Not Necessarily the News

“When you look at the dark side, careful you must be. For the dark side looks back.”
– Yoda

Before getting too filled with angst and concern over the latest chapter in the ridiculous China Tariff War saga, ask yourself this:

"What in the hell happened to the earnings recession and slowdown of Q1?  Or, better yet, when I go back and read all the headlines of NOV and DEC, I see recession everywhere - which of course, led to the selling fears then - ending thousands of points lower from here.  Where was that recession in Q1 when GDP came out at 3.0+ - even if we shave a little from the inventory burn...?"

Hmmm…

Here’s a thought: Most of the crap you read in headlines or hear from some talking head expert on TV never happens.

As per Yoda’s quote above, if you give the dark side too much heed, you’ll find that it has teeth. 

And when those hooks are dug in deep, you would be shocked at what that fear will cost you over time.

Try a cool $20 billion...

That's right, a few weeks ago equity funds in the US saw that mass exodus happen in just a few short days of selling.

That’s upwards of $115 billion leaving equity funds this year already for – wait for it – the safety and security of cash and bonds, and now on course for the worst year since 2016.

And the beat goes on…

Now bonds, which are perceived as a safe haven in times of market distress. BAML analysts identified mortgage-backed securities, emerging-market debt and high-yield bonds as drawing the most inflows, reflecting what it terms as an ongoing "lust for yield" amid an unanticipated drop in bond yields.

Shocking, eh?

Stand Back from The Abyss

Now, I know this seems like a bad way of seeing all the risk out there, but we impress upon our clients that risk is always present - even when you feel it is not – and that "risk" and the perception thereof - is centred on two important pillars: Time, and a plan.

Time tends to resolve the perception of risk.  I provide you a chart of PG as a recent example:

Here’s the test we all undergo as short-term traders vs. long-term investors.

Look at the two views of PG above. 

The bars at the top are the increasing dividends you get for owning the stock each year - they have risen for 70 years straight. 

The bottom portion is the price action of the stock paying those dividends.

You get to pick which one you are going to pay attention to. 

Just over a year ago, PG was selling for $70, and was considered a broken company long past its prime, and not prepared for the future. 

Today it’s about 50% higher.

And guess what? 

Those red dots are all the points in time when the experts were suggesting PG was "done" and it was time to move on. 

I was advised a long time ago by a very wise friend who said:

"Mike, don't confuse activity for accomplishment."