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Truth Is Not Always the Loudest

metal pole with green street sign pointing to the left saying 'this way' and one green street sign pointing to the right saying 'no, this way' Some of my clients and other friends have asked for my input on the goings-on related to the price volatility and surrounding news of late January and early February related to ‘GummedUpStop’ (Everlasting Gobstoppers?) or whatever it is/was. In spite of how much you know I hate to offer opinions and conjecture, I’ll say this: day trading isn’t investing, it’s gambling. I don’t mind if a person chooses to participate in this wagering, but I will always insist it isn’t any form of “investing”.

While I did not investigate the matter to any great depth, it sounds to me like there were a whole bunch of people participating in market manipulation. I am admittedly not a legal scholar, so I can’t say that actual manipulation or crimes were committed. However, I also believe that the fallout from what we saw take place in the marketplace will likely involve lots of district attorneys, state/national legislatures, and civil law attorneys.

Despite the legal impact, what is of most concern to me is that such trading “schemes” and the resulting fallout can easily reduce investors’ confidence in the integrity of the markets. When investors lose confidence in the markets, barren markets often result. I’m always reading and looking for signs of the investor community flip-flopping their emotions – trading greed for fear, and vice versa – and how it may affect our desired asset allocations.

Grievances of Mine

While I am grousing about “Things Beyond My Control”, I’ll confess that it took almost one week of President Biden’s term for me to become upset with him. I’m sure he will still sleep comfortably knowing of my disappointment, but I was frustrated to see the halt of the Keystone pipeline. If you are on the other side of that issue, let’s agree to not be upset with each other; there is room in our discussions for differing opinions, but I am concerned about the price of oil taking a hike over the next four years. I believe that clean energy is very important, but my opinion is that the only way to get there is through cheaper energy today…and for now that means fossil fuels. However, I will also admit I’m not an expert on these matters and may well be wrong, so keep the torches and pitchforks in the barn for now.

animated circuit board with a large red-topped battery popped up with lightning bolt on the sideAnother pet peeve is that I don’t think electric cars are a solution to anything on a large scale.  If we look at estimates of lithium reserves on the planet, there is likely not enough lithium on earth to replace our existing numbers of automobiles beyond 20 years or so. If you throw in the questions regarding the ecological impact of mining and the disposal of waste batteries in the future, are we creating a bigger problem than the one that results from carbon-belching cars? I do not yet know, but I’d like someone on the national level to have this discussion in a public forum before we drive down the road willy-nilly.

I bet you’re wondering: what do these three issues have in common (besides me complaining about them)? Furthermore, what do the issues have in common with investing?

The Stupid Truths

In the last year, we have heard more and more arguments from both sides of the political aisle: the college football fans of America, the save-the-environment crowd, the save-the-industry crowd and (perhaps even the round earth vs. flat earth partisans). Which only emphasizes that if you say it loud enough and long enough, people will begin to believe it. Even so, perhaps, with persistence, it will become the proverbial boulder rolling downhill becoming an unstoppable accepted truth.

white block letters 'true' on a teal background with a magnifying glass on top saying 'false'This, of course, is hogwash, but it is a troublesome fact of life for us in these days of our lives (yes, that’s intentional sarcasm). Investment decisions are sometimes subject to the same loud, manufactured untruths that we hear about other truths great and small. When my son was a teenager, he told me when he was older, he was going to invest in real estate and real estate only because “it could never go down in price”. Hmmm, where did you hear that?

I tell my kids and grandkids (and that nitwit in the mirror) that stupid is something we all step into from time-to-time no matter how smart we think we are, or even actually are. Willful stupidity, however, is best avoided, whether it results from stubbornness or laziness. It is a nefarious foe, and we must keep fighting the battle, lest it creep in when we are tired or not alert!

Comfort in Basic Investment Rules

As always, I urge you to dig a little deeper when you hear investment prognostications whether they be rosy or bleak. There must be a compelling argument based upon solid before we make any adjustments to our lifetime plans. Unfortunately, so much of our news outlets today are geared to be the first to report and the loudest voice in the room, while the facts are often a lower priority.

Yet, the most basic rules of investing haven’t changed: over the long life of our investment plan intrinsic value matters more than momentum; the majority of market timers, day-traders and casino players will end up with less money in their pockets than when they started; and asset allocation, along with emotional disincline, are the two most important contributing factors within your control that account for performance over time.

I wish you every success wading through this world of misinformation. I’m here to help when I can. Let’s keep wading!

March 2021

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Investing involves risk including loss of principal.

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