 |
From Tim W.: I receive more than one of your newsletters (and other companies’ advisories)… and I don’t know who to believe. Each analyst says something different.
I think you’re just trying to cover all your bases so someone is always right. At least it’s entertaining!
Reeves’ Comment: Tim, there’s a simple way for conflicting investment “gurus” to both be right…
It’s thanks to the “fractal” nature of the markets.
A fractal is something that displays “self-similarity” in all parts of itself. Think of a stalk of broccoli: Every new offshoot is a tiny replica of the larger plant.
You can see the market fractal when you look at a stock chart. Prices are always zigging up or zagging down… whether you’re talking decades… or months… or minutes.
Bull markets have sharp corrections. Bear markets have steep rallies.
So it’s not uncommon for one analyst to be short-term bearish (say, within the next 12 months) while another is long-term bullish (say, over the next 14 years). Both may be right in the end.
Consider the two S&P 500 charts below:
In the first, a “guru” warning his readers to sell stocks in August of 1987 would’ve been “right” to do so…
But a different “guru” telling investors to buy stocks in August of 1987 could’ve been “right,” too…
Your success in either situation depended on how long you stayed in the trade.
If your time in the markets is shorter… it pays to err on the side of caution. If it’s longer… you have more “leeway” to see a market downturn reverse itself.
But no one has a crystal ball. Even legendary investors get things wrong 25% of the time—or more. Trades “go south” all the time.
This is why PBRG preaches intelligent asset allocation as the key to overall investment success…
We want to diversify our assets… so the entirety of our wealth doesn’t ever rely on being “right” in one particular market. We stay protected—no matter who’s bearish or who’s bullish at a given time. Thanks for your note.