Hurricane Michael slammed through Florida the last couple days, described by the Wall Street Journal as one of the most powerful storms ever to hit the U.S. Many died, many homes were destroyed. If I thought Chicago's winds and wind chill were tough, Hurricane Michael was clocked at winds of 155 mph. Wow. It's just another reminder that nature runs its course whether human beings want it to or not, and there are so many things in life that are out of our control, however much we think we're in control.
It's a grave lesson that carries over to the stock market, which has had its own form of a hurricane the last couple days, in the form of huge drops in the Dow and Nasdaq, Dow losing more than 1000 points in the span of those 2 days. Mutual funds were destroyed, profits meticulously built up over long periods of time (just like houses) were wiped out in a short span of hours. At one point today, the Dow went from down 300 points to 600 points in about a minute and a half, registering losses at the speed of about 200 points per minute, or about 3.5 points per second. That's really fast. I haven't lived through a hurricane, but I imagine it's similar to the empty feeling of having a portolio that seems ransacked by a storm, that it's comes through quickly, wrecks everything, and then just leaves. (Except the storm in the stock market might not be gone just yet). And even after this storm leaves, there will be a period of calm, but then there will be more storms that come later, at unexpected times, subject to the force of nature. There always will be. And just like forecasters can predict without a doubt that a hurricane will come but can't pinpoint the exact time, everyone knows a dip in the stock market will come, but when is the key. Do you just not build houses or live in coastal areas in the U.S.? Do you just not invest in the stock market at all even though it's a wise investment most of the time?
The stock market storms puts forth another critical lesson that I keep telling myself but not don't learn: don't be complacent. Just a week ago the Dow reached its all time high, a bunch of my stocks reached their all time highs, I had made a significant profit over the course of 2018, and I was feeling rather happy about myself, sitting pretty, feeling invincible, and dangerously thinking that the trend would continue. Unfortunately, the stock market doesn't always go up, and when it doesn't go up, it often plunges precipitously, leaving those who didn't take a profit or hedge their bets agape. It's easy to be a "passive investor" (letting your stocks sit there in a "let it ride" approach) when stocks are going good, but that style lends itself to complacency and a smug feeling that even if the market dips a bit, it'll just come back soon, so no need to panic. Pretty soon if you don't hedge your bet, you've lost all that profit and possibly then some. Just like those who don't worry about hurricanes in coastal regions even though they're headed straight for you, being complacent about stocks and always thinking stocks will be fine, it's all good until the storm wipes out everything and leaves you feeling empty inside.
Fantasize on,
Robert Yan
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