Crazy Like Me
People. Are. Crazy.
I don’t exclude myself from that description.
I’ve made bad decisions, experienced regret, disagreed with my former self, etc.
I do hope I am less crazy than your average Joe. I strive to be introspective, work on my temperament, mature daily, and seek wise counsel. Yet, I realize that I, too, am still susceptible to even a little bit of crazy.
An All-Time High in Crazy
With that said, what I am seeing in the media these days just blows my mind. The sensationalism regarding the daily financial news has hit an all-time high.
In the last few weeks, I’ve heard one stock described as “the most important stock in the world,” with its upcoming earnings report touted as “one for the history books.” I’ve seen economic data being treated like Christmas presents; the excitement and anticipation behind a monthly retail sales report as if it were being delivered by old Saint Nick himself. I know this next comment isn’t true, but it felt like the Fed meeting this week had more coverage than the Super Bowl.
And THE worst part of it all? It sucks me in too. I work in the industry, speak out against these financial soap operas (CNBC, Fox Business, etc.), yet all the headlines and chatter make me just as curious as the next guy. I should know better, but the storylines are like catnip for investors.
A Sober Reminder
So, I’m simply here to remind you that as fun as it may be to follow the Federal Reserve’s actions, to try to predict their next move, and to critique their decisions, it all has very little impact on YOUR financial plan. It has very little to do with achieving your financial goals. I might just be writing this article to remind myself of this truth: an audience of one.
For illustrative purposes, look how ridiculous this is (see below). You are looking at a chart of the stock market’s intraday movements (between 2:00 pm and 4:00 pm EST) and the volatility relative to the Federal Reserve’s announcement to cut rates on 9/18/2024. This looks more like a heart rate monitor than a stock chart:
SOURCE: FactSet
Something, Nothing, or Everything
To be fair, earnings reports, economic data, and the activity of the Federal Reserve do matter. These are all variables and components that help to paint the picture of a larger economic landscape, a landscape that should have some influence on the way you design and manage your investment portfolio. It reminds me of this game they play on one of my favorite sports shows; the game is called Something, Nothing, or Everything. Basically, a topic or headline is introduced, and then the cast has to conclude whether that particular topic should be deemed as something, nothing, or everything. With these game rules in mind, I want you to know that the Fed meetings are something, they aren’t nothing, but the media wants you to believe they are everything.
Keep Your Edge
So, what’s an investor to do with all of this?
Know thy edge.
You are not going to be the smartest guy or gal in the room, sorry. You are not going to have access to information that other investors aren’t privy to. You don’t have real estate next door to the stock exchange with enough fiber-optic cable to outsprint other investors (e.g., high-frequency trading).
So, what’s your edge?
Well, in the words of the Rolling Stones (or at least a song they covered), “Time is on my side, yes it is. Time is on my side, yes it is.” Your edge is time, specifically your time horizon. If you are willing to be counterculture and be a long-term investor in a world of short-term gratification and sensationalized financial media then you have a real edge.
You can lack intellect and access and still be wildly successful in the realm of investing. You just need to be willing to approach investing with a long-term perspective and map out a gameplan that you are able to stick to.
Again, time is absolutely your edge.
The Zapper
We will conclude with a short note about bugs.
Have you ever seen those outdoor lanterns that zap bugs? Every time it catches its prey, you get a little zip-zap-buzz sound. Depending on the time of year and weather, the sound may be constant, and you can see the accumulation of the insect graveyard. I don’t know the science behind it, but the bugs are almost magnetically drawn to the light which ultimately leads to their demise.
Perhaps a gruesome analogy, but one that very much relates to the bug-killing light that financial media projects daily. It draws us in, captivates our attention, and feeds us absolute junk that is worthless for our financial plan, with only one goal in mind—to destroy us.
Steer clear. Don’t get duped, distracted, or zapped. This or that earnings report isn’t of great historical significance. Whether rates go down by “X” this month or they go down by “X” next month will all prove to be irrelevant in the long run.
And, as much as you may not want to hear this, your plan should not (and I assume it does not) depend on one person winning the election over the other. Yet, this topic and this news feed will captivate most and even cause some to make regrettable financial decisions.
Don’t let it be you; don’t get zapped.
Trevor Cummings
PWA Group Director, Partner
tcummings@thebahnsengroup.com
Blaine Carver
Private Wealth Advisor
bcarver@thebahnsengroup.com
