Remember just a few weeks ago, when Macquarie tipped the ASX to hit 10,000 over the next 10 years, underpinned by a booming superannuation sector?
Sounds fanciful, right?
Especially after the ASX’s wobbles these past few weeks.
Especially when you’ve got people like Jim Rogers saying the worst crash in our lifetime is coming “later this year or next.”
Sounds scary, right?
Just like the Royal Bank of Scotland’s “sell everything” call in January 2016. Since then, the S&P/ASX 200 Index has jumped 15% higher, the Nasdaq soaring 35%.
Not so scary after all. Wealth destroying for those poor souls who took everything out of the market and parked it in a term deposit, earning a pittance.
My guess is such people will never make a fortune in the stock market.
No matter how smart you are, no matter how good you think you are at predicting market crashes, the truth is if you can’t control your emotions, if you can’t hang on in there when markets inevitably wobble, you’ll join the ranks of the “buy high, sell slow” brigade.
Sadly, you’ll be in good company.
Legendary investor Peter Lynch ran the Magellan fund for Fidelity Investments in the US for a 13-year period during which his annual average return was a remarkable 29%.
Yet, a study by Fidelity found the average investor in the fund during Lynch’s tenure actually lost money.
It’s almost unfathomable. Yet true. In short, instead of staying the course, people were scared out of stocks. They bought high and sold low.
Not to be outdone by Macquarie’s ASX 10,000 call, billionaire investor Ron Baron, founder of US-based Baron Capital, was quoted on Marketwatch as saying the Dow could potentially hit 40,000 by 2030.
Baron said that interest rates and oil prices will stay low for “a very long time” setting up the economy to grow “much faster” than it would have otherwise.
Right on cue, yesterday the ASX surged to its best daily performance in seven months, helped by Macquarie analysts saying…
“We believe the market will continue to trade above the long-term average valuation until we begin to see some clarity on domestic earnings risks for key heavyweight sectors such as banks, telcos and consumer [names].”
Overnight US stocks bounced back to record highs, as The New York Times reported that “investors put money into companies that stand to benefit from faster economic growth.”
So much for the so-called tech wreck. It looks to have lasted all of two days. Year to date, Google parent Alphabet Inc’s share price is up 23% and Apple‘s share price is up over 26% so far in 2017.
Some tech wreck…
In morning trade, the ASX has blown back through 5,800, the banks again leading the market higher.
Never mind that just yesterday top fund manager Hyperion cautioned there are simply too many risks in the banking sector, with too little growth to compensate for it.
In the short-term, animal spirits and the fear of missing out trumps everything. And in the twinkling of an eye, rather than fearing a full-blown stock market correction, investors are now buying the dip.
If you’re struggling to read these markets, you’re not alone. Writing on Marketwatch, Scott Nations says we are not smart enough to spot a coming stock-market crash.
In a nutshell, each crash comes from left-field. The so-called Black Swan event. If the catalyst for the next stock market crash is staring you in the face, it’s already priced into the market.
So where is the next stock market crash coming from?
Not high house prices. They are staring us in the face.
Not the high valuations of a few powerful, fast-growing US tech stocks, each one with huge competitive advantages. They are staring us in the face.
Not higher US interest rates. They are coming, tomorrow.
Not Trump, the potential for him to be impeached, or the threat of war in North Korea.
Not even Jim Rogers knows, saying market crashes “always start where we’re not looking.”
At least Rogers got that part of his call right.
As for the list of calls he’s got wrong in the past few years, as listed on A Wealth of Common Sense…
2011: 100% Chance of Crisis, Worse Than 2008: Jim Rogers
2012: Jim Rogers: It’s Going To Get Really “Bad After The Next Election”
2013: Jim Rogers Warns: “You Better Run for the Hills!”
2014: JIM ROGERS – Sell Everything & Run For Your Lives
2015: Jim Rogers: “We’re Overdue” for a Stock Market Crash
2016: $68 TRILLION “BIBLICAL CRASH” Dead Ahead? Jim Rogers Issues a DIRE WARNING
2017: THE BOTTOM LINE: Legendary investor Jim Rogers expects the worst crash in our lifetime
Why Rogers is still in the headlines for making such hyperbolic calls is beyond me.
The best you can do is totally ignore such garbage. Instead, stick to tried and tested investing principles…
— Buy quality stocks.
— Buy them regularly, likely every month, whatever the market, bull, bear or something in between.
— Invest for the long-term, staying the course during the inevitable periods of market volatility.
— Where possible, reinvest your dividends.
— Keep a solid cash balance, to give you firepower to buy when bargains abound, so you don’t have to sell shares in order to live, drive and travel, and so you can sleep well at night.
It really is that simple.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Of the companies mentioned above, Bruce Jackson has an interest in Alphabet and Apple.
- ASX 200 follows Wall Street higher | Have we passed the bottom? | Recovery will be brutal | ASX stock of the day hiding in plain sight – April 23, 2020 12:42pm
- Top fund manager is finding “an abundance of growth opportunities” outside the hot ASX tech stocks – September 19, 2018 3:24pm
- Here’s everything Apple did — and didn’t — announce today – September 13, 2018 10:06am