The Past, Present, and the Future

 

We witnessed a substantial stock market decline in 2008 and in 2009. It was brutal and swift, and no-one escaped. The last ten years has been the worst decade for the stock market going back to 1820. If you invested in the Dow Jones Industrial Average ten years ago your investment is down 21%. Those ten years included two moves up of over 50%, and two moves down of over 50%. The world has now become full of speculators and risk takers which will lead to greater volatility in the future. The over exuberant herd mentality will push prices to unsustainable heights, and to unsustainable lows. What we are witnessing is a melding of the world, and earth’s problems now affect us all. Anti U.S. sentiment will continue to run rampant, and perhaps justifiable.

The thread of reality that permeates here, and you must agree, is that the odds of more political, economic, epidemic, climatic, or generic crisis will relentlessly continue at a feverish clip, unabated, and it will never subside.

When we make financial decisions we are not explicit about the odds we are taking. Because we aren’t explicit, the overconfidence remains an illusion that never gets corrected. Many stock market events in the past half century have been surprises, an underestimate of the uncertainties of the real world.

We also owe the media a good portion of blame for these market downturns, and the ones we are about to experience. I understand, and oddly enough respect the role of the media, however most investors are fuelled by fear and greed, and the media seems to relentlessly prey on those emotions. Sensationalism breeds indecision, euphoria, and destitution all at the most inappropriate times, swaying the always fickle-minded investor.