If you aren’t familiar with Farrell, he was a legend at Merrill Lynch from the 60’s through the late 90’s. During his career he witnessed every market cycle imaginable, which lead to his 10 rules for investing. Looking at the markets today, we are reminded of another Farrell rule: “There are no new eras – excesses are never permanent”. The lesson is simple and timeless: it’s never “different this time” which is what we hear when markets go to extremes. Markets reflect human nature. Often stated but frequently forgotten is the truism that HUMAN NATURE does NOT change!
Fast forward to the current environment in the markets and in Washington. Ever since Trump was elected hysteria has been building on the left to get rid of the 45th president. The media has been relentless and no longer attempts to hide their bias. This weekend IBD (Investors’ Business Daily) published a Harvard University Study that verified what most already knew. Harvard looked at the TV networks CNN, NBC, & CBS, and found negative coverage 93%, 93%, and 91% respectively. The New York Times gave their readers coverage that was 87% negative; WAPO was 83% negative and the WSJ was only slightly less at 70% negative. Even Fox, who is accused of being a Trump lapdog, was 52% negative.
President Trump has had the worst coverage of any recent president — Obama, Bush, and Clinton. It shows no signs of letting up as the daily barrage continues with calls for his impeachment by the left, special prosecutors, and the like. Yet, when asked, not one individual can state what crime he has committed or what law has been broken. His big crime is being an outsider who wants to change the status quo. That has the “establishment” of both parties in panic mode.
One last example of how absurd the current situation is, arrived in Barron’s this weekend. A professor from the left is predicting that if Trump is driven out of office, the Dow will climb 1000 points. I thought professors were supposed to be intelligent. More Fake News!
While there are some who find all the chaos mildly entertaining, the instability being created by the media and the left is damaging to the country over time. They have one goal and they dismiss the collateral damage. The end justifies the means? Pathetic and anyone who is delusional enough to think what they are doing is somehow justified, needs to grow up and study history.
Last week the markets started to reflect the chaos. Until recently the markets reflected the optimism the Trump agenda promised which is greater growth, a stronger economy, border security, etc. The left has done all they can to slow or stop any progress and they are far from finished since they got a little taste of blood last week.
The questions for investors is how to navigate the insanity. My suggestions are as follows:
- Don’t get emotional now or ever when investing
- Don’t allow all the noise to influence your decisions
- Have a discipline — a plan for buying and selling — and stick to it!
- Invest now the same way you would at any time by buying solid companies, in a positive trend
- Always look at the chart before you buy — the left side of a chart has valuable information – USE it!
- If you’re worried, that means emotions are involved — sell until you are no longer worried
- Make your decisions for the right reasons
- Keep a trading diary for future reference
- Don’t get distracted with chat rooms, opinions, predictions, etc. If they’re wrong you lose – they don’t!
You should be well informed but not allow the noise to seep into your thought process such that you make irrational investment decisions. That’s why a trading diary is valuable provided you write your thoughts and reasons for each trade. You can see mistakes as well as success and know why.
Investing is vital because everyone needs the freedom that additional money will provide. Investing is not complicated if you stick to your discipline. The payoff is greater than just money in the bank.