How to Make Perfect Short-Term Predictions

Sean and his colleague, Ben, discuss making short-term predictions - which people have no logical way to make. Even certified financial professionals can't predict whether the stock market is going to be up, down, or flat six months from now. 

Transcript

Sean 0:03

Well, I am Sean Kernan, CFP.

Ben 0:07

Ben Earl, CFP.

Sean 0:09

We're financial advisors with 360 Wealth Management. And we're going to talk today a little bit about one of the things we do with clients and with each other in the practice to make sure that we're planning properly for clients and not influenced unduly by the news. So one of the biggest things that we end up doing for people is helping them ignore or reduce the impact of news and specifically short-term market predictions. Ben, would you say that's a common thing that comes up in our conversations with people?

Ben 0:44

A lot of our clients are very focused on investments and they're looking at news, political and financial news. And so they're worried about what they're seeing for sure.

Sean 0:53

Right. And Ben and I talk about this offline all the time, uh, in terms of, you know, we certainly keep apprised of what's happening. Um do a lot of research and homework to make sure we understand the investments we're using for clients, of course. Um, but about almost six years ago now, I started uh taking screenshots on my phone on a regular basis. If I came across a market or economic or societal prediction that sounded interesting to me, and I had paid attention to the inaccuracy of predictions um before that. Uh the 2016 election in particular was a big one that everyone was surprised because uh, you know, Hillary Clinton was supposed to win and Donald Trump did.

Ben 1:39

And you mean the most important election ever?

Sean 1:42

Most important election of the universe ever, which is every election, of course. Um, and of course, then the market was supposed to crash because Trump won, and then it crashed, right? Is that what happened? I forget.

Ben 1:54

Uh the Trump effect is what I remember.

Sean 1:57

Then it went up then the next year, 2017, was the calmest year on record, and the market was up 30%. But point is that there were lots of people that were surprised. Uh Nate Silver of 538 was was a big deal in 2008 for predicting Obama winning, and he was completely wrong in 2016 and you know, and decided it wasn't him, it was the models, or it was this, or was that. So there's a theme of um predictions gone awry. And so I started just saving them here and there in 2000, late 2007.

Ben 2:28

That's an understatement, though. You make a game out of it. It's you're you have gamified this where it's it's uh sport.

Sean 2:35

It's it's fun to me because it's so consistent. And you know, I'll say this now, and hopefully we'll remember to say this at the end. We are we are laughing at the game, not at the players, right? So nothing wrong with people making predictions. Well, I are there is, but we're not attacking the people, we're attacking their silliness of the predictions they make, right? And the lack of accuracy mostly. And it's not saying that we can do any better, because uh Ben, what do you think the market will do in the next six months?

Ben 3:06

I have no opinion on that.

Sean 3:07

No opinion, none. We have no idea. I can guarantee it'll be up or what do you think? Up or what else?

Ben 3:14

Maybe it could be flat, could be flat.

Sean 3:17

That's a good one, man. Guarantee it'll be one of three things. My bad. Up, down, or flat. Although I'm gonna bet against flat, because if you carry that out to a decimal point or two, I don't think that's likely. So that's a hot take that you're saying could be flat. We'll keep that in mind. Uh so yes, I kind of uh have enjoy the let's let's let's let's take a look at that later. Let's check the take, as we used to say back in the in the day. So the the prediction that caught my attention that I first saved, I was looking back at the at the folder I created on my phone for these screenshots, was um it was because the the little bit of real estate on the phone, uh there was a prediction that Tesla, the car company, if you've ever heard of them, they were gonna go out of business. And then there was another prediction, a few couple down that said it was gonna be a$60 billion annual revenue company within a few years. Um, by the middle of next decade, which I guess, or early next decade, it didn't specifically specify the year, but you know, this is 2017. So we're talking about now, roughly. So I thought that's interesting. One of those is probably gonna be spectacularly wrong, right? Because if they go out of business, they won't be 60 billion in revenue. And if they are 60 billion in revenue, they won't go out of business. I guess they could go to one and then, but anyways, not likely it happened at the same time. So I checked the numbers just a bit ago, and um, by the way, well, I'll come back to that. So so Tesla's revenue in 2022 was about 80 billion dollars. So that prediction was was pretty good, or maybe even slightly conservative. Uh, since if you had bought the stock then, which we're not proponents of individual stocks very often, um, or ever really, but and we did not buy the stock, we have no opinion on the stock. But just historically, if you had bought the stock when this article or prediction was, I took a picture of it, you'd made about 11 times your money. So if you had you know if you had$90,000, you put the work in Tesla, you'd be sitting on about a million dollars right now. And that's down from a peak.

Ben 5:23

Uh so well, and for every you know, one of those, there's nine other strikeouts.

Sean 5:28

So it's a it's a bad idea to try that. It just this is more okay. That one was right, but the other prediction was made by a guy named Bob Lutz or Lutz, and he was a uh he's a highly respected uh car executive, worked at a very high levels. I think he was the chairman of of GM and also high levels of Ford. And uh, what's the other one?

Ben 5:52

Dodge, Damer Chrysler or three of them.

Sean 5:55

They're just Chrysler, yeah. Maybe it was Chrysler. Anyways, he was a big deal in the car business, and I don't mean to impugn his reputation. He's in his 90s now, but he was his mid 80s when he made this prediction. But so far, I think he was a bit off on the future of Tesla, it's safe to say. So the point is, this very smart, educated, and well-respected guy made this prediction, it didn't do anybody any good. So if you would try to bet against that and take advantage of his prediction, you would be bankrupt, uh, essentially. So, you know, you're lucky in that case where those were so contrary that one of them almost had to be right eventually. Um, so that's what caught my attention back in 2017. And as Ben and I have worked together for the last uh five, five and a half years, um, you know, we enjoy sort of reinforcing this for ourselves largely, because I mean, I don't know about you, Ben, but I'm still prone to listening to smart people making good arguments, right?

Ben 6:48

It's yeah, off off the the camera, we were talking about this with a guy that we highly respect. It's just the strategy is not panned out the way he thought it would.

Sean 6:58

So right. So this does not mean people aren't smart, their arguments aren't well intentioned. It's more about the usefulness and the accuracy of these predictions, especially in the shorter term window, and sometimes the longer term as well, because the future is it's unpredictable. That's why it's the future. So that's a little bit of backdrop um for um how we got here. We're gonna talk about. I went back to my my files and we're gonna talk about three of these in particular that that I that I have looked at closely just to get a sense of if I could share my screen, I will do that because I might be able to give you give us a people that are um watching a there we go. So we're gonna start with this one. This one is from uh March 8th of 2023, right? So more one of the more recent ones, and as you can see, stock market will crash in 60 days. A best-selling author on Lehman Collapse Warrants, right? So um Bear Traps Report founder Larry McDonald predicts earnings will be the trigger. So that gives you the gist of it. So I'll pause the sharing there, um, because that gives you the the uh headline that that tells you most of the story. So what jumps out at you about that headline that is it is it uh it's not very it's pretty direct and specific, right?

Ben 8:27

For me, what jumps out is the best-selling author, giving him credibility, but I don't know where you're going with that.

Sean 8:33

No, that's true. I mean, I I I just mean, first of all, this isn't one that can be interpreted like no, I didn't say that, or at least the headline of the article saying in the article, he does say high probability, right?

Ben 8:45

But yeah, you're saying will crash, it's not like maybe or could, can, possible, will.

Sean 8:52

Okay, and in 60 days, it's pretty funny because not too much, 60 days. I always liked it. Oh, it's oh, it's the specific amount of eggs. I'm very so that's almost a uh a sh a tell for a ridiculous attempt at a prediction. Is oh no no 1221 12. That's when it's all gonna end, right?

Ben 9:13

Right. So the more specific you are, it's it gives even more credibility to you. I I know exactly what I'm talking about. That was funny.

Sean 9:21

Yeah, nobody likes, I mean, most people don't like it, depends, and it could do this. You know, we don't like hedges, we don't like ranges, just our brains aren't wired that way. But you know, making specific it's it's a lot easier to make fun of the the actual results or evaluate them when they're that specific. So um, you know, again, we always caveat what things could change, and things could still crash any day, could be crashing as we're recording this. But in March of uh March 8th of 2023, the Dow was around 32,255 is what I have as the close that day. Um it's 35 something now, so it's up about 9% since then. And we're recording this about five months later, so about 147 days, something like that. So, and news, you know, shot spoiler alert. What happened uh by May 60 days? Let's call it May 8th. What happened by May 8th? Did the market crash and recover?

Ben 10:17

Had not crashed.

Sean 10:18

Not I think it kind of raged higher, if I'm not mistaken.

Ben 10:22

Well, certainly in the 60 days after that, it went higher because the market performance lately has been pretty phenomenal until this latest little dip.

Sean 10:31

So yeah, in fact, I think the the the regional banking uh there were some issues there in mid-March that were right after this, maybe. Uh, I didn't check the timeline, but you know, the market did dip a little bit based on some of that, and then has taken off in most of the of the 147 days since. So um, so that's it's just funny to look at that. And and when you see that, it's hard not to see it on the TV or on print and go, oh my gosh, what should I do? And the answer is usually nothing, or at least nothing that relates to the the headline, right? So uh what else? So the yeah, the best-selling author, you touched on that.

Ben 11:08

Um yeah, to give him more credibility. So I'm gonna be very specific about the prediction, and then best-selling author. It's like, oh, I that's somebody I need to listen to. He's he wrote a bestseller.

Sean 11:19

Oh, books. So, so uh should we go to uh JK JK Rowling? She's very popular, but best selling, way more guy than this guy. Maybe she should we should get her opinion on the market. Um, did so is this book that he wrote, was it about a market crash that he correctly predicted? No, I did a little research. Um, he wrote a book about Lehman Brothers where he worked um that was at the center of the 2008 financial crisis. And so, you know, he worked there, and you'd probably think he'd quit if he knew something was going wrong, right? So, no. Uh in the in the summary of the book, this book shows beyond a doubt that the longtime CEO of Lehman and his top executives were totally out to lunch, allowing Lehman's risk profile to reach gargantuan proportions. While the traders, like Larry McDonald, our friend here from the prediction, the author, clearly predicted more than two years in advance that the market for would evaporate. The high-flying Lehman bosses pushed hard on the gas pedal until the very end. So, what he's saying is there were all these warnings he was telling his bosses, his fellow traders. And what did he do about it? Did he quit? Did he go on TV and pound the table? No, he stayed and kept cashing his paycheck until Lehman was gone. So you have to forgive me if I'm a little skeptical about, you know, not to pick on this Larry, but um it just it's follow the money is a good way to sort of check people's motivations, right? So um again, he may have predicted it, but but his actions didn't appear to change. Now, good for him that he wrote a story about it that was he was on the inside, and that's probably an interesting story.

Ben 13:01

Glad it was best selling, but um I haven't read it, but it would be interesting for him if he had proof. Show me the emails that you were pounding the table here, drawing the line in the sand.

Sean 13:12

But yeah, we all have friends, family members, co-workers that uh that you know will tell you what they predicted, and then you think, man, they should be phenomenally wealthy. And it doesn't appear that they are, or that you know they've done anything with their predictions that they supposedly knew ahead of time. So um, again, this is I'm not going after this guy in particular. I just happened to come across this headline in March and took a picture of it. So um, so that is the first article. Another thing that jumps out, Ben, what is this guy's newsletter called? Is it fair and balanced? Is it uh neutral market analysis? What is his newsletter called that he writes?

Ben 13:49

Uh, just right there on the screen, the bear traps report, which makes me think of golf. I'm blaming on the bear trap, which which uh, well, of course, everything makes me think of golf, but particular course that like maybe 9, 10, 11, or 10, 11, 12 is the the bear trap.

Sean 14:08

Yeah. And for those that aren't familiar, what is a bear? Bear market, bear market.

Ben 14:14

Bear market is a down market. So he has a vested interest in uh, I guess, promoting you promote bear markets. And actually, we probably would have clients that you know come across that would say, Oh my god, it's gonna crash in 60 days. What should we do?

unknown 14:33

Yep.

Sean 14:34

And so give me out, it's gonna crash. Larry said so. Yeah, the um one of the interesting, one of the kind of uh the patterns you see in these kind of predictions or articles is then there's some real smart sounding uh data that back things up, right? Like he's not just saying it. I mean, he he said the latest economic data have to come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than anticipated. So, in other words, the economy is too good, so the market has to crash. Now, there's a little nugget in there that I think is is interesting and particularly useful, which is the market, you know. If you don't follow this stuff, you think, well, if the market's if the economy's good, that means the market's gonna go up, right? So when it recur comes with interest rates, Ben, what's the what's the sort of nugget of truth in there that we could pick out? Yes.

Ben 15:23

So I guess if Powell in particular is saying he's going to Jerome Powell's the Fed chair. If he keeps raising interest rates, or the I guess the board, it's not just Jerome Powell, but he's their spokesman. They keep raising interest rates, then the market anticipates what that means because the market is looking down the road of okay, what are economic conditions going to look like in six months or nine months or a year? And so if they keep raising rates, yeah, this might be a self-fulfilling prophecy, basically. So, yes, it keeps going, it will kind of crush the economy.

Sean 16:02

Quote, yeah, there's there's there's that nugget of, you know, the market's looking forward. So if the economy is good now, the market doesn't care. I mean, it cares, but it's not as important as what's going to happen. And if there's the assumption, and this is the argument that Mr. McDonald is making, is if rates go up, your your truck payment goes up, your mortgage, your, you know, when you have to borrow and pay more, there's you know less money to spend on other stuff, right? So in theory, lower interest rates are always better, but but that's not entirely the case. But when interest rates have gone up a lot, as they did in 2022, and this was written only a few months later, at the end of you know, in early 2023, that's not a crazy thing to suggest that the economy could be affected, I guess. So, you know, that part sounds smart, right? Which is uh a hallmark of these kind of predictions.

SPEAKER_02 16:51

Um okay, I think that's a good headline.

Sean 16:56

Another thing I like to do, a little tactic tip, trick, is if I come across a prediction by someone like Mr. Larry McDonald that I've never heard of, or even if I have heard of them, um I don't just assume that they're always this bad at predicting things. I go back and check the record. And what's so phenomenal about the internets, uh, this article from March included is it's all there, all the history is there. They don't delete. If I was making predictions like this, I think I would go back and take down the pages that were this wrong. But the internet doesn't do that. It's phenomenal. It's so wonderful. So I found another article that I'll switch to here if I can figure out how to do this correctly. Um, so this one is from uh July of 2020. Ben, can am I sharing the screen okay?

Ben 17:43

Yep.

Sean 17:44

Okay, so here's July 4th of 2020. So a little bit after the bottom of the COVID uh market, certainly still in the middle of COVID itself, but the stock market went down quickly again in anticipation of what was going to happen economically and then recovered once it appeared we weren't going in, we might not go into a depression, which so far we have not. Um so this was four months after the bottom of the stock market. Um, despite stock market disaster predictions, is what we're going to focus on. This website was Bitcoin.com or Bitcoin News. So they tend to focus on Bitcoin, right? So we're not as focused on that. We're I'm looking at more. What did Mr. Larry McDonald say here? He's the bear traps report author. They might see some disastrous and unimaginable impacts in the near future. I didn't go back and look, but I know the SP was way lower than it is today because, um, or at least lower, because things have been really good, even after a bad 2022. The rest of 2020 and 2021 were extremely good uh on a relative basis, especially compared to disastrous and unimaginable. Unimaginable.

Ben 18:53

To his credit, he did say might, so might, might.

Sean 18:56

He might not, but the words, the writing in this is great. Pending doom. Um, there's some great, great verbiage here. They're talking about the cobra effect, which is a great sort of behavioral thing. It's a great story, cool story, bro. But uh a time in India where there were too many venomous cobras, so the the government paid people to bring in cobras. Are you familiar with this story, Ben?

Ben 19:23

Oh, whenever I read it, I was like, oh wow, that's crazy. It almost reminded me of I think Florida is paying folks to uh get alligators out. So maybe they're breeding alligators in Florida.

Sean 19:34

Yeah, so if you don't think about the potential unintended consequences, if you get paid to have venom and stakes, people decide, hey, I can make more money by by creating more of them and handing them in. Not exactly what they were going for, right? So um cool story, but hasn't really this prediction has not worked out any better than the other one. So I looked this up again, not to pick on Larry here, but um more just to say, is he really phenomenal? Has every other prediction been perfect? And just happened to miss this one, so maybe he's due to go on another winning streak. No, this one was also quite wrong. Um, and in a note, in a nod to that that wonderful 1980 sitcom New Heart, um, the hit the other Larry, you know, there's Larry. This is my brother. No, that was Daryl and Daryl, and my other brother Daryl. This is Larry and the other Larry. So Larry, he's a trading expert. He predicted an exact date. It will top in July 28th, 2020. So we didn't pull the charts, but that's spectacularly. Wait, wait, it's that one is that prediction is disastrous and unimaginably wrong as well. So Larry and Larry or we're 0 for two on Larry here.

Ben 20:44

Well, you would think his report was doomed after that you know, spectacularly wrong uh prediction, but I nobody ever goes back to scoreboard it.

Sean 20:53

Nope, he's legendary though. Wait for it, legendary. Um, so that's another interesting thing. You could probably start, and there might be some websites I haven't dug around for them that that evaluate predictions, and because that would be fun just to see it's uh it's it'd be entertaining to see the results because when you give this this specific of information, um, it's easy to evaluate. You know, again, not saying we can do it any better, we will not make these kinds of predictions because they're a bad idea. A bad idea. So that's that. Um and there's some Bitcoin talk which we don't care about. So that's the first two that we came across. Um, so Ben, are we saying we can predict the short term better than these people?

Ben 21:42

No, we just don't attempt to play the game. And again, we're not hating the players. Um we're hating the game they're playing, we just play a different game.

Sean 21:52

Right. When we talk about how we invest, um I think a lot of times what people are trying to do is pick the next. I like

Ben 22:00

basketball so if you're not familiar with these names so I apologize but it's like trying to pick the next LeBron James or Michael Jordan when they're in third grade or fifth grade or seventh grade or even high school and and then versus just saying you know I'm gonna invest in the NBA the the the the best league in the world because they seem to be doing well and I'm gonna make sure I get a piece of their growth and yeah if you can find LeBron when he's three or seven or twelve and somehow buy that stock you're gonna do you're gonna be able to retire on that by itself but the odds of doing that are essentially zero uh from for almost any situation so getting exposure to the the economic engine of uh in this case of the NBA is is really all you need and so that's where we try to take what we would call the the it's the simple way it's not always easy but it's it's much more uh reliable or at least has been historically again performance is no guarantee of future results yeah the problem with that though is it's not as much fun I mean there's way less fun yeah so the the people that uh I guess they bet the people that you know and I'm not saying that necessarily people have a gambling problem that that want to pick stocks but I don't know what the gambling now that it's legal like DraftKings and stuff like that but that's a huge industry and people love to bet on the or baseball or football and so uh and people bet on you know even golf did you say golf I didn't say golf but more mundane weather bet on the weather maybe I don't bet on anything yeah well so it's way more what is the word um it's sexier to try to to go pitch the LeBron James versus okay I'm gonna go pitch the Cavaliers or I'm gonna pitch uh the Lakers or it's even you know less fun to pitch the NBA versus a specific team so you know and then another principle this is getting off to a more philosophical conversation that we can talk on in later episodes but once you know it's LeBron or modern day Victor and Victor Wembenya that was just drafted by the Spurs number one pick everybody knew he's gonna be the number one pick because he's seven five and can handle the ball and he's kind of a freak of nature much like LeBron but in a different way once once they're LeBron and once they're Wemby assuming he pans out once they're Jordan do you pay him the same as the as the the undrafted rookie who's gonna sit the bench no you they you pay them the max contract so you have to get the results to justify the investment so so usually if we everybody knows yeah that's the best investment it's hard to be the best investment because everything has to go right and that's where expectations factor in that's very um I think it's intuitive once you do it for a while but it's not always obvious to people I I think that's uh pretty safe bet, right?

Sean 24:54

Yeah yeah examples of that are the Fang stocks right now everybody's talking about the FAIN stocks um and yeah they're high they could go higher but they might not but they're in the indexes which I like to I like indexes so not that we get paid for that but no not that's not our that's not our deal but yeah once the expectations are to the point where if if um Google only grow you know they're supposed to grow at 52% they only grow at 49% which is a ridiculously fast growth rate you know as an example if if their earnings come in they only grew 49% versus 52% the stock could go down which makes no sense unless you understand um you know that that the markets are always looking forward that they're things are based on expectations versus what actually happens so um all right we we had one more article here to to kind of go back a few more months and this one was based on millionaires in the US and what did they predict for the stock market in 2023? So this might pull that up because they have a lot of money so they should be right right yeah yeah they they they know millionaires know and they of course they all made their money trading stocks right no they did not uh all right can you see this headline then yep all right why don't you read it for us millionaires predict gloomy US stock market will get much worse much worse oh much worse good um here's a here's a uh here's a couple words that I thought were great from this article um towards the end it says well well here here's a great quote from our friend the CEO of JP Morton Chase one of the biggest banks in the world earlier this month CEO Jamie Diamond warned that ongoing rate hikes in quote might derail the economy and cause this mild to hard recession people are talking about might might he's also talked in other recent you know months about economic hurricane and of course his company's making money steadily so that's been fine um here we go here's here's a great great words the stock market has already plunged into bear market territory this year as decades high inflation and tightened fiscal policy hammered US firms good good words good thesaurus good book with different words that mean the same thing great job I've got a good picture that's good imagery yes losses are more extreme for the Nasdaq where large cap giants such as meta or face which is Facebook and Amazon have conducted layoffs in an effort to trim costs the tech heavy index is down a whopping 33% uh ironically that is even up more than the the broader market so you know this is this was published in December on December 19th as you can see it right here um so you get the idea from that article same thing millionaires wealthy investors expect this market nightmare nightmare it's a nightmare to get worse in 2023 with most predicting recession blah blah blah so they have been wrong so far it's worth pointing out too that um yeah because I don't know that a lot or most or you know I don't know how many people really keep up with it but markets are up despite the news and if you were just looking at headlines and news you would think markets aren't up so you know I think it's worth pointing out the headline was wrong because they're it's what 20% up the SP yeah the broad markets are are done quite well and you know again it we're only seven twelfths of the way through the year so there's five more months where they could get right but part of the idea of why you make if you make these predictions if you think about the logical consequences let's say the market tanks gives all those gains and the nightmare gets worse and we get hammered I get all the words right so what does that mean this was smart these were correct predictions and how would you think about that well temporarily they were wrong so they're not right immediately I guess um it's all a time frame question what time frame are you looking at certainly whenever you come up with a plan or you're looking at at investment returns it matters of over what time frame you're you're trying to do things in right so and if the way I think we've talked about this too is if if someone ends up getting it right right let's say they the market does drop that much and they say yeah I knew that was gonna happen. Okay well if you're able to predict that then why wouldn't you benefit from this run up that we've had the first half of the year and then sell right like what why would you wait and miss that well the obvious reason is what they didn't really know they just they're just saying stuff that sounds smart and they're you know generally trying to either promote their report or gather assets for you know so it's they're saying a lot of things that sound smart but if they really could do it they wouldn't be working because they would have a portfolio that was ridiculous.

Ben 30:15

Because you know if you especially if you use options or some other strategy to benefit off of your correct position your correct predictions um you wouldn't need to be working.

Sean 30:26

Right. And this by the way this should be obvious that is to us but doesn't mean people sh might not want to have a part or all their portfolio depending on their goals in very conservative or protected things. Most of our clients are very conservative guys this is more about the ability to predict these short-term movements not how to be positioned how to be positioned should be based on what time horizon your goals yeah what you're trying to accomplish and um certainly the everyone wants to have more return less risk right all the return none the risk that that doesn't exist so we focus on what we can control you know our own situation our our temperament is is part of that and that's a big part of what Ben and I uh help people with so another great part of this is this paragraph just stuck out this this is again published in December of of uh of night of 2022 this is the most pessimistic we've seen this group since the financial crisis in 2008 and 2009 said George Walper president of Spectrum Group which conducts the CNBC Millionaire survey so um so wow that's scary right so what has the market done since 2008 and 2009 been pretty ugly right pessimism hammering temporarily it was though yeah it depends on what time frame you focus on in 2009 that was scary but yeah which is why people are scared it was a scary market but then since then it's been phenomenal yeah the Dow bottomed around 6500 in in the in the early early part of 2009 so you know depending on when the survey was taken in 2008 or nine we're talking the Dow at you know 8000 7000 maybe maybe as high as 9000 depending on what part of the year um so and where is it riding now ballpark I think it's 3500 is where the Dow is so we use the SP more so that's why I have to look yeah 35241 is so that is um believe it or not if you were to try to if you were to try to make predictions I mean this one of the single best things would be that sentiment indicator right I mean that's if you had to just look at one thing and how how would you look at how would you read the sentiment to to get a guess on what was going to happen in the long term for me it would be contrarian you would look at the opposite of that would be a signal the George Costanza I will do the opposite if every instinct I've had is wrong the opposite would have to be right so when and it kind of makes sense because if if everybody's saying this is never going to end everything's terrible the worst world's gonna end in 2008 nine or in you know at the end of 2022 it's gonna be a nightmare we're pessimistic then there's you know most people have already sold right there's it's there's been some selling whereas it's it's always darkest before the dawn etc so so usually when things are look scary that ends up giving you the best long-term results and when things look perfect nothing can go wrong there's blue skies and everybody's happy and um everybody's above average that is when typically you have COVID hits or our you know uh bond gets down our debt gets downgraded to double A plus instead of triple A.

Ben 33:44

So that's when things go wrong and it goes wrong.

Sean 33:47

Right and when things are perfect when unemployment's low and no nobody can lose money in real estate everybody's making getting money getting rich with tech stocks daytrading pets.com you know 1999 that's when things can should be a little we should be a little nervous like okay we're missing something right because the expectations are so high that's like any situation in life if you go to a restaurant if you work with someone or you have a family member and you expect one thing and they do a little bit less you're upset. Whereas if you have that person you know or restaurant or experience that you expect to be down here but it's it's okay you're almost happier right because you're it's it's all about expectations so um we don't put too much um strategic importance on these indicators even though but if we had to look at something sentiment is is a is a is a reverse one so the fact that they're quoting that in this article is just perfect to be wrong and to quote almost explain why they're going to be wrong or they have been wrong so far. So I I I just thought that was great. Olding older millionaires are more likely to be pessimistic in this there was another in this survey so that makes sense caution in a way we would never know anyone who's cautious as they get older right now that's a normal thing. I'm much older than Ben so I'm you know obviously worrier and uh that happens you you think about shorter time horizons maybe but any other thoughts uh about uh why predict making short term predictions is a bad idea or reading them and unless you're just gonna try to make fun of them then that's worth it.

Ben 35:21

But I wish um we had thought about showing the Carl Richards uh fear and greed you know picture that would be a perfect one here. Um but yeah the market works on fear and greed cycles and you just don't need to get caught up in either one of those cycles see if I can find that that's a pretty simple um talk about who Carl Richards I'm trying to find it. Yeah Carl is a thought leader in the financial advice space he was an advisor he was the sketch guy for the New York Times he had a column there and just smart guy good guy and we kind of follow what he says along with Michael Kitsus and so uh he's got really um good napkin type sketches with a sharpie that kind of simplify concepts um yeah here's the here's the one that uh Ben was referencing I think it's a great one to to reference yeah so it's pretty normal it's kind of goes the the uh the sentiment right it's normal to want to buy when things have been going up everything feels great and then you know when you've lost money you've seen your your hard earned money go down and value that's not easy we're not I don't mean to make light of that at all it's difficult. We've lived through that with clients we've lived through that ourselves um which helps sort of understand that okay been there done that everything it always feels a little bit different because there's new reasons why you're seeing this decline but you know if you if you buy here and sell here and repeat you know that's sort of the outcome so for people who are not watching it's people get greedy when things are going up and they jump in at the top and then when things go down they get scared and they sell and believe me if you're watching financial news the um the financial shows you're probably going to be subject to this type of pattern because they make a living off of clicks so they're going to say the most outrageous things to get clicks and add revenue and so that just kind of leads to that cycle.

Sean 37:25

So yeah there's here's another one that uh is kind of a good um kind of re reinvigorates the point re-emphasizes the point in terms of time horizon and so you know it's always easier to look back at the history and say oh yeah look what happened right and um when you're looking at the the daily movements of the market and we have most of our clients don't watch this like this anymore um and gosh it's so much easier to help them get where they're going when you're focusing on sort of the the longer term. So you know if and again if you're listening not watching the the five year or the long term chart in the market is way less bumpy than the daily chart or the weekly chart or even the monthly chart, right? So you certainly want to make sure you have a plan and hopefully someone's paying attention either you or someone you've hired to to make sure your your your investment mix matches your goals but um once you've got that in place looking at the the daily or weekly movements is just noise.

Ben 38:25

And so at least that's it's like checking your blood pressure every 15 minutes. I worked in the ER and I use that analogy a lot the more you check your blood pressure the more it's going to go up because it freaks you out.

Sean 38:34

So there you go I've lived that I don't like uh when that cuff starts tightening whoof man makes me squeeze just thinking about it. So uh I don't like to be uncomfortable probably less than most people do I like to be uncomfortable. All right well so in short this is one thing we help people with you know it seems like a simple concept but it's it's easy to get sucked into well this time's different no no you don't understand my situation or I can't lose money and that may be as specific to you but um one of the big questions we ask ourselves when we're helping clients is what if we're wrong so what's the impact? So if we could make you know in the example of uh the crash in in the next 30 60 days well if you had gotten out of the market you could have you know if you had a million bucks and you just wanted to protect it you could have cost yourself$90,000 in gains at the moment right in and that's just one example but that's that's a big mistake right and if you make those over and over it does get painful. So a lot of what we do is helping people um not mess things up and harness the the the market the power of long-term compounding and uh we don't make predictions so we're not any better at predicting than these people that were kind of uh these predictions that we're making light of but um I don't know we probably make this a regular feature because there's lots of them out there right yep absolutely news the news cycles never end it's just always a different there is no shortage of predictions because the internet has infinite amount of space to fill and and people are happy to fill it so um what's the market going to do uh next month I would like to know I would be probably a millionaire if I knew yeah then you can be you could get surveyed and say it's gonna go down exactly exactly full survey good deal all right well that was fun uh thanks Ben and until next time thanks see ya