“If a business does well, the stock eventually follows.” – Warren Buffett
I was told once that the best way to eat an elephant was one bite at a time.
This current batch of problems is just another proverbial elephant – in a long line of elephants – on the pathway of the last 40 years. How nutty would it have sounded in 1982, if I told you (at DOW 970) that we would be cowering in fear because the DOW was a few percent off its most recent all-time highs – at 29,000 PLUS?
In 1982, that would have been met with only one conclusion: I had lost my mind.
Almost 30 times over since then. All while everything bad happened.
Every point up the mountain unfolded within the construct of a myriad of seemingly unending struggles, problems, setbacks, hurdles, disasters – and unrelenting fears, etc etc etc. While the mind was encased in focusing on the near-term, the long-term mountain climb continued over time.
Investors must recognize this trend – as it is in the midst of being fueled for another 20-year++ run.
Lots of change? You bet – and at “hard to grasp” levels.
Faster times? You sure – the speed will be mesmerizing.
Need to adapt? For certain – patience and discipline will be an even larger friend along the pathway.
It is incredibly difficult at times – but our ability to look through, over and beyond the day-to-day chatter, focusing instead on the underlying current driving us all forward – will be critical to long-term investor success.
If you need a refresher, click the video below (there are two short clips on the same page):
The red ink of the last few days is precisely what one would prefer to see before this election. Remember, it is the spring-loading effect that we must focus on and permit to unfold. These gyrations tend to set the stage for “what’s next.”
Don’t fret – anyone who thought the crowd would get too zealous, merely needs to check a few of the latest sentiment points. The AAII continues to set records for the now huge span of time where bears have outnumbered bulls. It continued this week.
Imagine that – single digit percentages away from all-time highs -and 2/3’s of the crowd STILL does not feel all that well about stocks.
In a word – fantastic.
And how can we gain further confidence in these settings?
Simple: follow the money.
Right now, there is a whole bunch of it sitting in the bank…creating the very thing the crowd fears (yes, the top of that cumulative blue bar is just shy of $19 TRILLION dollars)…a rainy-decade fund if I’ve ever seen one indeed:
Sure, they continue to pop up – but are being ignored in the media.
That’s good for the spring-loading we are now witnessing. Be patient and let it roll:
Call me a little slow but I would call that Philly Fed number a pretty big beat – and a solid indicator that if you are buying into the news and the negative slant for everything – you may be surprised by the light in the tunnel ahead.
And one more thing here: don’t let politics sway you on your long-term pathway. In my time in the business, we have seen 6 Presidents (Reagan, Bush 1, Clinton, Bush 2, Obama and Trump). The trend has remained the same – even when interrupted by a myriad of disasters along the way.
Small Business Overcomes
While the news would lead you to believe that small businesses are just a bunch of weak minded souls cratering under the pressure – the data say otherwise.
One must remember above all else that American business does BETTER under stresses. It does BETTER when it counts the most. When American Business needs to shine at its brightest, one merely needs to throw a problem at us – the bigger the better.
…read ’em and reap:
When I look at data in this format, I train my mind to scan backwards across the chart – to gain a sense of where the present readings stand from a relative perspective.
The green line above on these two great Calafia charts does that for you. Note – on only rare occasions has Small Business Optimism been higher than it is right now!!!
Bet against that over the long haul at your peril.
And below – that optimism feeds on itself. Note the two purple lines. On both Jobs Hard to Fill and Hiring Plans themselves – small business is running fast toward recovery.
You can kick her in the teeth and punch her in the gut – but history proves, forcefully, that youCANNOTkeep America down.
Collectively – (and very gratefully) we are just too good at overcoming –period.
The Grim Reaper will keep coming. Don’t fret.
When he knocks on the door of your mind and stokes your fears — laugh at him and look forward – not back.
This rocket-ship ride is just getting loaded up for the trip.
Long-term investors have learned that when all of the above ingredients are baked into the pie, the road ahead has been marked by a clear and resounding message:
…surprises to the upside.
It is our job to withstand the assured storms ahead and be disciplined in our planning for clients’ goals.
Sure, more choppy waters are likely as the earnings season unfolds ahead. Oh – and we have that election thing too.
The media will do their best to knock you off your focus, grabbing at your fears and taking you off your pathway.
Rise above that tension and pull your seatbelt tighter. Exciting things are dead ahead.