“If you are depressed you are living in the past.
If you are anxious you are living in the future.
If you are at peace you are living in the present.”
-Lao Tzu
If you are invested in the stock market in any capacity, you have undoubtedly gone through this gauntlet of emotions over the past two weeks.
Well, the first two at least…
I know that after the DOW dropped over 2% on August 20th, I started becoming reflexively anxious. While I was prepared and knew better than to panic, my twitching eyeball, incessant finger tapping, and needless shoulder shrugging betrayed my usually cool demeanor.
In a manic effort to figure out what the hell was going on, I kept refreshing web browsers like I was in the Cocaine Monkey Trials.
I was living in the future, terrified about what could happen come Friday. Of course, my frozen terror did me no good. The next day, the hammer came down and the DOW dropped another 530 points, and I went into full-fledged depression.
My precious portfolio! Why didn’t I sell!?!
The total two-day stock market crash ran up a terrifying total of 888 points — larger than any one-day stock market crash in U.S. history. After rending my clothes all weekend, this headline greeted me that Monday morning.
“Dow Down 1000!”
It was at that moment when I slapped myself, threw a glass of cold water in my face, and stomped on my own foot like Curly on the Three Stooges.
That is to say, I started living in the present…
Yes, the DOW dropped another 1,000 points in just minutes of trading…
Yes, investors completely freaked out and tried to claw at any gains they once had…
Yes, this happened before any Fed rate hikes…
But that doesn’t account for the psychological effects on the average stock trader. They say there are no atheists in foxholes, and I’d say there are precious few zen masters in stock trading. The ‘living in the present’ thing usually causes trouble for even the most ‘zen’ of all of us.
And — I have to admit — I kind of baited you with that pillow-soft, new-age quote I opened with…
“If you are depressed you are living in the past.
If you are anxious you are living in the future.
If you are at peace you are living in the present.”
If you gleaned something from it, I’m not trying to be haughty: you can certainly harvest some serious pearls of wisdom from these seemingly ocean deep, yet river shallow sayings. They belie the tangible, gut-wrenching decisions we have to make when dealing with the cold, hard ramifications of actually losing hard earned money. Such aphorisms make things far more simplistic and hazy than the sentiment they are trying to absorb:
“Buy low, sell high”
“Price is what you pay; value is what you get.”
“The four most dangerous words in investing are: ‘this time it’s different.’”
Of course you’ve seen these tropes trotted out haphazardly by every billionaire investor with a few seconds of air time. But the fact is, these quotes are the bastard children of the two most hollow phrases ever:
“It is what it is” and “Everything happens for a reason”
If you would please pardon my French: “No shit, Sherlock…
In actuality,
1) As Bill Clinton famously implied: “That depends on what your definition of ‘is’ is”.
and
2) Of course everything happens for a reason (or reasons) — but identifying that reason is pretty much the crux of its importance.
I hope I haven’t gone too far down the linguistic wormhole here in an investment column. If I have, please let me burrow my way back out with some concrete, real-world lessons.
Your present does not exist without the failures of the past or the potential of the future.
You see, my Crow’s Nest readers have been prepared for this moment for the last year. I’ve known that the day would come when we’d be staring down the barrel of a sizable market correction. But when it actually comes to pass, it’s not as easy to turn off the screaming voices in the recesses of your brain and stick to the plan.
But we do know what happens afterwards….
That’s why it helps to boil down emotions and reactions to simple patterns. Just check out this famous chart:
We’re approaching the maximum pessimism territory…but we’re not there yet. And that period never lasts as long as you’d hope, so you best start getting prepared now…
That’s why I have been identifying stocks that have shown time and time again — after each and every crisis and correction since Black Monday — that they can rebound stronger than ever, and provide massive, yet completely safe, gains for anyone with the testicular fortitude to buy a stock at the point of maximum pessimism.
So plot out a couple of stocks that you’ve been dying to own, and simply wait until they’ve been beaten up. It really is that simple.
Not to belabor my point but, “Actions speak louder than words.” So we could sit here and talk in abstractions, or we could get down to business and start staking our claims.
It’s your choice.
