The Last Five Stock Market Corrections

time

In case you missed it, you can watch an “At a Glance” summary of this week’s blog posting here.

I couldn’t get a word in.

I had never spoken with Steven before. But I had been on many calls just like the one I was having with him.

I tried talking over him, hoping he’d get the clue that I wanted to talk. Didn’t work. I would wait for a pause and then start talking. Didn’t work either. I finally just started saying his name as a way to pattern interrupt his stream of consciousness.

Steven…

Steven!

Steven!!

Steven!!!

STEVEN!!!

And finally he stopped. He didn’t say, ‘what.’ He wasn’t annoyed. He just stopped.

Steven’s portfolio had already but cut in half once (read: 2008) and it was about to happen again and he knew it but didn’t know what to do about it. And we was scared.

I’m noticing millions of Steven’s right now.

Are you doing what almost cost Steven to lose half his portfolio again?

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What Matters Most?

We all know what matters. We know that instability matters to the market. We know that Central Bank’s printing matters. We know that Central Bank’s buying corporate bonds matter. We know that Central Bank’s buying equities matters. We know that Central Banks lowering interests rates to zero and below matters.

We know Central Bank’s actions matter.

We all can agree on “what’s that matter.”  

total assets of major central banks

We agree on these “what’s” because Central Bank’s actions are clear to all of us. You can’t get something for nothing. Eventually it catches up with you.

Just like Steven knew what mattered. He knew all the “what’s.”

But he was having a big problem. And it didn’t make sense to him.

Again, we know “what’s the matter.” But here’s the thing. Knowing what’s the matter is 10% of the problem. The real question is

“WHEN DOES IT MATTER?”

WHEN does it matter that central banks are printing money?

WHEN does it matter that central banks are buying ETFs?

WHEN does it matter that the Japanese Central Bank owns 75% of ALL Japan-based ETFs?

WHEN? Not what?

Japan ETF holdings

You get it?

“WHEN” is the question you must ask.

And this is the question that I taught Steven to start asking himself. And it changed his life. Portfolio. And sleep.

WHEN are zero interest rates going to matter?

WHEN are negative interest rates going to matter?

WHEN is $15 trillion of money printing going to matter?

WHEN?

Our Spidey Senses

Finding “what is the matter” is easy. Just turn on the TV or type “market crash” into Google. And you’ll get hit with more “what’s” then you can handle.
Because our Spidey Sense can pick up on these things easier. But the “WHEN do they matter?” is where the power is found.  

what matters most?

The question I want you to ponder is, “WHEN does it matter?”

When does it matter that Trump still has 114 vacant positions? When does it matter that the Russian manipulation is getting closer to him? When does it matter that Trump is going to build an entirely new Fed? When? Not what…

what matters vs when does it matter

“WHEN?” allows an investor’s nervous system to slow down and change from an information collecting investor searching for information to support his confirmation bias. To a “curious – WHEN will this stuff will matter?” investor.

Like, how will I know WHEN central bank action will matter? WHEN the passive investing craze will matter? WHEN subprime auto lending will matter? WHEN, allows openness and curiosity. “What” stops openness.

One of Fearless Wealth’s Research principles is, WHEN is more important than ‘WHAT.’ Because ‘WHEN’ forces the investor to look for turning points between the four main assets say to pay attention. AND not evidence to back personal biases.

This is why we knew the 2008 Global Financial Crises was more than just a correction. The 58% fall in the S&P 500 between October 2007 and March 2009 hadn’t been named yet.

But because we were following the “WHEN” and saw it starting to show up in late 2007 and early 2008 we knew it  was finally time to take action.

Prior to that time period the “What matters” were happening for two to three years before that.

We knew subprime lending mattered. We knew the inverted yield curve mattered. We knew recessions almost always follow inverted yield curves.  We knew all of the what’s, just as most other research companies in the world did.

What made Fearless Wealth Research different? We focused on “when does it matter?” AND how we will know.

We know, a lot of research companies tout how many “what’s” they know. Companies that are bigger, have better writers, and have fewer typos than us. We know.

We’ve just found that tracking the “when’s” is where the stability is.

So how do we track the “WHENs?”

We watch, track and obsess over the relationship between four specific assets on the planet. And it’s in these four relationships that clarity is found. That the “WHEN” is found.

What vs. When

The Last 5 Corrections

I want you to see that 5% and 10% and 15% corrections are normal. And are not the beginning of “WHEN” everything falls apart. The market can have many five, and ten and fifteen percent corrections. And being able to see what they look like and knowing not all corrections lead to “the end of the world” can help.

This is what a 4.8% correction looks like.

4.8% correction

This is what a 5.9% correction looks like.

5.9% correction

This is what a 13.4% correction looks like.

13.4% correction

This is what a 5.7% correction looks like.

5.7% correction

And this is what a 12.4% correction looks like.

12.4% correction

So what’s the takeaway?

Three things stand out to me.

  1. Corrections are often grouped together. And the idea that there is such a thing as an average stock market correction is bogus. I just showed you five corrections in 11 months. That’s. Not. Suppose. To. Happen. And neither is two 50% correction in nine years.
  2. Corrections or falls are four times more painful to investors then an increase of the same amount. Meaning, fear operates four times faster than pleasure (my own findings by looking at actual price falls to rises). Scientists have only just recently found that financial pain and actual pain show up to the brain the same way.
  3. Corrections ALWAYS feel bad. And it’s only in hindsight that we know whether the correction was a 4.7% one or a 58% one. This uncertainty is what every human is trying to avoid.

If you find yourself open to the idea of a powerfully simple investment approach, then maybe we have what you are looking for. You don’t have to give up on performance to get stability. And because powerfully simple, is… well… simple. The compliance rate is high.

In Your Corner,

RCPeck-Dig Signature.JPG     
RC Peck, CFP

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