The Cynical Seven

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When the markets are going up day after day, week after week, and month after month, I get especially contemplative. I probably think way too much for my own good anyway, but it’s “worse” when the markets are doing nothing but making daily new highs.

I think it’s fairly common for folks to think about the fantasy of leaping back to their younger selves and giving them some kind of advice or counsel which would serve them well. I’m not talking about something silly and specific like “Buy Bitcoin in 2010 and never, ever sell it” but something more general. This may come off as super-cynical, but it isn’t really meant to be. These are honestly the must-have tips I would offer my younger self for persistent success in the post-1987 U.S. equity market:

  1. Debt Doesn’t Matter: It doesn’t matter if the nation owes $10 trillion dollars or $20 trillion dollars or Infinity Trillion dollars. No one cares. It’s just a big number. It doesn’t affect anything. At ALL.
  2. The Government Will ALWAYS Rescue the Market: Because they have to. They will “print” as many trillions as necessary to save their rich friends and the unwashed masses. They have no choice. And the actions they take won’t matter (see #1).
  3. Fundamentals Don’t Matter: So what if the P/E is 50? Or 100? Or 4,000? Or invalid, since there are no earnings? No one cares. A stock just needs a hot story, and the hotter it is, the more people will gobble it up. People are bidding up dreams, not cash flows.
  4. People LOVE to Gamble: It’s a remedy for life’s boredom. People love to gamble, whether it’s Las Vegas, online poker, or YOLO-ing stock options. It’s in their blood.
  5. Retirement Plans are the Market’s Fuel: All that 401-k money has to go somewhere, and the millions of workers with their millions of retirement account are going to keep stuffing the market full of fresh cash. That cash has to be invested someplace.
  6. Consumers Love to CONSUME: Just as gambling quells boredom, so does buying stuff. It doesn’t matter that people have closets packed with clothes and shoes they never use. They’re going to buy more. There is no American that will utter the words, “I am satisfied with what I have already.”
  7. There is No Force Greater than Compounding Returns: ‘Nuff said!