Someone forwarded me a 10 minute video clip of supposedly well-meaning people predicting a market crash ‘within the next 12 months.” Historically, this would be well within the realm of the possible, if not necessarily a high probability.
Since 1926, the US stock market has crashed nine times, or roughly once a decade, although these events are not necessarily spaced out evenly. There were no stock market crashes in the 1950’s or the 1990’s. There was one in the 1980’s that only took a few weeks to stabilize. The 1930’s and 1970’s accounted for a lot of the crashes in this tally. In the 2000’s there were two back to back crashes within seven years of each other. There hasn’t been one in this decade yet, seven years in.
The link to the video was sent to me reverently, “These guys are really smart, they know what they’re talking about.”
I considered that for a few minutes. It got me thinking about how little talent it takes to make an exhaustive list of all the negatives and things that could go wrong, and then pass the whole pile off as though it’s profound. It is not profound. I could make that list right now off the top of my head. Domestic issues, international issues, financial issues, technical issues, demographic issues, political issues.
Big deal. We all read the same newspapers and are aware of the same statistics. There’s nothing profound about it. It takes no talent at all.
The same goes for the reverse outlook – I could write 2000 words with my eyes closed about all of the good things that are happening and all of the issues that could potentially resolve positively. And if the markets continued to rally it would appear to be some sort of heroic stand that I’ve taken, even though I’ve merely catalogued some bright spots and reasons for optimism. This also takes no talent – stocks go up in three out of four years historically and there has never been a crash that wasn’t an amazing buying opportunity just a few years later.
So where does the talent come in?
How about in helping people make sense of all the scary things and see them in context, as opposed to through the lens of the clickbait economy?
How about in designing and managing portfolios that offer an answer to multitudes of potential outcomes, not just the one that your gut instincts tell you is the most likely at any given moment?
How about in managing your own behavior and the behavior of the people who’ve entrusted their futures to you?
How about in remaining diversified when every atom of your being tells you that there’s one asset class offering a sure-fire way to get rich right now?
How about in controlling your emotional responses when things go awry and people tell you you’re a fool for believing that tomorrow will be better than today?
That’s where the talent is, not in making scatological lists of newspaper headlines and things to be terrified of.
The people assembling these lists and videos and tweetstorms all have a few things in common – they mostly don’t actually report to anyone or answer to any investors. Additionally, they all think they’re going to be the subject of Michael Lewis’s next book on whatever market crisis is to come. I don’t blame them – you gotta shoot your shot and hope it lands.
But let’s not confuse this with talent.