Just what is a white-collar brutha supposed to do?
Presently, only one of the major large-cap equity indices is in the green and barely at that : the benchmark S&P 500 is holding onto a 0.7% percent gain against January's opener, and this is at severe risk of going under. The Dow Jones is upside down at -1.2% year-to-date, while the NASDAQ is the obvious laggard at -1.5%.
Some might question the intense granularity of the above trends. Markets never move in a consistent pattern and as long-term investors, we should ignore the day to day irregularities and focus on the big picture. The problem with such entrenched and perhaps well-meaning advice is that it's wrong : every investor should have a measured and disciplined accountability towards their money. Take for example your children : they are a long-term investment from both a financial and familial perspective, yet does the length of the relationship determine your level of concern for them? Or let's say you bought a car with a five-year warranty. Does that embolden you to not take any care at all for the vehicle? The rational answer is no on both counts, so why should your finances be any different?
I approach the domestic markets from a day to day outlook. With trillions of dollars of wealth being leveraged in the most important stock exchange in the world, I see no good reason why you shouldn't know what your money is doing. There is no such thing as an insignificant moment in finance ; often, the calm before the storm provides signals of where the macro-trajectory will head. Ignoring such signals is akin to deliberately disregarding symptoms of a potentially serious health problem.
But when the markets are pulling back aggressively as we have seen over the past few days, there's a reason for that. Perhaps its speculation on geo-political events about to go awry, or an expected price shock in key commodities due to a weather-related supply shortage. Any number of events could trigger investor fear, and fear is the deadliest emotion in finance.
As psychological studies have shown, the threat of losing is far more poignant than the anticipation of winning. It is perhaps the single greatest reason why stocks tend to move with far greater velocity on the downside than they do on the upside. And when the professional money looks up at the score, they will soon realize that they have done nothing, absolutely nothing, over the past three months.
The danger, then, is that the big boys will cut their losses and move over to something that has positive momentum working in its favor. The effect of that leveraged pessimism could reverberate not only in our borders but across the entire globe. I think that it's no small sign that gold and silver, despite having a rough time of it, continues to inch forward.
Where else would you turn?