You can’t really blame investors for mouthing this market since the bottom of the financial crisis of 2008.
When the S&P 500 dropped almost 50% in the throes of the 2008 global recession, it looked like the end of capitalism as we know it.
And believe me, I’m not exaggerating.
In mid-September, when the safety of investment banks was put into question, panic broke out on Wall Street.
Just a short time before, Lehman Brothers declared bankruptcy, setting off a chain of events that still has repercussions today.
On September 16, 2008, the seemingly impossible happened: a money market “broke the buck.” The Reserve Primary Fund lowered its NAV to $0.97 per share due to losses on Lehman Brothers commercial paper.
It was the first time in investing history that a retail money market fund failed to maintain a $1 per share NAV.
And even though investors yanked assets from money market funds at an accelerated pace, they weren’t concerned about the return on their money.
Instead, these investors were worried about the return of their money.
Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry M. Paulson Jr. concluded the time had come to pull out all the stops.
They came up with a $700 billion rescue plan that needed the approval of House of Representatives.
Bernanke and Paulson called a quick meeting with the House speaker, Nancy Pelosi, and told her the startling truth. If the House didn’t approve this, Bernanke said, “we may not have an economy on Monday.”
It doesn’t get worse than that.
For the next several weeks, the stock market continued to plunge even lower, and the fear was palpable.
As expected, experts of all kinds — economic, markets, finance… you name it — came out of the woodwork and proclaimed the death of stocks.
But you had to be a fool to buy stocks in this environment, right? After all, these “experts” were almost all predicting another downturn in prices.
For the next several months, until early March 2009, it looked like they would be proven right. Stocks moved 30% lower from the time of the bailout talk.
And then the impossible seemed to happen: stock prices stopped falling.
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Over the next seven years, stocks prices have continued to move sharply higher, and the S&P 500 has surged more than 220% since hitting a low in March of 2009!
But during this period of a strengthening economy, higher corporate profits, and stronger balance sheets, did the experts (who called for a stocks to continue to move lower) change their minds or predictions?
Hardly.
In fact, they got stuck in what sociologists call a “commitment bias.” In a nutshell, this is a form of behavior where individuals or groups continue to rationalize their decisions when faced with a negative outcome — instead of changing their minds!
The chart below clearly shows you how the pundits bet against the S&P 500:
Click Chart to Enlarge
Of course, experts were calling for more gloom and doom each step of the way.
They screamed, “Crash dead ahead!” and predicted a new collapse each and every year… right up to the market’s all-time highs.
Most investors, when faced with overwhelming evidence that the market is not going their way, would rather change the facts than their minds.
But I can’t stress this next part enough:
Over 30 years of investing has taught me to ignore the naysayers and stick with the facts.
Listen, instead of trying to figure out what the economy (or even a company, for that matter) would do next, I’ve focused on one simple point.
It all boils down to this basic concept: Can I buy a dollar of value for 50 cents?
That’s it.
You see, after navigating Wall Street year after year, I learned that when you buy a basket of stocks that are trading for less than their value, good things always happen.
And this year is no different. In fact, 2016 has been an incredibly profitable year for members of my two newsletters: Hidden Values Alert and the Inevitable Wealth Portfolio.
They were able to close out several positions that made them serious money.
Now it’s time you experience the exact same success for your own financial security.
When it comes to investing, you need to stop listening to the “experts” in the media, or even well-intentioned family members… and start listening to sound, rational analysis that continues to make money.
I look forward to welcoming you as a subscriber to my advisory services.
As always, the next step is up to you.
All my best,
Charles Mizrahi
Twitter: @IWPeditor
Charles cut his chops on the trading floor of the New York Futures Exchange before moving on to become a wildly successful money manager on Wall Street.
And with more than 35 years of recommending stocks under his belt, Charles has knocked the cover off the ball, compiling an amazing record of success and posting gain after gain for his loyal readers. He is the editor of Park Avenue Investment Club and the Insider Alert newsletters.
Charles is also the author of the highly acclaimed book, Getting Started in Value Investing.
