This month, we hear about what bear markets feel like, remember that sensational media headlines can be dangerous, and consider how much patience is required for long-term success in the stock market.
#1 – “Hedgehogging” by Barton Biggs
“What did that secular bear market feel like? It felt like the stocks of companies with good stories that you believed in, that you had visited, going down more than you had ever dreamed, like there was no bottom, no support levels.” – Barton Biggs
This is one of the best descriptions of a bear market that I’ve ever read. Since the stock market often swings to extremes in both directions, remaining invested during drawdowns is critical for long-term investing success. As my old boss likes to say, “It’s always darkest before the dawn.”
#2 – “Risk & Reward” by Ben Carlson
“In fact, Bloomberg ran a headline in October 2022 that read, ‘Forecast For U.S. Recession Within Year Hits 100%.’ The recession never materialized and the economy kept growing. How can that be? From 100% likelihood—certainty!—to not happening at all.”
“In the summer of 1979, BusinessWeek published a cover story titled ‘The Death of Equities.’ Frankly, the timing could have been a little better. The stock market was about to embark on one of the greatest bull markets ever, as it rose 2,500%, or nearly 18% per year, from 1980 to 1999.” – Ben Carlson
These quotes were so good that I had to include both. Pessimism often sounds smarter than optimism, but we can’t let sensational headlines drive irrational investment decisions. Both of these famous calls, for instance, were published right before massive stock market rallies.
#3 – “Winning the Loser’s Game” by Charles D. Ellis
“The possibility of such outcomes should not be dismissed out of hand—and certainly not because the stock market has generated excellent returns in the past 20 years. For the period 1901-1921 the real average annual return of the U.S. stock market was 0.2 percent. For the period 1929-1949 it was 0.4 percent, and for the period 1966-1986 it was 1.9 percent. In other words, for periods covering more than 60 percent of the twentieth century, the real annual returns generated by the third best performing stock market in the world were less than 2.0 percent.” – Charles Ellis
While Mr. Ellis is clearly cherry-picking date ranges here, his broader point is helpful. Compounding requires immense patience, and the market offers no guarantees on when strong returns will actually arrive.
My goal for these blog posts is to provide useful information so that you can make more accurate decisions.
- Noise includes facts/data/news that cannot be processed into useful information (<— WHAT MOST STUFF IS)
- Useful information can be used to make more accurate decisions (<— WHAT I’M TRYING TO PROVIDE)
Since there is an endless and ever-growing amount of things to learn, I hope that these posts are helpful in summarizing important topics related to investing.
