Monday , 17 June 2024

Time to Sell? Not Necessarily – Here’s Why (+2K Views)

Anytime you see a data set trying to define the entire stock market you can take it with a huge grain of salt because markets are emotionally-driven. There are so many moving parts involved that it’s impossible to simply use a single variable or even a handful of variables to tell you exactly when the good times will end.

The above introductory comments are edited excerpts from an article* by Ben Carlson ( entitled What Stage of the Bull Market Are We In?.

The following article is presented courtesy of Lorimer Wilson, editor of (Your Key to Making Money!) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.

Carlson goes on to say in further edited excerpts:

The most intelligent investors are the ones that are willing to admit that there is no certainty with market cycles. The pundits, portfolio managers and financial advisors with the most certainty are usually the ones you should listen to the least. It’s impossible to know exactly when a market cycle will end because the pendulum can swing too far in either direction.

We’ve been inundated with crash calls for the past 3-4 years. Much of this is because of the recency bias since we’ve witnessed two huge market crashes in the past decade and a half alone. Some are fear-mongering and ill-conceived but many have come across as intelligent arguments about why the bull market should have ended. It hasn’t mattered just yet.

Investors probably spend too much time trying to determine which year the current market set-up resembles. Is this 1999 all over again? Is it just like 2007? How about 1987? The fact is that investor actions are shaped by past experiences so 2015 is just like 2015. The only constant is that investor emotions shape market dynamics, especially over shorter time frames. These things are impossible to call with any precision. The best you can do is use the process of elimination to see where we aren’t.

We’re well past pessimism and skepticism (save for those that have been wrong the entire way up). Everyone realizes the improvement is underway.

  • There’s no blood in the streets.
  • There are no babies being thrown out with the bathwater.
  • It’s not time to get greedy.

Does that mean it’s time to sell all of your stocks because we’ve seen huge gains over the past five years? [Not necessarily.] It all depends on your time horizon and what kind of investor you are. For some historical perspective see this chart of 30-year real returns from Jesse Livermore at Philosophical Economics:

30 yr real rtns

Here’s Livermore’s observation** about investing right before the onset of the Great Depression: Surprisingly, a long-term investor that bought the market in November 1929, immediately after the first drop, did better than a long-term investor that bought the market in September 1980.

Patience can be a great equalizer of cycles in the financial markets. As Barry Ritholtz reminded his readers in the Washington Post recently – time, not timing, is key to investment success. The bull market will end at some point. Stocks will go down and we will eventually see a bear market. These things happen. When it happens is up to Mr. Market.

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

* (Copyright © A Wealth of Common Sense)**

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