There they go again We might sound like broken records, but we believe the wisest investing strategy involves regularly buying shares of outstanding businesses for the long term. In retrospect, the wisest response to the biggest financial crisis since the Great Depression might have been to do nothing. Since the market's low in March 2009, the S&P 500 has more than doubled. Those who exited the market during that year missed a 27% gain in 2009. Many of us are still understandably scarred by the S&P 500's 37% decline in 2008. Do you really think an anonymous Swiss analyst can help you discover the correct entry and exit points? Can the television pundits do any better? Over long time frames, the worst trading days often occur during the same periods and same months as the best trading days. Motley Fool contributor Morgan Housel recently showed why investors cannot profitably jump in and out of the market on just the right days. History indicates that most investors cannot consistently time the market. Time to tune out Investors might be wise to ignore financial pundits altogether. We'll, ahem, report back in 17 days on how that call turns out. Another red flag: Our source drenched his forecasts in mumbo-jumbo, convoluted charts, and obscure metaphors (likening his forecasted bubble to the "Indonesian Rupiah crisis of '58").įortunately, our secret source's prediction that precisely three global banks will go kaput by April 17 will be pretty easy to track. In our April Fool's joke, we noted that our secret source had a great track record, though we didn't offer anything substantial to support that fact - which should have been an obvious red flag. That's why we should all insist on clear track records from financial pundits and forecasters, regardless of their experience or reputation. Investors need to be able to know which financial predictions to value, and which ones to discard.
Insist on accountability Motley Fool co-founder David Gardner has been talking a lot lately about how we must insist on everyday accountability - whether it's on a stock pick or a market call - from our financial media. After completing his valuation exercise, Damodaran intends to "stop worrying about the overall market and go back to finding undervalued companies." On the other hand, professor Aswath Damodaran, a valuation expert from New York University, recently attempted to value the entire stock market, and he came away thinking "there are good reasons why U S stock prices are elevated." He notes that cash flows are high right now, and growth prospects are encouraging. If this sounds like advice to get out of the markets and hide out in cash, it is." And just last Sunday, David Stockman, President Ronald Reagan's former budget director, wrote, "When the latest bubble pops, there will be nothing to stop the collapse. (Special thanks to the annoyed readers who, without realizing the day, wrote to chastise us over the word "Hugest" in the headline.)īubble, bubble, toil and trouble With the S&P 500 wrapping up the first quarter at a record high, there are quite a few pundits, of course, who do believe we are experiencing a market bubble right now.Īt the website Minyanville, an anonymous source talks of an impending credit crisis, and warns, "When the music stops, there will be no chairs." The economic forecaster Harry Dent is far more precise, and declares that we'll have another crash by this summer. Yesterday, April 1, was The Motley Fool's de facto annual holiday, and our special report, "The Hugest Bubble in History Set to Explode," was our April Fool's Day joke. It's time to come clean: We don't actually have a secret source in Davos, Switzerland, and we aren't producing batches and batches of Market Goggles.
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