Perry Glasser

TREES DON’T GROW TO THE SKY AND OTHER TRUTHS GRANDMA TAUGHT ME

In Business, Economics, FINANCE FOR THE CLUELESS, Personal Finance, Political Economy, Wall Street on February 6, 2018 at 3:42 pm
(modified from a post originally written in 2017)

Simple Truths

  • The stock market neither advances nor retreats–though prices indeed go up and down.
  • For every buyer, there is a seller.
  • When buyers and sellers agree to prices, they set asset values.
  • Buyers buy with the expectation of future profit; sellers sell when they believe continued ownership of an asset constitutes a risk no longer commensurate with possible reward.
  • No one in a free market is under compulsion to sell, buy, or participate at all.
  • Wall Street is neither a battleground for territory, nor  an adversarial contest.
  • It’s a market.

Wizards require small investors to believe that generals understand the battlefield and so deserve your trust and your fees because they otherwise have nothing to sell.

Market Sentiment

After getting into the game by buying 3 to 5 broadly diversified vehicles, you should do nothing. Nada. Nothing at all. In 2017, if you followed that strategy, you made mere 20%. In January of this year, the froth of your beer bubbled up, but the winds of February blew them away.

Throw thyself off no bridges. You are still 20 percent ahead of a year ago.

Since the vast majority of investing operations on Wall Street and the bourses around the world are performed by networked machines that monitor every price tick and move great mountains of capital for millions of worldwide financial vehicles, there is no human sentiment involved. Understand: When you as a small investor get the news of sharp price movement, it is too late to act, unless you think and make decisions at light speed and happen to be a Cray computer.

  • Machines do not agonize over decisions such as Buy, Sell or Hold.
  • Machines have no hearts. Machines do not succumb to sentiment. Machines do not read the newspapers.
  • Machines do not hold on to send their kids to college.
  • Machines do not save pennies to accrue the down payment on a house.

Nevertheless modern Wizards want us to believe market sentiment exists and that they are plugged into that sentiment.

Yeah. Sure. Right. Got it. Roger that.

How do TV Wizards get away with recommending buying or selling new assets every day?

kramer7

Sells perpetual panic and urgency

A Warning

Dollar$ is aware that sharp price moves can be precipitated by events and non-events such as national elections, earthquakes, floods, train wrecks, and planet-killing asteroids. Only that last may have an impact on your buy and hold strategy, and Dollar$ is unsure of that.

If you think the US is going to hell in a handcart, do you also believe that after the crap hits the fan that the money you buried in the backyard will buy a can of tuna?

This is why reasoned investors await blood on the floor before buying, and unless you are within 5 years of a financial goal–retirement, your kid’s first year of college, that down payment on your house–sit tight, never sell, buy steadily, take advantage of dollar-cost averaging, and sip better whiskey.

  • Buy and hold.
  • Ignore alleged “corrections.”
  • Sleep at night.

(modified from a column originally published in December 201)

  1. Reblogged this on dollar$ and commented:

    reposted for the third time as a public service.

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