The Road Most Traveled

This week I was speaking to a Financial Advisor friend and he was lamenting about the fact that he had several older important clients that became “freaked out” in February-March period last year (2020) and demanded that he liquidate their accounts where today they basically sit in cash. They got to endure the worst of the fast and significant correction without participating in the rebound and the markets going to new highs recently.

This story reminds me of the one I heard back in 2012-2013 from some of our earliest subscribers. They got hit hard during the financial crisis when the market was down over 30% (some markets like Nasdaq much more than that) and from emotional “discomfort” and panic, decided to sell out at or near the bottom.  Because of paralysis, these same investors who had worked hard and long their whole life amassing their retirement funds, never quite had the gumption to “get back in” the market” and therefore missed huge returns of since 2009.

Our belief then, as it is now, that very few individual investors (Most Financial Advisors and Wall Street in general) have extraordinarily little knowledge or discipline as to when to get out of the markets and when to get back in.  Even many of the “big hedge fund players” do not have this discipline as evidenced by the lagging performance many of have endured these most recent good market years. Clearly, without a well thought out risk management process, one is doomed to fail or do poorly in the business of investing or trading

We have great markets right now. How long it lasts is anyone’s guess. We have highlighted in our commentary a few weeks ago “Priming the Pump” how the central banks, the federal reserve and Congress are working to stimulate the economy and keep the train on its tracks. This provides plenty of wind on the investors’ backs and keeps speculators continuing to use margin and keep the good times rolling.

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