The great thing is to last and get your work done and see and hear and learn and understand; and write when there is something that you know; and not before; and not too damned much after.
-- Ernest Hemingway
The market's health the past 8 months reminds me that I should reiterate my investing methodology. First, though, a review of the markets...
Based on closing prices for Monday, 30 June, the
S&P 500/SPX posted its worst first six month return since 2002, and its third worst first six-months (negative) rate of return since 1965, down 12.83%. Okay, the numbers reflect what has occurred, but how about going forward...? Market history shows that "... 5 of the 10
worst first-half returns were followed by 2nd half performances that landed them on the list of the 10 worst performers as well. When the S&P 500 was on the worst 1st half and worst 2nd half performance lists, the average performance in the 2nd half of the year was another 9.9% loss. Years of positive performance do exist; most notably during 1970 and 1982 (when the S&P posted gains of more than 25% during the 2nd half of the year to finish the year in positive territory)." (©
Dorsey Wright Analytics)
Compare and contrast the interpretation above with this notional sub-set, "
In the second halves of all presidential election years over the past 110 years, the Dow has gained an average of 9.7%. In the second halves of all other years, in contrast, the Dow's second-half gain has been 2.7%, or barely more than a quarter as much." (©
Mark Hulbert)
Throughout stock market history, there always have been prevailing concerns that worry most investors; concerns that, in turn, cause a massive shift to one or the other side of the ledger. While the then-prevalent concerns exacerbate a downtrend, they rarely cause a downtrend to occur -- unless the collective action by the preponderance of investors betrays an element of real or perceived exogenous risk. (Risk due to factors outside market dynamics.)
Whether investors buy or sell, they discount the future (albeit the consensual perception of that presumed future, which is why the market is so often wrong), so this moment, every moment --
right here, right now -- is the where and when and what and how that separates the true long term investor from the poseur. A concentration of focus on a diminishing spot (the asymptote I mentioned in a previous post) helps to end the extant trend sooner rather than later. Of course, a quicker ending worsens the ferocity of the trend; a
melt-up or
melt-down.
