One of the most liberating things I've done in a few decades is 'cut the cord'...
No, not to cable... though I have no idea why I still have it. I'm talking about writing almost exclusively about stocks that will fall, companies that will fail, and – when I wanted to stare into the abyss – what might bring down the market (and everything else, for that matter).
It was a good gig... I enjoyed it. And there's no question that being a resident skeptic played into my DNA. You can't effectively write or talk about things if you don't believe in them.
I still dabble in it, and the truth is... surrounding myself with anybody and everybody who had a bearish thought made great copy and kept me out of the market when I should have been out.
But it also kept me out when I should have been in.
Which gets us to where we are today...
Is this the opportunity of a lifetime ("you should be greedy") or the beginning of the end ("you should be fearful")?
Based on my Twitter feed... the answer seems to be to shut the windows, pull the drapes, and bolt the doors... It's that bad and about to get much worse.
And maybe it is, especially given the geopolitical backdrop (if you want to know what concerns me most). But that leads to something else I've been thinking a lot about lately... doomscrolling.
Merriam-Webster puts it this way...
Doomscrolling and doomsurfing are new terms referring to the tendency to continue to surf or scroll through bad news, even though that news is saddening, disheartening, or depressing. Many people are finding themselves reading continuously bad news about COVID-19 without the ability to stop or step back.
Ditto for politics... and the market.
With the luxury of having been able to step away – or at least, be out of the thick of it – at precisely the time all hell broke loose in the markets, which seemed combined with just about everything but locusts invading Manhattan, it's very clear: There's a fine line between sticking your head in the sand, and obsessing over every twist and turn of everything that can go wrong... and getting pulled into the vortex of doom.
The trick is to not avoid the realities of the risk while also not getting drawn in so deeply that you can't see the broader picture.
As I recently tweeted...
There's proof, too, in the form of a very recent study published in the journal Health Communication about the impact of the firehose of news – and how it can take people to 'a dark and dangerous place'...
As the study explains (emphasis added)...
We further argue that for these individuals, a vicious cycle can develop in which, rather than tuning out, they become drawn further in, obsessing over the news and checking for updates around the clock to alleviate their emotional distress. But it doesn't help, and the more they check the news, the more it begins to interfere with other aspects of their lives.
What may have begun as an effort to monitor disconcerting events and remain apprised of potential threats develops overtime into a maladaptive relationship with the news.
Getting sucked into the "doom loop" (or on the opposite side, getting sucked into a mania) can be worse for an investor... and doubly bad in a market as unpredictably volatile as this one.
That's why I cut the cord – not entirely, of course, but just enough to help clear my head... and in the process, with the benefit of time and eliminating the noise, not making a trade or two I might have regretted.
Moving on, I always hear that the market is efficient, meaning that everybody knows everything and all of it is priced in...
Maybe that's true for the broad market... but away from those "crowded trades," plenty of individual stocks aren't efficient.
I was reminded of this the other day when Ricky Sandler, who runs the hedge fund Eminence Capital, tweeted...
I responded to him with this...
In a supposedly efficient market, I'm surprised how many of these inefficiencies exist.
To which he countered...
Herb, the market is now dominated by passive investors, macro investors, quants, and pods whose mantra is to make money this week. And then exacerbated by trend following and momentum. Bottom-up, long-term fundamental investors are irrelevant in setting prices in the short run.
And my response...
I'm talking my book, of course...
That's the general focus of the stocks in my Investment Opportunities portfolio. They may not be grand slams, but they're excellent businesses whose main sin is that rather than make headlines, they make money. If you're not already a subscriber, you can find out how to gain instant access to the full portfolio of these recommendations right here.
As always, feel free to reach out via e-mail by clicking here. I look forward to hearing from you.
September 9, 2022