Summary
Charlie Bilello provides an illustrated antidote to overanalyzing the market.
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Most investors likely know someone who has stayed out of the market since the financial crisis, waiting first until things seemed safe again, and then waiting in vain for a good entry point.
Included in that population of those who have missed out on a historic bull market are exceptionally knowledgeable financial researchers, economists and industry bigwigs. Their crime was they knew too much. That is to say, their expert knowledge of the flaws of the U.S. financial system or their derivations of market history persuaded them to avoid being a sitting duck in the face of an imminent correction. One example that springs to mind is the famous fund manager, John Hussman.
Anyone who has read his weekly shareholder communications knows the man is brilliant. I mean that with complete sincerity. A former professor of economics at the University of Michigan, he is a virtuoso in market history – who knows it better than he? He rose to fame by correctly timing the market debacle that started in 2007, and his actions as a portfolio manager limited investor losses to just 9% in the brutal year of 2008 when the S&P 500 fell 37%.
But Hussman has been waiting for the other shoe to drop for a very long time now, and his poor timing has exacted its toll. His flagship fund, Hussman Strategic Growth (HSGFX), has lost 34.6% cumulatively since inception 17 years ago. A scared investor who put all his money in Vanguard’s Short-Term Treasury Fund (VBISX), a cash-equivalent fund, would have seen a gain of 7.7% in that time frame.
All this is my way of introducing and commending highly to your attention an article by Charlie Bilello that could serve as an antidote to overanalyzing the market, as people are wont to do. “Put These Charts On Your Wall…” is Bilello’s collection of example after example of moments in market history where it was all but certain that X had to happen next, but the opposite occurred instead. As Bilello puts it:
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