Keeping Investors Scared Witless

Investors, as usual, are bombarded with reasons to sell stocks. This means that they are Scared Witless (TM OldProf).  Let’s take a deeper look.

Short-Term Advice

There has been (yet another) sighting of the Hindenburg Omen. I pointed out the flaws of this approach in 2010. Those seeking a higher authority might check out Barry Ritholtz:

Hindenburg Omen?  Put a Fork in It.

Why do People Fear the Hindenburg Omen?

Despite the facts, CNBC keeps pitching this story with multiple interviews of Tom McClellan.  I tweeted a reasonable question, asking them to provide some review of his infamous and misleading “1929 chart.”  Will we get an answer?  It is time for some accountability from the featured guests.

Long-term Advice

There is no limit to the efforts of those on a bearish mission. Here is the chart getting wide circulation among those who want confirmation bias:

Meanwhile, the actual 20-year returns for ANY time period from 1930 to date are an annualized rate of 7.43% or higher. What is the difference?  The popular chart adjusts for inflation. Good idea. That is what investors should do.

Why not make this clear?  Owning stocks is one of the best methods for protecting against inflation, especially in times of strong economic growth.  Does the author have some better investment idea for the next ten years? A bond, perhaps?

A really serious study should examine inflation and interest rates at the starting and ending point of the period.

Bond Pundit Advice

Bill Gross is out with a new commentary. It uses his analysis of Fed policy (which has been consistently wrong) to suggest that investors should take money off of the table.

Wow!  I would be more impressed if I could remember a time when Gross recommended owning risk assets.  He did a great job of  beating other bond managers, but has stumbled in an era when bonds may have topped out. Check out the comparison:

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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