The Market Is Crashing And I Don't Care

rogernusbaum

The stock market is crashing. On one hand it is a very fast panic because we're down almost 20% (based on Monday's open) in less than a month but it's also kind of a slow crash because unlike 1987 it has taken over a month. People are scared because there are details that are different but the market manifestations are not different.

We are seeing comments like "today is the biggest drop in equities since..." or crude hasn't fallen this much since..." which tells us this has happened before. The equity comparisons go to the financial crisis and the oil comparisons go to Kuwait in 90/91, I was around back then.

Back to the Coronavirus, we've had health scares for markets before. It seems like most people remember SARS and ebola but I don't think too many people remember Zika or H1N1. This is clearly uncomfortable and I am not minimizing the human toll of people getting sick, people dying or the consequences if we can't avoid a recession. But from a long term markets perspective, these are all things that have happened before.

The reason the title of this post is that I don't care, well of course I care but what I mean is that these type of market events (crashes and other large declines) come along every so often. The bull market started in 2009. The next bear could have started in 2018, or 2022 but it might be staring in 2020 instead. Ok, we knew it would come at some point, maybe this is that point? When this ends, the market will recover and go back up. And then a some point in the future there will be another one of these. Are you 40 years old? How about 50, 60, 80? Based on normal life expectancies you are likely to see more of these. I am 53 and someone my age who makes it to a normal life expectancy will see several more of these, it goes with the territory.

In that light, if you know these events will happen does it matter whether it happens this year, or last year or next year? Other than managing sequence of return risk for people who are about to retire or just did retire, I would say it would rarely matter.

When you can truly accept that this is how it works then it becomes easier to focus on investment process and inputs--the things you can control. We have no control over what the market does, where the bottom is or how long this takes. My inputs have been discussed many times here before having held GLD, TAIL and BTAL for quite a while to help manage volatility. Recently I added SH when the S&P 500 closed below its 200 DMA for a second day. These products are doing what I'd generally hope they'd do but of course client portfolios are still down. When the dust settles, the inputs will either have been very effective or not effective enough but even if not as effective as I'd have hoped, they'll have helped.

This is what discipline looks like. Whatever your process is, you need to stick to it. Changing on the fly in the face of a panic is about the worst thing an investor can do. Staying disciplined becomes easier to do when you can truly accept that these events happen every now and then.

The above is how I manage my job but there are other inputs to consider which is personal well being. It is crucial to not neglect ourselves or our health. This means exercising, getting a little sunlight, proper diet, still doing fun things, sleeping, laughing, great relationships at home and probably some others.

I hope to get to the gym today to lift weights but if that doesn't work out then at a minimum I can do some jump roping (I have a little routine I do once or twice a week, this is a form of high intensity interval training and very important), this weekend I went to the Mint 400 offroad race and had a blast and got plenty of sun, I am on a low carb diet and am good at avoiding stress eating junk food, I slept well last night and I already laughed today at a funny, non-market related Tweet from @super70ssports.

My personal plan to is to make sure I maintain all of these habits for the duration of this event and further out. I've constructed my life and financial plan to minimize the chance that I have have an emotional reaction to these events, maybe more correctly that I don't succumb to any emotions that might go with the territory of navigating through crashes.

If you find time to exercise, it will relieve any angst you might be feeling. That angst might come back later but exercising helps. Eating junk food will make it worse. There are countless studies linking overconsumption of sugar to higher incidences of depression. Vitamin D is crucial for overall health, 15 minutes of sun can help. Having fun is a great distraction. Laughing is a great distraction. The list above is of things that are regular fixtures in my life and of course I realize now I forgot to include our dogs in that list. As I write this post, I am covered in dogs and dogs do wonders for stress and the like.

This will end, the market will go up again and then the next one will start at a level much higher than 3380 on the S&P 500. If you doubt that, if you think American capitalism is forever broken then you should get out but if the decimation of our home values in 2008 didn't end American Capitalism then a non-extinction level virus won't either.

Comments (1)
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Art Izagud
Art Izagud

American Capitalism is socialism for the rich and the "let them eat cake" attitude when it comes to younger generations. My folks have the same attitude, watching wealth evaporate in hopes that another bailout will make things right. They had to cancel their European vacation because of this crisis, even though one of their own has recently died of destitution, and others of their offspring are living in cars. The strategies outlined by Mish here for self-development disproves the argument that idle hands are the devils playground, as in this environment of cultural war with communists, Human Development is paramount. Bailouts destroy the society, as they, like the Boomers, are stuck with a 20th century mentality. 21 st century mentality is transparent and non-hippocritical, preferring liquidity on the local level, creating decentralized economies, rather than further chains of debt levied by boomer bailouts.