Hello my party people it’s (P.Diddy -I need a girl) part 2 before we get into things I want to tell you what I’m about to do or more importantly what habit I am breaking for YOU my followers!
During my first two years of investing there wouldn’t be a day when I wouldn’t check my stocks and shares ISA. I would get so excited when I saw my shares rise and get so apprehensive when I saw my shares drop.
When they would go down I would immediately start trying to read headlines about those particular companies and start to give myself a narrative to tell myself that I am still an “expert” in what I’m doing and that I was “right” all along for picking a certain stock.
It was only after I had read Ram Sethi, Andrew Craig and Benjamin Graham that my mind set regarding this investing hype began to change. I realised so much of what I did was pure guessing (or speculation as Graham says). As I implemented a new investment strategy based on my learnings from the authors above I noticed that because I have a plan based on whatever happens with the market, I stopped checking it less.
I taught myself to get super HYPE and excited when my shares were up and to shrug my shoulders and not give a fooooooook if it went down.
I know the markets have dropped fuck loads because of COVID-19 (Weird I would of preferred they called it COVID-20, just for 2020), I’m sure I read somewhere it has been the biggest sell off since the 1987 (the year I was born) “flash crash”
So I’m about to look at my SHOCKS and shares ISA, I won’t be doing my net worth because I only do that when I get paid.
DEEP BREATH 3, 2, 1, might be a bit longer because I gotta log in!
Minus -17.9% SHEESH! I’ve lost 4.7k!!!! Probably the biggest amount I’ve ever lost!
Ask me how I feel?
Surprisingly okay, in fact I feel relieved.
For the best part of 3 years all I’ve ever been reading is “RECESSION,RECESSION,RECESSION” every fucking month finally it has happened!
Of course losing 5 grand ain’t no joke! However I have shit to say that there most definitely makes me feel excited and WITHOUT DOUBT know there is a brighter day!
So I’m going to draw from two things that I read recently to articulate my points.
First let’s breakdown what COVID-19 is kinda doing to the market.
Charles Kindelberger details in his book “Manias, Panics and Crashes” the five phases of a bubble. I believe the reverse of a bubble is happening called an elbbub if you want, here is my version of the elbbub.
Phase One: Displacement. An event or innovation occurs that sharply changes expectations. This phase is typically grounded in reality, but the media and people would like to lace it with bad intentions
Phase Two: Expansion. This is the stage where the narrative takes hold and people begin to start selling assets, dramatically reducing prices of the assets.
Phase Three: Dysphoria. By this point, all bets are off. Everyone assumes that the world is fully fucked, that everyone is going to die and no one will have any money left or food to eat. Risk is forgone at all costs, everyone SELLS and DEPLETES all their stock accounts because every company in the world will go bankrupt and we are entering a zombie apocalypse.
Phase Four: Crisis/Hypsis. (we are not in this phase yet and this is the phase that I am waiting for)
The inevitable other side of any bust is a BOOM!!!!! This is the phase where the insiders begin buying, and panic selling quickly shifts to panic buying
Phase Five: Contagion. Just as prices undershoot to the downside of dysphoria, they often overshoot to the upside once the contagion of good news (eg, Coronavirus is now dead!) spreads and people think things will be bright, beautiful and rosy forever again!
Now tell me that phase 1,2 and 3 haven’t happened yet and that 4 and 5 won’t come true?
Here’s another graphic telling me why I have no reason to be scared.
I told y’all I’m in this for 10 years right? So apart from 1929, there has not been one bear market where the recovery has been over 10 years. YES YES YES “I know past performance is not a predictor for future performance” but bruv cammon it ain’t happened since 1929 for fuck sake!!!
EVEN more exciting and these are not my words “So investors could be waiting a while before being made whole from the prior peak. But there is a silver lining here if you look at these numbers a different way. The last column in this table shows the gains necessary to be made whole from these different loss levels:
Some people may choose to look at these numbers negatively because it shows you need to earn larger percentage gains than the initial losses just to make your money back. I look at this data as an opportunity.
If it takes a number of months or potentially years to make your money back, that gives investors time to take advantage of higher expected returns. For those who are net savers, this means plenty of time to deploy capital at lower prices than we were being offered in recent months. For those with diversified portfolios who won’t be making new contributions, this means opportunities to slowly rebalance into the pain.
Here’s something I can say with 100% certainty — every bear market in the history of U.S. stocks has led to new all-time highs at some point in the future.
Is it possible this time is different?
Sure, anything is possible.
I choose to believe things will be better in the future. People will still wake up in the morning looking to become better people and make something of themselves. Innovation is not going away nor is the human spirit.
Times are tough right now and stock market losses aren’t helping matters.
But we’ll get through this…eventually.”
Damn straight Ben Carlson we WILL get through this, and I’m going to take you guys with me all the way!
2020 baby let’s goooooooooooooooooooooooooooooooooooooooooooooooooooooo!