| By Charles Mizrahi, Founder, Real Talk Dear Real Talk Reader, It knocked the stuffings out of the market. Tuesday’s inflation data came in higher than expected. The Dow Jones fell more than 1,200 points. Nasdaq did even worse. Later in the day, I was a guest on a podcast. (You can check it out here.) The host asked me my thoughts on the market being down sharply. I didn’t have any. In fact, I didn’t even know the market was down. I’m in Israel visiting my family and wasn’t keeping track. The host was flabbergasted. He was a short-term trader and followed every wiggle and jiggle. I told him I gave up doing that more than two decades ago. Short-term trading is a very hard way to make a living. And I then told him there’s a better way to make money in the stock market… In fact, the Forbes 400 list is filled with investors that made money with this very same approach. And here’s how they do it… No. 1: They Avoid This Like the Plague “It's tough to make predictions — especially about the future.” — Yogi Berra.
Yogi wasn’t kidding. To see how tough it is, take a look at predictions made for 2020. Barron’s rounds up the top stock and bond analysts each November. They ask them to give their predictions for the coming year. I checked their predictions for 2020. The biggest threat to the markets was inflation. Not one of them mentioned a pandemic shutting down the world. I’m not beating up on them. These folks are well paid, went to the best schools and have tremendous research at their fingertips. And despite all of that, their predictions throughout the years have been pretty lousy. I don’t blame them. There are so many variables that come into play that trying to predict them is a waste of time. Given how difficult — or near impossible — it is to predict the market, avoid forecasters and their predictions at all costs. They are not accurate, they add no value and they have terrible track records.
Billionaires and tech companies are pouring money into a new industry set to grow 63,000% this decade. It’s not crypto, AI or pot stocks. What is it? Watch this video presentation for the answer.
No. 2: They Keep These in Check Stock prices will rise and fall. Most of the time, this has nothing to do with the underlying business. Studies show 80% of short-term fluctuations are the result of computer models. They're trying to make small profits off of trade flow. These models don’t care that Microsoft is a better business than Frank’s Hamburger Stands. Their sole aim is to find small discrepancies in stock prices and squeeze out tiny profits. So why should you care if stock prices fall one day or rise the next? You can either react to every wiggle and jiggle of the stock price or ignore it.
If you know the underlying worth of the business, why should Mr. Market tell you how much it should be worth? Especially if 80% of the gyration has nothing to do with the underlying business? Sounds silly, no?
The second and better choice is to let Mr. Market serve you.
Use down periods to buy stocks when they go on sale. And use up periods to sell stocks when they become detached from reality. Because if you have an idea of the underlying worth of the business, the stock market is there to help you make money. Don’t let Mr. Market be your guide. Most of the time he’s a terrible one. No. 3: They Know Who They Are "If you don't know who you are, [the stock market] is an expensive place to find out."
Over the past two centuries, stocks have returned close to 3X more than Treasury bills.  Stocks outperform — 3X more than Treasury bills. Source: Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies, Sixth Edition
(Click here to view larger image.) So why doesn’t everybody invest in stocks instead of Treasury bills? It’s because stocks are volatile. If you can handle short-term volatility, you deserve the great returns stocks deliver. If you can’t, then you need to be content with much lower returns. There’s no free lunch on Wall Street. Bear Market  This cheat sheet can make you a better investor. You won’t make any money by selling in a panic when stock prices drop. But you can make money by using this time to be a buyer. Legendary investor Shelby Cullom Davis put it this way: A down market lets you buy more shares in great companies at favorable prices. If you know what you’re doing, you’ll make most of your money from these periods. You just won’t realize it until much later. And that’s the Real Talk. Bear markets allow intelligent investors to buy underpriced stocks. If it weren’t for bear markets, we’d never have the chance to make enormous gains. If you buy quality businesses at bargain prices and then hold them for the long term — it’s pretty hard not to make money. You can start here today. Regards, 
Charles Mizrahi
Founder, Real Talk
We're on Social Media! Be Sure to Follow Us…
   Privacy Policy
Real Talk With Charles Mizrahi, P.O. Box 8378, Delray Beach, FL 33482.
To ensure that you receive future issues of Real Talk With Charles Mizrahi, please add info@mb.banyanhill.com to your address book or whitelist within your spam settings. For customer service questions or issues, please contact us for assistance.
The mailbox associated with this email address is not monitored, so please do not reply. Your feedback is very important to us so if you would like to contact us with a question or comment, please click here: http://banyanhill.com/contact-us
Legal Notice: This work is based on what we've learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Banyan Hill Publishing permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication.
(c) 2022 Banyan Hill Publishing. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Banyan Hill Publishing. P.O. Box 8378, Delray Beach, FL 33482. (TEL: 866-584-4096)
Remove your email from this list: Click here to Unsubscribe | 
Post a Comment
Post a Comment