I was talking to my friend Michael not too long ago and he shared a fish story with me. Now– don’t roll your eyes, it was a fishing story… not a “fish story.” He was out on the flats on the eastern side of our Sunshine State and had a rather successful day. He had caught a few trout and a nice redfish; his cooler was nearly full.
Towards the end of the morning, he hooked a nice snook that fought with a vengeance. Three times the fish made a run into the mangroves, and three times Mike finessed him back out. Finally, he drew the fish near the boat; it looked to be a perfect slot-limit keeper to round out the day. As Mike looked down into the water and reached for his net, the sleek, striped, magnificent fish made one last quick turn — hooking the line behind his gill plate and snapping the line clean as could be.
And thus goeth our investment metaphor for the month.
October and November were volatile for the markets
October was not a lot of fun for the equity investor; November “ ‘twern’t much better” as an old salt might say. I remember a day, in fact, when the Dow Jones Industrial Average was up 545 points at close. “Phew,” I thought. “Finally, a little relief.” Then… bam! The DJIA was down 600 points the next day. I’ll tell you the truth, I looked at my account balances in mid-month and wanted to fire my investment advisor just for spite. But if I did that, I couldn’t look myself in the mirror. (That’s a joke, get it? …Thanks, I’ll be here all week…)
Everyone’s current investing question
So clearly, volatility has returned to the stock market. It’s never truly gone though, is it? The question to which everyone wants an answer:
“Is this more than short term volatility… will we see a recession and a deeper market correction soon?”
Corrections, like market volatility, are “the norm”
My answer about corrections is the same as my answer about general volatility: We should consider them both the norms rather than the exceptions and always invest as if they were just around the corner. You can’t expect every outing to net you the big one. Harry Truman might say, “If you can’t take the heat…”
To that point, here’s an interesting tidbit: I listened to a nationally renowned and respected economist give a 45-minute presentation on the state of the economy. He firmly stated: “There is zero chance of a recession in 2019.” Well, that’s encouraging — but not so fast, bulls and bears.
I then listened to a different economist the next week — with credentials and respect just as strong as the previous gent. This economist, however, concluded with: “There is a nearly 100% chance of a recession in 2019.” In contrast, that’s a little sobering. So, who do you believe?
The right question to ask yourself about investing
Let’s try a different question. How would you position your investments if you were unable to make any changes afterward for a year? How about three years, or even ten?
THAT, dear reader, is how I think you should think about your investments. If a day fishing is only considered a success if you land that last great fish to reach some imaginary quota, you are doomed for more disappointment than joy on the water.
Similarly, if your measure of investing success is your accounts high water mark, you will have one happy day followed by many more days of disappointment.
Going back to basics… and keep on fishing
So, in time of doubt (i.e. “life” as I call it) I do what I always do. I try to spend a little less, save a little more and keep some cash on hand for when buying opportunities come along. Most of all, I stay the course: I keep fishing, you might say.
After all, it’s hard to catch any fish at all while sitting on the couch.