Well a week has gone by and the sky hasn't fallen and the sun continues to rise every morning, even though my Clemson Tigers loss convincingly to the LSU Tigers. LSU dominated Clemson in all phases of the game. How could Clemson have loss? They won 29 games in a row. They are not supposed to lose. Clemson has nothing but tremendous football players, a great coaching staff, etc. Everything was in place for them to keep winning. Well sometimes things don’t work the way we expect them to work out. It is exactly the same confidence and “irrational exuberance” that gets investors should wary of.
We are in the tenth year of a bull market in the US Stock market and the new year has already started off very well. The stock market keeps winning by going ever higher. Money keeps pouring into stocks pushing indexes to unprecedented levels. Investors in the markets have benefited from the ten year bull market. The 401ks are flush with gains. The confidence in the market is palpable with everyone thinking the are the next Warren Buffet because their 401ks are up 20% YoY. It is getting to a point where people look at the market and just can’t fathom it going down. I’ll be honest when I look at the market and the economy, I see great fundamentals in place. You have low interest rates, low inflation, favorable regulatory environment, etc…
So why would the market ever go down? Why would Clemson ever lose a game? You have five star players all over the field, a quarterback who hadn’t loss a game since high school, a tremendous coach, etc. The point I am trying to make is that even when everything looks good and you feel invincible is when the unexpected most likely happens. Unexpected events by definition occur when they aren't anticpated. In Clemson’s case it was a much better LSU team that dominated them for most of the game. While the analogy isn't perfect the point is sometimes you have to take off your rose colored glasses and be prepared for what eventually will happen.So when will the stock market lose it’s LSU game?
No one knows when the markets are going down. You’ll get the pundits on financial news channels predicting the top but they really have no clue. They just want to be the one who says that they picked the top. Not much accountability in the punditry business, lately. However the market will go down someday in the future and when it does, there will be people saying how can it go down. The economy has great fundamentals, i.e. low inflation, low interest rates, etc.. Sometimes you just lose games for no other reason then it’s time to lose a game.
My Clemson Tigers have been bloodied and defeated. However,the fundamentals of a great football program are in place for many more wins in the future. So remember when the market eventually falls remember that the fundamentals are and always have been in place to be successful if you are investing for the long term in the US economy. No truer words were spoken when Warren Buffet said, “ It’s never paid to bet against America…” The same can be said for Clemson…. Go Tigers!!!