Good morning and happy Monday!
“It’s not what you look at that matters, it’s what you see.”
– Henry David Thoreau, American naturalist, 1817-1862
Let’s have a little fun this morning. See if you can solve this puzzle:
Count the number of “F”s in the following text:
FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF YEARS
Scroll down for the answer.
The most common answer is three.
Seeing four is quite rare.
The actual answer is six.
Wait, what?
If you missed it, go back and look again. I totally got it wrong the first time I saw this too. In fact, when I went back a second and a third time I still did not get it correctly.
FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF YEARS
Our minds have a very hard time processing the “f” in “of.”
How crazy is that? Our brains cannot process what our eyes see.
With investing this same principle can play out too.
We see a scary headline and all of the sudden all the information we know about investing goes out the window.
A friend tells us about a hot stock that is about to triple in value and we ignore all investment fundamentals in pursuit of this idea.
Someone we don’t like wins the presidency and we convince ourselves that the end of the republic has arrived and our investments will soon be worthless.
These all seem so illogical when described here, but when these events are actually occurring in our lives the story can be very different. We as human beings are masters at getting ourselves to believe whatever story we are telling ourselves.
One of the great lies we can often tell ourselves on our investing journey is “This time is different.”
I became a Licensed Financial Specialist at a bank in 2001 at the ripe age of 21. What happened within months of me starting this investing career … September 11, 2001. “This time is different … we have never been attacked on our own soil.” S&P 500 value September 10, 2001 = 1,092.54.
Then 2008-2009 “Great recession” rolls around. Home values plummet, unemployment skyrockets, banks get bailed out by the federal government. “This time is different.” S&P 500 closing value on December 31, 2007 = 1,468.36
I heard the “This time is different” cries when Barak Obama was elected in 2008 (S&P 500 = 966.30), when Donald Trump was elected in 2016 (S&P 500 = 2,139.56), and when Joe Biden was elected in 2020 (S&P 500 = 3,369.16). I’m sure I’ll hear it again in 2024 no matter who wins.
The “This time is different” was screaming at us when Covid-19 hit the scene. S&P 500 went from 3,386.15 on February 19, 2020 to 2,237.40 on March 23, 2020.
Let’s pause for a moment here.
September 2001 S&P 500 = 1,092.54
December 2007 S&P 500 = 1,468.36
March 2020 S&P 500 = 2,237.40
To start this year S&P 500 = 3,839.50
The end of last month (July 31, 2023) S&P 500 = 4,588.96
History teaches us that in each “This time is different” moment the market reacts, resets, and then continues forward. Is it smooth? Absolutely not. Is the timing predictable? Not even a little bit. Is it a worthwhile journey to be on? I contend it most certainly is!
“This time is different … fill in the blank” will be a message we will have to contend with our entire investing career. When those thoughts pop in your head (or are screamed at you by the financial news media) I would encourage you to put them in their appropriate historical context.
We as investors are focused on our long-term financial goals and we refuse to let any “This time is different” messages detract us from achieving those goals.
I know this investing journey is not always easy, I am so grateful that you have partnered with my team & I to help navigate these waters.
Make it a great week ahead!