The Stock Market Indicator that you won’t hear about…

Dear Mr. Market:

We’ll open this letter to our friend “Mr. Market” by stating one thing that will be very obvious in six to 12 months. 90% of people reading this article will have gotten it wrong. It’s not your fault though…it’s the way our minds are wired and the content we’re constantly being fed.

Regardless of your current market strategy it’s times like this that will test the most patient of long-term investors. We’ve written about this countless times but no matter what the sage counsel or stock market adage is, you should be rattled right now. We could be like most “perma-bull” financial advisors and try to data mine for all the reasons to stay calm or share positive anecdotes to convince you that now is the time to invest; it won’t matter though. Putting “lipstick on a pig” won’t help you nor the current market environment. Bad news and reasons to panic will be the headline for the weeks to come and there will seemingly be no safe place to hide.

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Sell in May and Go Away?

Dear Mr. Market:

Does the old stock market adage of “sell in May and go away” make sense? We’ve actually written about this one spring about nine years ago where we actually advocated taking some chips off the table, however it had less to do with a cute stock market rhyme and more due to profit taking. Where are we at now going into May and is this allegedly poor seasonal time of year appropriate to sell or perhaps not?

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Pssst….That was NOT the stock market correction we’ve all been waiting for!

Dear Mr. Market:

Yesterday seemed like the start of the Great Depression for some pundits and nervous nellies. Fear sells, and negative prognosis appears smarter than positive outlooks for whatever reason. The reality, and key reminder we wish to bring up again, is that the long awaited correction has yet to come. As of this writing, we are literally only -3.91% off of all-time S&P 500 highs in the market.

It should be noted that AAII Bearish Sentiment reading is as high as its been since the last most major S&P 500 sell-off.

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Buy the Rumor and Sell the News

Dear Mr. Market:

The stock market has provided many sayings and memorable catchphrases that people tend to regurgitate ; some have merit and some are just garbage.

If you’re a regular reader of Dear Mr. Market, or a client of My Portfolio Guide, LLC, you’ll know that our all-time favorite is “The four most dangerous words in investing are …This time it’s different” -Sir John Templeton. Here are some other all-time adages that you’ve undoubtedly heard:

Buy low sell high” Uh…yeah, but easier said than done.

“The trend is your friend” Sure….until it’s not!

“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks” -John Bogle

“Markets can stay irrational longer than you can stay solvent” -John Maynard Keynes

So…what does “buy the rumor and sell the news” mean? You probably know that the stock market is full of speculation, great stories, and chock-full of hidden nuggets as well as potential land mines. Even if you’re not an experienced investor or trader, at some point you’ll figure out that by the time your neighbor (you know the guy who never loses and is always up) tells you about a stock tip…the ink on the newspaper is already dry and that idea is likely stale.

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I got in at the top of the market…Now What?!?

Dear Mr. Market:

It’s over.

The “fat lady is singing”, the alarm bells are ringing, and you are literally the last dunce in the room who decided to get into the market at the all-time high. Now Mr. Market shows you what real pain looks like and sells off like nobody has ever imagined.

Let us preface this article by stating it’s worth bookmarking and revisiting for those times when you may be rethinking your investment time horizon or just how much risk you truly are able to take on.

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All-Time Favorite Stock Chart

Dear Mr. Market:

It’s been a while since we’ve had to talk about you. The world has been focused on many changes which sometimes leaves you to quietly do your thing while we catch our breath. We’ve ushered in a new year, the United States has a new President and administration, and we’re finally seeing some light at the end of the tunnel with regards to the most surreal pandemic one could imagine.

How have you been… Mr. Market?

Up, down, sideways, and all over the place…That’s how.

Today we write you a quick note to share our all-time favorite chart as well as a reminder to all those investors who may fall prey to short-term memory lapses. The recent stock market sell-off is a great wake up call to the fact that markets obviously don’t just go up in a straight line. It’s a bit more than that though…

Below is our all-time favorite stock chart and we’re going to share why it’s important to look at this every so often.

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Revisiting the Permanent Portfolio

Dear Mr. Market:

It’s been seven years since we last reviewed the Permanent Portfolio. Please click here to view the original article.

Why do we bring up this article now? Lots has changed but lots has not! More than anything we believe that our current environment has so many unknowns embedded in it after one of the wildest rides in stock market history. We won’t dig into the weeds too much but one could easily make the case that any of the following scenarios could take place over the next year:

  1. The Stock Market could absolutely continue to defy odds and climb higher.
  2. We could see another market crash like we saw in the spring this year as there are plenty of issues that have not gone away (Covid-19, political unrest, handcuffed economy, geopolitical concerns)
  3. A deteriorating dollar, inflation on the horizon, a ticking time bomb of debt, and more fear of a prolonged recession, negates any appeal for stocks for quite some time.
  4. We trade up, down, and basically sideways as this market consolidates and digests one of the most tumultuous years in history.

Without rehashing all that has transpired in 2020, we believe that being properly allocated and prepared for just about anything that comes our way seems like a wise way to go. The market is almost always unpredictable but there are times when reading the tea leaves and figuring out clear direction is even more difficult; we believe that’s exactly where we’re at right now.

If you didn’t read our old article from 2013, the basis for the Permanent Portfolio strategy is simple at face value: You divide your portfolio into four distinct and fairly uncorrelated asset classes (Cash, Bonds, Gold, and Stocks). Ideally at any point in most economic cycles one of these asset classes will stink it up but the others could compensate and outperform. During prosperous times Stocks should win. When there is inflation a case can be made for Gold. Should the opposite occur and we get deflation you would ideally see long-term Bonds do well. Lastly, during a severe recession Cash is perhaps your best friend. When coupled together you may never hit a home run but this approach can mitigate disaster and still produce modest long-term returns.

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Economic Outlook: The voice and face behind Dear Mr. Market

Dear Mr. Market:

We’ve written you hundreds of letters over the past decade and on occasion it’s nice to put a face with the name! Last week, Matt Pixa of My Portfolio Guide, LLC, was given the honor and opportunity to present an Economic Outlook to the Seal Beach Chamber of Commerce.

We share it with you here and look forward to your feedback and questions!

PS- Click here to view the entire presentation but the “meat” of the show starts exactly at the 10 minute mark. Enjoy!

Investing & Diversification: When Less is More

Dear Mr. Market: download

In many of our letters to you we discuss the ups and downs of the stock market. In doing so, we often times will share basic knowledge and investing reminders to our readers to help guide them. Without question, even a rookie investor will have learned the simple advice of diversifying their portfolio. “Do not put all your eggs in one basket!”

While that “advice” is intuitive and seems to make sense, it’s mainly regurgitated by every financial advisor because of one alarming reason. Yes, on one hand it’s with the intent of managing risk but part of the dark reality is because most people (pros included) don’t know what they’re doing. This last sentence may sound harsh but our job is to be candid and also share ideas and truths that you may need to know yet not always hear elsewhere.

If you stop reading this article right now do yourself a favor and at least spend seven minutes when you have more time. The seven minutes we want you to spend are watching the following clip of Warren Buffett and Charlie Munger. Click here to view it and learn their basic belief that most investors over diversify and are simply “protecting themselves from ignorance”. Continue reading

Why buy Gold and Why Now?

Dear Mr. Market:download

We have commented many times on how people have short memories. In the case of recent stock market behavior, however, there is no way one could forget what a ride we’ve all been on. Our job today is not to draw attention to the very obvious past but to one area of the market that is not always directly connected to stocks or bonds.

Do you have gold in your portfolio and if so, should you buy more, hold on to what you have, or dump it? Continue reading