Sunday, November 15, 2015

It ain't easy predicting bear markets!

My charge as counselor to the folks who entrust their portfolios to our firm is to teach them how to think like long-term investors. Which, in today's media-rich world, can be quite the task. When pundits who---by nature of their media exposure---have to know what they're talking about tell us that there's a "99.7% chance we are in a bear market", that "the S&P may fall further 10-15%", that we should go "long bonds and short stocks", that there's "danger ahead", that "equities have another 10% to fall" and that "now is not the time to buy", it can be tough for little old me to convince our clients to buy and/or hold stocks through the inevitable fluctuations that are part and parcel to the business of long-term investing.

In showing this chart (click to enlarge) exposing the recent miscalculations of today's media darlings, I in no way want to suggest that these chaps are always wrong. I have no doubt that they've made some very impressive calls during their careers that have ascended them to their present perches.


When Carl Icahn (arguably one of the world's best investors) issued his "danger ahead" warning, he said that experts like himself should've helped the little guy by sounding the alarm ahead of the 2008 bear market. Problem is, he didn't see it coming either, the hedge fund he managed took a 35% hit that year.

It's gotta be tough being a prognosticator. Especially when notoriety only comes when you accurately predict a bear market. The visual below (click to enlarge) tells why predicting higher stock prices doesn't garner much attention, it's easy. Stocks tend to rise over the long run. Guessing the red, on the other hand, is hard.

bull & bear market chart

1 comment:

  1. […] on any of them today (I’ve done that plenty over the years—here’s the latest, here’s the one before that), and simply suggest that the next time you hear someone claim that he/she is […]