Listen, I get it.
When markets are rising everyone wants to be bullish.
Why not? As Bob Farrell’s Rule #10 states:
“Bull markets are more fun than bear markets.”
It is also safer to be “always bullish.” No one remembers the guy that called the previous bull market peak as human psychology is designed to “mask pain.” If it wasn’t, women would never have children after their first one.
Despite the fact that many media commentators and pundits yelled “buy” all the way down in 2008, people only remember when the call to “buy” was eventually right. We like to “feel good,” and bull markets “feel good.”
Yes, 80% of the time the markets rise. It’s just the other 20% that’s a real bitch.
But “bear markets” are like “Fight Club” and the first rule of “Fight Club” is:
“Never Talk About Fight Club”
Last week, Eric Nelson, CFA, published an interesting article discussing predicted returns by Vanguard Founder, John Bogle. He starts by quoting Bogle from 2009:
“1) Beware of market forecasts, even by experts. As 2008 began, strategists from Wall Street’s 12 major firms forecast the end-of-the-year closing level and earnings of the Standard and Poor’s 500 Stock Index. On average, the forecast was for a year-end price of 1,640 and earnings of $97. There was remarkably little disparity of opinion among these sages.
Reality: the S&P closed the year at 903, with reported earnings estimated at $50.”
This is a fantastic point and a clear lesson that should be learned by all investors.
It is also Bob Farrell’s Rule #9:
“When all the experts and forecasts agree – something else is going to happen.”
