Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Do What the Stock Market Bears Do... Not What They Say

Stock-Markets / Stock Markets 2015 Mar 30, 2015 - 05:23 PM GMT

By: Investment_U

Stock-Markets

Alexander Green writes: Here’s a thought experiment for you.

Imagine you’re a business owner who is attending an investment conference. A smart, articulate and extremely bearish stock market analyst takes the podium and warns of impending economic doom.

He marshals an impressive array of scary facts. He points to past predictions that have come to pass. And he claims the economy and stock market will soon collapse.


Would you go home and sell your business?

I’m guessing your answer is somewhere between “of course not” and “what, do you take me for an idiot?”

But if the economy were really about to collapse - and the value of your business along with it - shouldn’t you sell it now while you can still fetch a good price?

You wouldn’t - and for good reasons.

The first is you may need your business to provide an income. But isn’t that the same reason you shouldn’t sell the stocks in your investment portfolio? After all, they’re not only supplementing your income - with dividends - but also building the capital base you need to meet your retirement goals.

You also surely realize that a bearish analyst is only voicing an opinion, the same as a bullish analyst. In your heart of hearts - if not your frontal lobe itself - you know that no one can accurately and reliably predict the future. (Although pundits generally do a good job of cherry-picking past predictions that have come to pass.)

But here’s another reason you might not sell your business: The bearish commentator isn’t selling his. And that’s a bit odd when you think about it.

I work in the financial publishing industry. When people give up on the stock market - as they did following the financial crisis of 2008-2009 - our business takes a sharp downturn. In a full-blown collapse, a business might fail completely. There wouldn’t be enough revenue to meet expenses.

Yet I notice these passionate bears are never filled with enough conviction to sell their own business at “the top.”

I had a direct confrontation with a perma-bear on this subject a few years ago. We were debating before an audience in New York and the moderator began by asking us to declare whether we were bullish or bearish on the stock market.

My opponent - who had been bearish not just for years but decades - make a quick pronouncement.

“I’m a bear,” he said.

I said, in turn, that my investment approach is “market neutral.” I don’t know whether the market will go up or down, and my recommendations have nothing to do with economic forecasting or market timing. Both are meaningless noise and don’t add value.

My opponent pounced immediately.

“You’re recommending stocks. So just admit it. You’re bullish. Just say you’re bullish.”

“I’m not recommending certain stocks because I think the market will go up,” I said, “but because I think these businesses are undervalued. The market may go down and these stocks could still go higher.”

“You’re playing a game,” he insisted. “If you own stocks you’re bullish, end of story.”

I disagreed and added that since I knew he owned a lot more equity than me, he was actually bullish not bearish.

He took great offense at this remark and insisted he didn’t own any stocks.

“But you have equity,” I said.

This fellow was an industry colleague of mine. He owns a successful publishing business. In fact, his publishing interests were probably larger than my entire stock portfolio. I pointed this out to the audience.

“By your own logic, you’re bullish,” I said. “Why don’t you admit it? If you weren’t, you would sell your business.”

He seemed dumbstruck by this - and more than a little embarrassed. The audience was very possibly viewing him as a hypocrite.

He finally argued that there was a big difference between owning a private business and being a shareholder in a public one.

Except there isn’t.

The issues facing a private publisher are the very same as those facing a public one: labor costs, printing costs, paper costs, mailing costs, advertising costs, advertising demand, economic strength or weakness, overhead, health insurance, information technology, etc.

In short, he wanted the audience to sell their businesses (the stocks they own), but he wasn’t about to sell his.

I’ve found this to be a general rule in our industry. So here’s the takeaway: Don’t do what the great bears say. Do what they do.

Hold on to your equity. It’s the best way to build and protect a fortune.

Good investing,

Source: http://www.investmentu.com/article/detail/44564/do-what-stock-market-bears-do-not-say

http://www.investmentu.com

Copyright © 1999 - 2015 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in