Once again stock market investors have borne witness to a significant selloff, occurring soon after equities reached record highs!
So why, you may be asking yourself, is the owner of a title insurance company writing and opining about investing in any asset class other than real estate? Because, said owner needs to vent a little bit about the commentary that he sees and hears on the subject of stock prices and stock market gyrations!
Owners Expertise? He’s A Former Wall Street Analyst And Trader In Bonds And Stocks…
Throughout my career, pre-title insurance, I have worked in the role of bond analyst and bond trader for some of Wall Streets largest firms, some of which no longer exist.
I was also a proprietary equity trader for what at the time was the largest prop trading company in the United States. At this firm, I was also tasked with training traders on techniques for committing capital as well as the controlling of emotions. Critical was the lesson of buying on dips, never as a stock was running as nothing goes up in a straight line. Additionally, shorting rallies as nothing goes down in a straight line either.
Finally, one of the constants in all of these jobs were televisions trained on CNBC and later Fox Business News as well. I have business news on in my office now too.
Investors will hear phrases uttered by strategists, experts, commentators and shills that have a vested interest in stocks (or any other trading vehicle such as cryptocurrency) resuming their upward trajectory such as:
- If you liked XYZ Corporation at $230/share, you must love it now that it’s on sale at $175/share,
- This selloff provides an incredible buying opportunity in stocks that investors said they would buy, only after they pulled back from their highs,
- The market has seen its low (typically said by business news guests AFTER the market has bounced significantly),
- Stocks sold off because of algos (algorithms that instantaneously recognize small profit opportunities and execute trades) that were triggered and that often are programmed to execute trades across various asset classes. Not due to any fundamental reasons,
- The consumer remains optimistic and this will be a record-setting holiday retail selling season,
- The consumer is in great financial shape, despite the fact that there is a ‘Rising Rate Of Subprime Credit Card Delinquencies And Charge-offs…An Economic Canary In The Coal Mine?‘,
- The fall in crude oil is like a tax reduction that will help to spur consumer spending,
- Recession, despite any of the signals such as plunging crude oil and a 10-year yield declining into Fed rate hikes, is definitely not in the cards,
- Retail investors often sell at the exact wrong time (i.e. the bottom) and buy at the exact wrong time (when emotions have stocks running to new highs). This is an opportunity to join with the professionals and buy low,
- Trump will cut a deal with China at the G-20 this week and stocks will fly,
- The Fed, meeting this week, will moderate and raise rates less aggressively,’
- GDP growth, while potentially declining from the 4% range, will still be in the 2.5% range which is strong enough for stocks to move higher,
- Trillion dollar federal deficits will not impact the economy.
Let’s be clear that this may indeed be a dip that represents a ‘once-in-a-lifetime’ buying opportunity. Only time will tell and this morning major indices are higher by more than 1%.
That said, I listened recently as one of the commentators on Fox ‘guaranteed‘ that investors buying Apple when it dipped to $210 would not be wrong.
He reiterated the same at $204. Apple is now trading in the mid-$170s.
Of course, today may indeed be the buying entry-point opportunity in Apple (and other beaten-down companies), but investors need to do their own research and come to their own conclusions.
Also remember that strategists who come on business shows, in addition to those who own investment firms, typically have a vested interest in what they recommend.
Remember also that buying on dips has been a great strategy for some time, but that at some point it does not work. This bull market in stocks has been around for close to 10-years, historically old age.
For anyone who watched during the tech-wreck around the turn of the century, they know that buying dips does not always work (‘Historic Look At Following The Herd Or Worse, The ‘Experts’, When Investing!’)!
Focus on stocks with provable fundamentals going forward, as anyone who has invested in the iconic former Dow 30 stock General Electric knows only too well.
In the same way, try to avoid buying merely on emotion and momentum as those who jumped into the cryptocurrency craze, some borrowing on their credit cards to do so, have found out. Bitcoin topped out at around $20,000 and is now trading below $4,000.
These are my thoughts and we would love to hear yours.
Michael Haltman, CEO
Hallmark Abstract Service
Phone: (646) 741-6101