Risk Is For Wimps

Mike Williams | 7th November 2019

Step Back and Ponder

Back during the 1980s and 1990s, a period driven by the massive influx of what was then the economic record-setting generation called the Baby Boomers, the US saw:

Two serious recessions
One mild one
A stock market crash, and
One extended period of "stall-speed growth" (1994-1995).

Anything sound familiar in that summary above?

The US has shown throughout history that it can move through "stall-speed periods" very well. The key is to focus on what happens after - not during - the trade ranges which unfold with them.

By the way, during those same two decades (the 80s and 90s), the US investor witnessed a market that went up nearly 14 times over.

My point is that it’s a repeat of what has been mentioned manty times before during times of emotional peril; that recessions tend to follow periods of excesses - e.g., soaring home prices, rising inflation, widespread optimism, way too much investing "in a good idea", oversupply of many goods and services, mass feelings that all things are good - and most important, the over-riding sense that any inkling of concern about "risk" is for wimps.

And that picture is the opposite of what we’re seeing today.

Today, risk aversion footprints in the sand are everywhere.

The near constant tape running in the back of the collective investor mindset says, "This is all going to end badly.”

The crowd is dragging that mantra around with them like a ball and chain.

Read 'em and reap:

Just before I get to the images above, I want you to keep in mind that in the period right before the latest bounce in stocks "over tariff war improvement" we witnessed weeks of record outflows from stocks and into bonds.

Those are the same bonds that have already lost money for anyone who panicked into them - literally weeks, or even days, ago.

And investor sentiment?

It’s still in the tank, folks.

Ok, so you are reading the above sentiment data correctly.

We are now back to almost the same levels we were during the onset of Brexit (which on its own sounds more like a British word for aging than it does the global cataclysmic meltdown trigger it seemed to be just a short 3.5 years ago!).

√ Or back during that "the China meltdown" in 2015 when they first began to slow (as stated then - it's demographics folks - not the China Trade War).

√ And please don't forget "the worst start to a stock market in 85 years" that kicked off 2016?

√ Yes - for sure - the audience is as afraid today - as they were then.

The comedy is that they will only feel better once things rise to much higher prices, and the opportunity to gain from their growth has gone.

Note that while the experts in the headlines are driving you to be overly concerned about new highs and what comes now, larger events are unfolding.

The purple box above highlights two companies that are about to (potentially) disappear.

And what’s driving those corporate actions?

Well, there are a few things that sound something like this:

The crowd is so afraid that they are missing how well we are performing.
Investors will go private on cheap money (also a result of overwhelming risk aversion) and go public again later at much higher values when people "feel good again about our work."
Efficiencies, where 2 + 2 can equal 6.

The Bottom Line Here?

It all comes down to perception.

Slowly but surely the stocks in the "stock market" for building wealth over time for patient investors are disappearing.

So, which pair of glasses are you peering through: Short-term fear mongering today, tomorrow or next month; or long-term elevated horizons of the future?

It will matter more and more as the new decade unfolds ahead.