Stop Watching Your Stocks!
Board: Macro Economics
It was kind of a strange day. I was sitting on the stump watching the maple tree burn, when suddenly a middle-aged woman came trudging up Hollister Byway – the dirt road that cuts across the ridge just below my cabin.
I say trudging, but really she was jogging – or at least making all sorts of jogging motions while she moved up the steep hill at about 1 mile per week. Lots of motion, but not much progress - sort of like the market. (Yes, there is an investing point down the road a bit; I will get to it.)
Always neighborly, I said, “Ma’am, you are the slowest thing we have seen in these parts since who flung the chunk. You want to set a while, have a lemonade?”
She gave me a warm smile – I have that effect on younger women; it is a gift. “Mind your own business, bub, and why in Pete’s sake are you burning your tree?”
“I’m not burning it, I’m just watching it burn. Sure you won’t have some lemonade? Or I could break out the marshmallows . . . . .”
“Is everybody up here as strange as you? Don’t you know that is a fire hazard?”
“Well, I do; that is why my son and daughter are standing over there with hoses.”
“I guess I will set a while. That hill is a lot steeper than it looks. And it’s not every day you see a big old tree turn into a ball of fire.”
So she sat down and we talked a while. She explained that she was training for a 10K race and maybe she should start with something a bit shorter, and I told her how my son had decided that maybe it would be a good idea to douse the hornets’ nest with lighter fluid and then burn it, and we had a rollicking good time, drinking lemonade and eating peanuts and watching the smoke roll out across the valley below.
And then she jogged off down the road, and in the hour or so it took her to disappear over the ridge, I got to thinking about the market. (This is kind of a difficult segue – I sort of dug myself a hole here . . . .)
Let me put it this way: I did not need minute-by-minute reports to know where Fern was, and the same is true of the market. We are excitable creatures, like gophers or magpies; we love to chatter and dart around at every little bit of fresh news, but really, the economy, the market – they move along more like an ocean liner than a jitterbug.
When CNBC shows a chart illustrating a massive change in a stock’s price – a steep mountain or a plunge off of a cliff – take a closer look. It is usually a 2% change, maybe from $40 to $40.80, with everything below $40 on the vertical axis cut off. Look at a graph showing the entire y axis and the mountain becomes a wrinkle, the cliff a dimple.
Now, this is not exactly breaking news, right? Wow, Daisy has a scoop – our $16 Trillion economy, our $16 Trillion market (is that a coincidence?) have a certain amount of inertia; they do not turn on a dime!
OK, of course you are right and I am wasting your time here . . . except that maybe you haven’t taken the logical next step. If this is true, why do we think about the market almost every day? Why do we check prices more than once every six months or so? Why don’t we at least wait for headlines announcing the rare tectonic shift in the economy or market before tuning in?
Could it be that there is a huge, basically useless industry built around exploitation of our magpie-like tendencies to be attracted to every glittering trinket, to miss the forest for the trees (get it? magpie/tree? . . . .Sorry.) The more we demand a constant flow of information, the more people can make money exploiting that desire. So, like cigarette companies and nicotine, they feed us alarming headlines, passionate diatribes on television, and we succumb; we buy newsletters, check stocks every day, trade just to be doing something . . . . we spin and dance and flail around, while the economy and the market just sail steadily along.
A long time ago, on a board far, far away, under a different name, I suggested that maybe I would start my own newsletter, called the Grump-O-Gram, which would provide subscribers with a steady flow of pessimistic information. I remain deeply pessimistic; I am sitting almost entirely in cash, waiting for S&P 900 or so before I invest. But I have a new, better idea for a newsletter – a steady, consistent, anti-churning publication, the only one of its kind. Here are the details:
I will send out an issue once a month. Unless we have reached S&P 900, it will simply say, “Do not buy anything. If you are still holding stocks, sell them.”
The monthly newsletter will analyze three stocks. Because I am deeply pessimistic, until we have reached S&P 900, I will have three possible ratings: “Do Not Buy;” “For Crying Out Loud, Do Not Buy;” and “Are You Some Kind of Maroon? I Really Mean It: Do Not Buy!” Until we reach S&P 900, every stock will consistently receive the third rating.
In addition, I will issue occasional Urgent Alerts saying, “Do not do anything.”
Our marketing will be antithetical to everything else that is out there:
“Stop Thinking About Stocks! Do Something With Your Kids! The Market Does Not Need Your Attention! Buy Our Newsletter, Which Will Provide Monthly Reminders of These Facts, as Well as Occasional Urgent Alerts Saying the Same Thing.”
Actually, I have a confession – even that minimalist newsletter would be way too much trouble for the average Drumlin Daisy. It is a fun idea, but I am just going to sit here on the stump and watch the stars come out, and hope maybe Fern comes by this way again . . . .
A Drumlin Daisy