Is the bear market over?
"The shortest interval of time measurable by man is between the moment when it is too soon to buy stocks and the moment when it is too late."
Source -- unknown
Journalists have woken up in the past couple weeks somewhat groggy from a 4.0 year hibernation and proudly proclaimed; "Hey! We think the stock market is starting to recover!"
Chart courtesy of dshort.com
Hard hitting journalism indeed!
Where would we be without business journalism? A cynic might say...better off?
The 2012 DALBAR report claims the media (or response to media reports) as a significant factor that hurts investor returns.
In my personal view, I would go a bit further and state that investors’ inappropriate media response can not only hurt returns - it can destroy investment returns. Although behavioral economics suggests to no one's surprise, that investors may be their own worst enemy, I think we are too quick to blame the victim. Although we can never underestimate humanity's propensity to do something really stupid, I often wonder if business journalism in general, is a help or a hindrance to most investors.
Please do not get me wrong, I often see and read many fine articles in the national papers about the latest government budget or about how the new TFSA account works. For the articles that educate and inform, I say bravo!
If you take a look at the above chart you will see the S&P 500 Index is up a staggering 123.7% since March 9, 2009. Although no President or Prime Minister, Finance Secretary or head of state foretold a minus 56.8% downdraft caused by the collapse of the U.S. residential housing market in 2009, advisers had to earn their pay (and then some) to counteract the end-of-the-universe scenarios painted by just about every media outlet in the world. So if you were among the many investors (none here of course) who sold out just before the market did a one eighty, who should you blame?
People are funny creatures (we're just hardwired that way) who often do not-so-funny things at the most inopportune moments. While business papers berate their own readers about their lack of financial literacy and publish ubiquitous articles about finding the cheapest investments you can find while throwing in a smattering of do-it-yourself financial advice, business columnists (they must meet today's print deadline, after all) - almost always miss the big picture. It is not the investment they should be focused upon – it’s the person holding the investment that is the key to investment success (or failure).
However, we should not paint all journalists with the same tar brush because sometimes we can manage to find some wheat in all that chaff. As always, I will do my best to find and publish them on this modest blog.
Here's a good article worth reading: http://bucks.blogs.nytimes.com/2013/02/04/the-question-you-should-be-asking-about-the-stock-market/?ref=business. And speaking of blogs, a hat tip to one my favorite investing blogs of all, The Big Picture for providing the above link.
Therefore, if you are an equity money manager or a financial adviser who survived, dragging their clients through the muck and mayhem of the Great Panic (2008 -2009), kept clients fully invested, despite the howling chill winds of journalism, enjoy this (short) moment of bliss and remember the sacred and unwritten rule. If you ever find yourself at a cocktail party alongside a media personality, never ever under any circumstance whatsoever, say I told you so.
