It has been interesting as of late reading the numerous views espousing the value of “indexing” and lamenting the short-term underperformance of some fund manager. What is more interesting is a large majority of these individuals have only been involved in the markets post-financial crisis. In other words, many of these individuals have never lived through a 2000 or 2008 type financial market event.

It is only during these periods where true investment “metal” is tested as the battlefield becomes a vast wasteland of bodies and failed ideas. Despite strategies that promote the value of long-term investing and the benefits of indexing, it is the realization of “loss” that derails even the most well-intentioned of individuals.

“Everyone’s got a plan, until they get punched in the face.” – Mike Tyson

But that is a realization that only occurs “after the fact.” Like the prey being hypnotized into immobility by the gaze of the snake as it slowly tightens its coils, investors are lulled into sense of complacency by a market, and the ongoing commentary, that seemingly “can’t go down.” 

Maybe, I have just been around too long. Over the past 25-years, I have seen just about everything that happens to investors fiscally and psychologically and the market environment that drove those outcomes. The current market environment of back-and-forth action is not unlike that seen just prior to the major market corrections in 2000 and 2008. As shown in the chart below, there are too many similarities to simply be coincidence.

Could this time be different? Sure. Is it likely? Probably not.

The only question in my mind is “timing.” Which brings me to “The Clash” and the reading list for this weekend.

Should I stay or should I go?

CENTRAL BANKING

• Drain No More: Fed Funds RIP by Danielle DiMartino-Booth via Money Strong
• Interview: Danielle DiMartino-Booth by Lance Roberts Show via Real Investment Advice
• NY Fed Quietly Replaces Fed Funds Rate by Matt Boesler/Liz McCormick via Bloomberg
• The FOMC Wants It To Be About Inflation by Jeffrey Snider via Alhambra Partners
• Yellen Drives The Dollar Bus by Roger Blitz via FT
• The Fed’s Risky New Mandate by Alexander Friedman via Project Syndicate
• Before Negative Rates – QE4 by David Keohane via FT
•  

THE MARKET & ECONOMY

• The Global Growth Funk by Nouriel Roubini via Project Syndicate
• The Global Economy At Stall Speed by David Stockman via Contra Corner
• Economy Will Rebound From False Dusk by Roger Bootle via The Telegraph
• Americans: No Raise In 16 Years by John Crudele via New York Post
• Why Is Wage Growth So Slow by Pam Villereal via Nat. Ctr. For Policy Analysis
• Stock Pickers Beware by Ellie Ismailidou via MarketWatch
• It’s May…Now What? by Macro Man
• Market Will Go Down Double Speed by David Merkel via Aleph Blog
• Odds Still Favor Bulls Over Bears by Michael Gayed via Market Watch
• Mind The Stock/Bond Gap by Ellie Ismailidou via MarketWatch
• Dollar Bulls – Nothing Left But Hope by Michael Kahn via Barron’s
• Today’s Market Makes No Sense by Ken Brown via Unhedged
• Markets Cut Against Consensus by Erik Swarts via Market Anthropology
• Risk On/Risk Off Market by David Keohane via FT Alphaville
• The Charts Support Both Bulls & Bears by Michael Kahn via Barron’s

MUST READS

• How Much Are Those Dividends Costing You by Meb Faber via Faber Research
• 10 Things I Learned From Tony Hawk by James Altucher
• Lies, Damn Lies & Statistics by Rob Arnott via Research Affiliates
• Seeds Of Next Housing Crisis by Michael Brush via MarketWatch
• Justifying Current Market Levels by John Hussman via Hussman Funds
• Investors Should Be Very Concerned by Buttonwood via The Economist
• How Gundlach Is Preparing For Trump by Tyler Durden via Zero Hedge
• Can Momo Regain It’s Mojo by Dana Lyons via Tumblr
• The Misadventures Of Fannie & Freddie by George Will via National Review
• Druckenmiller: Get Out Of The Market by Jesse Felder via The Felder Report
• Risks Interbred With Atrocious Math by Salil Mehta via Statistical Ideas

“Bull markets bail you out of your mistakes. Bear markets make you pay for them.” – Dick Russell