos. Well, actually, I should direct that last line at just the older gent---I've been listening to him since he was the youngster, thus I know he won't take being wrong lying down. As for the young fella---the foolish forecaster he is---I get a good vibe. If the market continues its climb from here, I expect he'll concede to the faux-sage who remembers placing trades at Dow 1,100 in the summer of the year I began my career (1984). But wisdom will elude him if he believes the old man---who, in December 2007, predicted a stock market rally for the second half of 2008 (the market declined 40% that year)---is anything more than a lucky guesser.