Notes: Every week I send a letter to tens of thousands of investors covering the most important charts and themes in markets (Subscribe here). Click here for a video on this post.
Put these charts on your wall for reference the next time you think…
- It’s “oversold” or “at support” and can’t possibly go any lower…
- It’s “overbought” or “at resistance” and can’t possibly go any higher…
- It won’t be a problem because it hasn’t been a problem in decades…
- Mortgage rates can’t go any higher…
- Home Prices can’t go any higher…
- Valuations don’t matter…
- Stocks only go up…
- Gas prices can’t go any higher
- Consumer Sentiment can’t get any worse…
- Stocks and Bonds can’t go down together…
- It’s stable because someone named it as such…
- What goes up can’t come down…
- The “fundamentals” are a more important driver of returns than sentiment…
- My stock is too big/safe/important to crash…
- Reversion to the mean is dead…
- A stock that’s removed from an index must go down and a stock that’s added to an index must go up…
- Markets follow a normal distribution…
- The Fed won’t hike rates in a bear market…
- The price you pay for a high growth company doesn’t matter…
- The jobs are never coming back…
- Bonds are risk-free…
- Chasing performance during an IPO mania is a good idea…
- It can’t be a sign of the top because it’s too obvious…
- The answers to the future are found on the covers of magazines…
- Putting money under your mattress is an effective long-term strategy…
- Central banks know what they’re doing…
- Big rewards come without big risks…
They say a picture is worth a thousand words and in markets that is absolutely true. Having a few extreme charts on your wall can be a helpful reminder that there is no such thing as “can’t,” “won’t,” or “has to” in markets.
The market doesn’t have to do anything, least of all what you think it should do. The market does what it wants, when it wants to do it. It is the real-time personification of collective human psychology, with fear and greed on full display.
That’s what makes it so hard and at the same time so interesting. There are times when skepticism is warranted and other times when you need to suspend disbelief, with no manual to help you decipher which situation applies.
Find some charts that speak to you personally, and put them on your wall as a constant reminder that the range of possible outcomes is much wider than any of us think. We’ve already seen a lifetime supply of material in 2022 and we still have over five months to go.
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Related Posts:
Put These Charts on Your Wall … 2021 Edition
Put These Charts on Your Wall … 2020 Edition
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