The Stock Market Will Fall This Far… At Least.

I took my deep dive into figuring out what really works in investing in my 20’s.  I was told by everyone to read this book. Or read that book. Or read this study. Or read that study.  

The problem… my brain doesn’t do “reading” it does “seeing.”

Almost all of learning is based on reading. And I get it, reading is how humans are taught to learn today.

The world learns by reading. This wasn’t always the case.

A hundred years ago, learning was done visually (3D learning). A person 100 years ago would watch someone do a skill, then they’d practice that skill.

In the olden days (as my kids call it), this was called being an apprentice. This still happens today if someone is going to learn a trade (mostly blue collar type jobs). 

There is no exact number but it is believed that 15% of humans have a 3D-Brain (dyslexia).  

But how does a 3D brain get by or operate in a 2D reading/learning world?

We are all taught to learn by reading. But what if reading isn’t the best way? What if thinking/learning by seeing could shortcut 10 or 20 years or even a lifetime of learning? What if 3D thinking could eliminate investment stress or angst?

..dyslexic people hold a unique set of skills that will be important to business – the ability to think flexibly, creatively and solve really complex problems by thinking differently…

What if seeing and not reading is what investors have been searching for? What if investors are attempting to solve a 3D problem (investing) with 2D tools (reading)?

And what if investment solutions like “diversification” was a result of 2D tools attempting to solve a 3D problem?

And what if this 2D thinking actually increases an investors odds of loss? What if 2D-Investment Strategies (buy and hold, 60/40 stock bond split, fee-focused, Target Date Funds) were creating more risk and not lowering it?

What if the investment world could simply be understood by seeing it and not reading it?

What if the 3D-brain was the answer?

The problem. 3D-brain’s don’t get high SAT scores. Or MCAT scores. Or LSAT scores. Or GRE scores.  These are 2D tests written by 2D people for 2D people.

I believe in the near future people will be asking their big-box advisor to speak to their Dyslexic on staff. And there will be a department of dyslexics. And any big-box advisor without a dyslexic department will lose business.

Richard Branson is one of the better known contemporary dyslexics.

There is an organization called, Made By Dyslexia, that has started to bring the power of 3D-brains to the forefront.  

Below is an example of a 3D-brain’s points of view.

Below is a price chart of the S&P500 w/dividends reinvested (IVV). I’ve drawn a red line on it to show where an investor might want to start worrying if the market breaks below it.

The red line on the price chart below represents the low of the S&P500 this year. Every time that price was hit, (three times this year) it jumped higher.  So it’s an important number.

If price breaks through the red line then you should start to worry. As that means there is a high potential for this correction to fall much harder.

But, if the red line holds and prices bounce higher then no need to worry.

So…

The charts are saying that the market is going to want to “test” that red line again.

That means investors should expect at least a 13% price fall from the high in September. Now, IF the red line holds how will investors know the US market is out of danger? The price of the S&P500 [at a minimum] would have to close above the green line on the price chart.

So everything between the green and the red line can now officially be considered noise.

Now before we turn our attention to the international market let me say the following:

As of right now, this is just a stock market correction and NOT necessarily a precursor to a recession, which means this correction is more likely to be a 2011 or 2015-2016 correction. Assume this if the red line holds.  

Now, turn your attention to the International Stock Market, shown below.

International stocks excluding the US market is being represented by the index, $MSWORLD. As you can see, the international stock market is not doing well. From the high of this year, it’s down 17% (US is down 6% from its 2018 highs).

You’ll also notice that the $MSWORLD index has a shaded section as a “worry range” instead of a red line. This is because there is no clear price but a price range that will act as support.

When will international stockholders know when they are out of the noisy middle? Prices will have to make new lifetime highs (the green line).

Before we move on, some of you might notice that the two price charts above are not updated to the end of close Friday.

I wrote this post on Monday and am just now going back in before it gets sent to you to point out that I purposely didn’t want to update them. As everything in between the green and red lines is noise. 

Below in the bulleted list, I bolded “How can your training filter out the noise.” This is bolded because most investors are going through life without a noise-filter. That’s a problem that has to get solved for all investors. Especially now that the markets are in a noisy phase.

— — —

Last week some of you asked questions about my Training PDF after I gave you access to it. 

Some of you asked:

  • Will I be dependent on you?
  • What will my portfolio look like?
  • Does everyone get the same portfolio?
  • What does the training look like?
  • Can I start implementing right away?
  • How can your training eliminate my angst?
  • How can your training filter out the noise?
  • How can your training increase my odds of having enough?

And probably the biggest one…

  • How can your training show me when to be in or out of the market?

All of these questions are now answered on page 7 and 8 of this PDF.

Please note when you download this PDF it will show up on your desktop. There are no emails to provide for access.

Reading to learn isn’t going away.

But, IF reading to learn is an investors only tool, then they will continue to live into a angst filled world with unneeded surprises… this will be especially true for investors if the bond market ended its three decade long bull market and has started its three decade long bear market. 

In Your Corner,

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RC Peck, CFP

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