Read the following message from Michael Santori.
Just as the depth of disappointment evident in indicators of investor sentiment around Labor Day was disproportionate to market and economic conditions, the amount of cheer generated by the 9% rise over the past four weeks was at least one. It looks like it’s been going on for years. After all, we are a little further ahead than what was a small breakout from a long tight trading range.
Aside from the still unimpressive volumes, there’s no denying that trading has improved significantly in almost every aspect. Earnings forecasts for next year have yet to be meaningfully revised downward. Until then, the superficial valuations of large-cap stocks remain unchallenged. Given the continuation of the rally, some investors appear to be feeling a lack of exposure to equities.
Very good for representing the last 9 months. The stock market bottomed out last October, but the economy held up. Investors risk-averse by holding too much cash this winter, leading to spring-summer gains.
But here’s the problem – Michael didn’t write it this week. he wrote it in late September 2010.
The takeaway from this exercise is the fact that the exercise always goes like this. You can find old Suntori columns that fit almost any market environment we experience. Although his work with the magazine ended 11 years before him, the impeccable record of his contemporaries’ weekly activities is still important to stock market history students.
And when I go back and read it, all I get is this realization (if I’m being honest with myself):
1. Stocks and the economy can diverge Stays directional for a long time. Alternatively, you can sync. Alternatively, there may be no discernible correlation or inverse correlation at all. Do you think you have a system Now, let’s see your system go 3 or 4 rounds with the S&P 500, the undisputed heavyweight champion of unpredictability. Then let’s talk about your “signals”.
2. Even if I give you tomorrow’s headline today, it is unlikely that we will yet be able to guess what impact all this news will have on prices, sentiment, valuations, or the reaction of fiscal and monetary policymakers. Case in point: In January 2020, 22 million people were laid off in March and April, schools and businesses were closed, all flights were grounded, and everything from sports to vacations to meetings and concerts was canceled. If I said the event would be canceled, I would probably expect the S&P 500 to return 20% that year and 30% the next, with church services going on across the country. It wouldn’t (check it out, it did).
3. Markets could go from euphoria to fear and back to euphoria before getting dressed. “Today’s market is transforming from funerals to parties as fast as VFW halls,” is what the headline says for his Suntory Vintage. He said this in 2010. Since then, it has been talked about many times, including 2023. I’ve been on TV with people who’ve been on Wall Street for decades, and they still gossip like, “This meeting doesn’t make sense.” they still don’t know. Meaningless things happen all the time. Stock market movements shouldn’t make sense if you were to judge them based on what’s happening today. Future development often makes sense in hindsight. Given enough time, I could look back and credibly explain almost everything that has happened so far.
Four. even if you know what happens nextcan you really be confident that you know what happens after that? Next Next?again next, next Next? Can you realistically plan 3 moves, 4 moves? Imagine a game like chess. You play by the rules and make logical decisions, but your opponent has no such restrictions and can do whatever they want. His pawn can move backwards, his bishop can move horizontally, his knight can move twice in a row, his rook can rotate in circles, and his queen can float above the board. And you’re sitting there playing “If This If That” as if you fell off a turnip. If he’s still so naive after 5-6 years in the market, I don’t know what to tell you.
Five. what people are talking about It doesn’t necessarily matter in the end. Did you have an “AI chatbot” on your bingo card as to why the Nasdaq crashed 35% in 5 months? I bet you didn’t. On November 30th of last year, when ChatGPT was born, you probably worried about inflation above all else. Please don’t be offended. me too.
6. Often The Most Amazing Results Are What Happen. But more often than not, sells and rises have a linear explanation, and understanding it will help you sleep better at night. Which one will happen when, and how can you know it? You don’t. ever. When you are falling in love with your own point of view, when you have all the confirmation you need to stick to that point of view, let it out of your hands like a school bully garnishing his opinion. Something happens that knocks out the New Trapper Keeper (with one) rainbow unicorn on it). The corridor is littered with loose-leaf papers. Because not only do you not know you don’t even know what you don’t know. Engineers and scientists are working on this problem with a concept. You can’t imagine how some of the calls and meetings I’ve attended over the years are going to knock this house down. There is no formula. Many people are bound by a mindset that they cannot or do not want to accept.
7. Survive or not if you haven’t arrived here yet – have a framework in place, or a set of rules governing how one behaves or does not, is never certain and can mean long-term pain, envy, or regret. But it’s better than nothing. There are a few professionals who always act on their intuition and can wake up and make new decisions every day based purely on their mood. Do you really know how few there are among these people? They’re all famous. They are all millionaires. For each David Tepper he has 20 million non-David Teppers who have tried and failed to operate in this manner. There are less than 30 Steve Cohens. There is one. Luckily, there are many more millionaires who manage their behavior by the rules. And they gradually get richer and then stay that way. Even if they don’t realize it, the limits they impose on themselves (buy and hold, only buy what they understand, dollar cost averaging no matter what, rebalancing twice a year, maintaining diversification, Never enter a no-exit trade, buy stocks in an uptrend, never buy stocks for profit, etc.) are the reasons they endured. Be careful, I said persevere with no success. If you do this right, you won’t feel successful for long. And it would be a relative success at best. No one knows about those who blew themselves up, but that’s actually how you win. That is your rational decision and all the wrong decisions others have made. If over time you start to win, it’s because of the person who sold you something you shouldn’t have sold, or bought you something you shouldn’t have bought.
8. Finally – and please understand that I have personally met many of the greatest investors of our time – need luck. All “legendary” investors acknowledge this at heart. Some people say it out loud. Right time in right place. I ran into someone who had a great idea. By chance, I stumbled upon a once-in-a-lifetime deal. They all say they were smart (but everyone is smart), hardworking and industrious (everyone is hardworking and industrious), but one day these traits met with opportunity (or serendipity). , then it will be history. Even at the retail level, luck has a big impact on people’s outcomes. My brother-in-law told me about Nvidia. My neighbor worked at Apple. A college roommate put me in an AirBNB funding round. My father left us Berkshire Hathaway A shares. Right out of college, I worked for a biotech company that was acquired by Bristol-Myers. I completely forgot about my old 401(k) that sat in an index fund from my last three jobs. I happened to sell her business at the end of 2008 for a lot of cash and dumped it on the market. I’ve been hearing stories like this for 20 years from ordinary people who have made far more money than they ever imagined. Luck is an important factor on all levels.
Old Suntori columns are filled with tales of dramatic reversals, puzzling gatherings, and deadly plunges. Almost everything that results seems to pop into the conversation out of nowhere. In real time, I was glued to the edge of my seat as he wrote it and I read it. The only things that have changed since then are the names of the people and the ticker symbols of the stocks they are associated with. The behavior is always the same.
Today’s markets change direction, and tomorrow’s markets will change as well. There is nothing you can do but prepare financially and mentally. Volatility is timeless, and wild swings in sentiment are the rule, not the exception. Don’t waste a second of your time believing otherwise.
If you’re not convinced, go back and read.