Charlatans and unethical scam artists don’t come right out and tell you they are attempting to make you part with your money while providing absolutely no value. The most skilled will tell you they are doing something altruistically and that they want to simply teach you what they’ve learned – for the small price of a subscription service or enrollment into their more intensive (and more expensive) classroom lessons.
The past week has continued the recent pattern of extreme volatility this year with major indices again moving into negative territory year-to-date. Though I will publish the more comprehensive market and economic quarterly newsletter soon, I thought I'd share a portion of the chapter on Media Madness from the book I'm currently writing. I hope you find the snippets from the chapter more useful than the "experts" shouting advice encouraging you to take rash action.
I'm in the only business in which no one wants to purchase something when it is 25% lower in price!
This past week, a client asked the good question of why we would purchase a company such as Mattel which has declined in value and sell or trim our positions in companies which have risen in price - particularly when the company doesn't pay a dividend which is generally at the core of our philosophy and critical to our client's future retirement success. Because this question goes to the core of our investment process, I thought I would share my answer with our friends, clients and investors. My reply email is enclosed as follows:
It is unfortunately difficult in the very noisy financial services sector to tell the difference from a broker working for a large bank, a financial services representative at your local bank, an insurance agent pitching financial advice via annuities or life insurance, online brokerage firms offering advice on a green chair, robo-advisors with model ETF platforms and accounting firms selling mutual funds. Some firms however are fee-only Registered Investment Advisors which provide wealth management services as a fiduciary for a fee without commissions thereby limiting many conflicts of interest.
Today's 1000+ point plunge for the Dow Jones Industrial Average can be attributed primarily to algorithmic, programmed trading. In an absence of any particular news during a trading day, the massive selling (or buying) that occurs during the opening or final hour of a trading day illustrates that a good deal of selling is occurring because of broken technical market levels which triggers further selling and a negative feedback loop. In addition, the massive rise of passive investing in indexes - which are laden with overvalued growth stocks unlike the reasonably priced value-based, dividend stocks we own - is major contributor to the recent sell-off as valuations come back down to earth for such overpriced companies.