Is it Time to Get Out of Stocks?

is it time to get out of stocks?

Do you want to BE better?
Or, do you want to FEEL better?                

I’ve been a dad for ten years and four months… and then seven years ago I became a “double-dad.”

I know, “double-dad” is not a term, but it should be. And so should triple-dad and quadruple-dad and so on, because being a dad is a daily exercise in just how many areas of your life you’re failing at. And the more kids a dad has, the more areas of growth that dad gets to discover.

That’s therapy-speak. Because “areas of growth”  and “gets to discover” really means, this is what you suck at… and it’s at the expense of your kids.

You thought you were good at managing people? Wrong. Try managing your little ones with underdeveloped prefrontal lobes (read: missing) when they are feeling hurt on an empty stomach after a day of having to keep it together at school.

So at the beginning of my “dad-hood,” I wanted to feel better. And so I found people who would make me feel better about my lack of good dad skills.

Do you get it?

I wanted to FEEL better and not BE better.

Now I want to be better.

And that’s hard work.

Feeling better is easy. Being better is hard. But it’s the right work. It’s the work that creates a bigger life for everyone.

People who want to feel better… they dig in their heels and defend and explain. People who want to be better, they start asking questions. The right questions.

So… and this is a big “so.”

Do you want to FEEL better about your investing? Or do you want to BE better at investing?

If you want to be better than I have to show you this price chart.

I shared the following price chart (right below) with you last week. It shows the answers to the first question of my “2-Question Strategy” since 1993.

That first question is, “Should I be in or out of the stock market? And the answers are depicted using green or red dots in the price chart below.

Get out and get in sp500

Whenever I show this chart I almost always get called names by people who want to FEEL better about their investing.

“You’re a market timer,” is the statement I hear most.

Though I don’t know what each person means specifically by that statement, one possible meaning is they are calling me a flip-flopper. The top definition from the Urban Dictionary of “flip-flopper” is someone who goes back and forth on an opinion or point of view without any reason.

flip flopper

Like, one day Judy wants to be your best friend. And then the next day she hates you. And then the following day she loves you. And then the following day she despises you.  And then…

Right, you never know where you stand with Judy.

And I believe there are millions of investors whose main strategy is the “flip-flopping-based-investment-strategy.” How do I feel today about Emerging Markets? How do I feel today about biotech? What about this hour?

What you saw above (the very first image) is not flip-flopping. What you are seeing are not my feelings. What you are seeing is the result of asking the right question.

What you will be seeing in the image below is the result of very large and measurable financial war. And the war is between stocks, fixed income, commodities and real estate.

What are they “war-ing” over?

One thing.

An answer to “Should I be in or out of the stock market?” Which, when an investor breaks this question down has two main parts.

Part one: Which one of the four core assets are in an absolute uptrend? AND, [part two] which one of the four core assets is also in a relative uptrend compared to the other three?

A two-part question that keeps the investor’s money in the stable asset. The “absolute uptrend” part of this question is what I want to share with you.  And then next week, I’ll dig into the “relative uptrend” part of the question.

The, I want to “BE a better investor” will look at the very first chart and ask questions like… Why are the dots where they are? Why so few dots? What are the questions behind those dots?

And the, I want to “FEEL better about my investing” investor will look at that chart and make statements. That’s a timer. That’s a trader. That’s a [fill in the blanker].

So if you’ve been in my world for any amount of time, you’ve seen the image below. It’s my goto image to show how everyone’s money is always, at all times, invested in one of those core assets.

Sometimes all of your money is in one of them and sometimes your money is in all of them (and possibly everything in between). And what I make clear each time, is  your money at all times can NEVER be outside those four core assets.

There’s not a fifth.

four assets

Now look at the image below.

I replaced the circles (image just above) with actual price charts that represent each core asset.

four asset classes

Isn’t that interesting?

An investors money is always on one of those black lines.

I’ve filtered out all the noise and left that one thing that matters most. And that is what your money is actually invested in.  

No stories. No beliefs of what should happen. Just what is actually happening. Some might call this real life. 

If your money is on that black line in the blue rectangle (STOCKS) then your future is getting more stable.

And if your money is on that black line within the red rectangle (FIXED INCOME) then your future might be getting more unstable.

By wanting to become a “BE-better investor” and not a “FEEL-better investor” a person’s future is changed.

Sidenote: The symbol for the stock asset class is the S&P 500 with dividends reinvested. The symbol for the fixed income asset class is the US 10yr Treasury. The symbol for the commodity asset class is the Commodity Research Bureau Index or the “CRB Index.” And the symbol for the real estate asset class is the Case-Shiller National Home Price Index.

Here’s the point.

Questions matter.

Have you ever noticed the quality of your life is determined by the quality of the questions you ask? Questions lead to answers. And answers generate emotions and drive behavior.

BEHAVIOR (not circumstances or market conditions) determine your results. Please print that out and tape it to your mirror. 

So what comes first?

The right answer (I want to FEEL better)?

Or…

The right question (I want to BE better)?

So, if it’s true that the right questions come before the right answers

What if you were taught to ask the wrong questions when it comes to investing? Worse yet, what if you were taught to not ask questions at all?

The first question an investor has to ask is, is the price direction of what I own or am thinking about owning going higher? Lower? Or, I-can’t-tell?

This is the first question to ask for those who want to BE better investors.  This is not a good question to ask. It’s the first question to ask. Right. It’s not a good idea. It’s the first idea.

Below are all four asset classes that you saw above but I’ve made them bigger so it’s easier for your brain to notice their price direction.

Ask yourself each time: Is the black line going higher? Lower? Or, I don’t know?

STOCK ASSET CLASS PRICE CHART:

Stock chart

When investors are buying the stock asset class, this is what they are actually buying.

FIXED INCOME ASSET CLASS PRICE CHART:

Fixed income

When investors are buying the fixed income asset class, this is what they are actually buying.

COMMODITIES ASSET CLASS PRICE CHART:

commodities

When investors are buying the commodities asset class, this is what they are actually buying.

REAL ESTATE ASSET CLASS PRICE CHART:    

Real estate

When investors are buying the real estate asset class, this is what they are actually buying.

Sidenote: The above four charts are focused on the US markets. So all four assets are either US-based representative of each asset or priced in US Dollars like the commodity price chart.

And regardless of where you live in the world, the 2-Question Strategy still works, as there is only one “investment market” on planet Earth. I’m simply saving time today and just showing the US point of view.

Once an investor has chosen to BE a better investor they can then start asking better questions. And by doing that they start eliminating the noise.

Again. Do you want to eliminate noise? Then ask better questions.

And when it comes to being a better dad. I come back to, what questions am I asking? And you know when you are asking the right questions. Because the answers are almost always a punch to the gut, to the ego, or to your pride.

Right? The answers are almost always uncomfortable truths about your behavior.

But, that’s where the gems are. That’s where the magic is. That’s where the growth is. And that’s where the better life is.

And as far as the question that was the title of this post, Is it time to get out of stocks? The short answer is no. The market is exhaling. And it’s about time.

In Your Corner,

RCPeck-Dig Signature.JPG     
RC Peck, CFP

P.S. Will your wife [or husband] know what to do with your investments if you were to die today? Could they figure out your approach? Could your kids? Could anyone?

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