Stock Market and Investing
The opening lyrics to the Stevie Wonder song “Superstition” from 1973 are:
Very superstitious, writing’s on the wall
Very superstitious, ladders bout’ to fall
Thirteen-month-old baby, broke the lookin’ glass
Seven years of bad luck, the good things in your past
When you believe in things that you don’t understand
Then you suffer
Superstition ain’t the way
I think Stevie is telling us not to be superstitious, but I suspect we all have our own superstitions. During a recent Steelers game, on a critical play, the stadium was full of fans waving their “terrible towels.” The opposing kicker then missed a last-minute field goal, giving the Steelers a victory. Probably no connection between the missed field goal and waving the towels, right? Sports is full of superstitions, but the real world has plenty too.
Let’s start with not walking under a ladder; superstition or common sense? Opening an umbrella indoors; only way to get them fully dry or bad luck? Breaking a mirror, spilling salt, stepping on a crack, etc., etc., etc. Well, I’m about to admit that I may have developed a superstition or two about this stock market and I want to share them with you. First, the less I write or talk about this stock market, the better it gets! Seriously, I used to write a quarterly commentary. In the past few years, it focused a lot on how long this bull market has lasted and when it might correct. Occasionally, as if the stock market took my advice, it would pause, almost correct, then edge higher (remember last November/December). This year, until now (cross your fingers or knock on wood), I’ve quit writing about the stock market at all and stocks are having an awesome year! New highs and double-digit gains are everywhere.
In analyzing my first superstition above, I discovered a second superstition I’ve been harboring (unconsciously?) for over a decade: the superstition of the Hawaiian Tiki god of money. Let me explain. Just after the 2008-2009 stock market crash, my oldest daughter (Tara) got married and went on her honeymoon to Hawaii. Upon her return, dad’s consolation prize for paying for the wedding during a period of great financial distress was a tiny, three-inch Tiki god of money (or so the box said). To appease Tara, I promptly put the little statue on top of my checkbook on my desk and told him to go to work improving my financial health. Wouldn’t you know it, just as suddenly, things started to get better. The stock market got better, business got better and all our finances (yours and mine) started improving. So, my little Tiki friend kept his coveted spot on top of the checkbook for many years.
Then, a few years ago, while getting ready to pay some bills, I dropped the Tiki god of money on a tile floor and his head and part of an arm broke off. Turns out he was made of some dark brown plastic composite instead of real wood. Was it time to throw away my little (successful) friend and move on? No. I spent a Saturday afternoon finding all the different pieces I could, glued his head back together and used a toothpick as a brace for his arm. Then, I stained the toothpick to match the color of the Tiki. Was I being superstitious or fixing a cherished but cheap gift to me from my daughter’s honeymoon? You be the judge, but the markets are still going strong ten years later (you’re welcome).
Listen, I’m 57 and have benefited from an excellent formal education in finance with 30-plus years of investment experience. I can give you three or more academic and economic reasons why the current stock market can and will go higher. I could also just as convincingly draft three or more reasons why the economy is on the verge of collapse and the next recession is imminent. The fact is we have enjoyed and continue to enjoy the longest bull market in stocks in recorded history. The economy and the stock market also do not show any signs of slowing in the near term (excluding my writing about it in this update; no, I mean editorial). However, until we get, if we get, the next recession and official 20% drop in the stock market, for your benefit and mine, the Hawaiian Tiki god of money will sit safely atop my checkbook on my desk in my office. Once again, you’re welcome, and many thanks to Tara for this mutual gift to all our finances from the island.
Staying diversified with tongue firmly in cheek,
Co-CIO Mike Kauffelt, CFA
Bill Few Associates, Inc.