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What the F*#k Should Investors Do? (Part 1)

“What the fuck do I do now?” This was the actual subject line of an e-mail I received that really summed up most of the correspondence I got in response to an article I published last summer. To be fair, I painted a fairly negative macro picture of the world, throwing around a lot of fancy words, like “fragile” and “constrained system.” I guess I finally figured out the three keys to successful storytelling: One, never say more than is necessary; two, leave the audience wanting more; and three ...

Well, never mind No. 3, but here is more. Before I go further, if you believe the global economy is doing great and stocks are cheap, stop reading now; this column is not for you. I promise to write one for you at some point when stocks are cheap and the global economy is breathing well on its own — I just don’t know when that will be. But if you believe that stocks are expensive — even after the recent sell-off — and that a global economic time bomb is ticking because of unprecedented intervention by governments and central banks, then keep reading.

Today, after the stock market has gone straight up for five years, investors are faced with two extremes: Go into cash and wait for the market crash or a correction and then go all in at the bottom, or else ride this bull with both feet in the stirrups, but try to jump off before it rolls over on you, no matter how quickly that happens.

Of course, both options are really nonoptions. Tops and bottoms are only obvious in the rearview mirror. You may feel you can time the market, but I honestly don’t know anyone who has done it more than once and turned it into a process. Psychology — those little gears spinning but not quite meshing in your so-called mind — will drive you insane.

It is incredibly difficult to sit on cash while everyone around you is making money. After all, no one knows how much energy this steroid-maddened bull has left in him. This is not a naturally raised farm animal but a by-product of a Frankenstein-like experiment by the Fed. This cyclical market (note: not secular; short-term, not long-term) may end tomorrow or in five years.

Riding this bull is difficult because if you believe the market is overvalued and if you own a lot of overpriced stocks, then you are just hoping that greater fools will keep hopping on the bull, driving stock prices higher. More important, you have to believe that you are smarter than the other fools and will be able to hop off before them (very few manage this). Good luck with that — after all, the one looking for a greater fool will eventually find that fool by looking in the mirror.

As I wrote in an article last spring, “As an investor you want to pay serious attention to ‘climate change’ — significant shifts in the global economy that can impact your portfolio.”

There are plenty of climate-changing risks around us — starting with the prospect of higher, maybe even much higher, interest rates — which might be triggered in any number of ways: the Fed withdrawing quantitative easing, the Fed losing control of interest rates and seeing them rise without its permission, Japanese debt blowing up. Then we have the mother of all bubbles: the Chinese overconsumption of natural and financial resources bubble. Of course, Europe is relatively calm right now, but its structural problems are far from fixed. One way or another, the confluence of these factors will likely lead to slower economic growth and lower stock prices.

So “what the fuck” is our strategy? If you want to find out, you’ll have to come back on Monday for the second article in this series. I hope you’ll find it worth the wait.

Leave a Comment    (7)

  • POST

I just can't get enough of your writing. Simply love it. But unfortunately I live in AUS, and not US.

Aug 30 2015 at 7:04 AM EST


You should use the F word. It doesn't matter.

Jan 03 2015 at 3:04 PM EST

Joan Lee

I think the F-word was necessary to show the real feelings of investors. actually, you give me a strong reason to take a decision with one of my articles.
I have been writting a paper about the current economic problems in Venezuela and I was hesitating about the tittle, "What the hell is going on with Venezuelans: the fancy economy of Bolivarian Revolution". But I agree with yours and understood that "what the hell..." is the expression I want to share because it's the expression of people around world says about the pasive behavior of Venezuelans...

Oct 17 2014 at 2:52 PM EST

Rafael Acevedo


Should I have used the f-bomb in my “What the …. Should I do” articles Part 1 and 2? Since the first part came out, I have been embroiled in a big debate about this (big is probably an overstatement, but a debate). I included the f-bomb in the article because I felt it showed the genuine frustration investors have with today’s global economy, where it is so easy to identify all the problems but so difficult to figure out what to do.

Those who know me well will tell you I that I don’t curse much, other than when I drop something heavy on my foot or when a company in our portfolio does something dumb (usually an acquisition) – the latter happens more often.

When I used the f-word in the article I felt that I was repeating someone else’s words, and so I did not own the f-word. But as my partner at IMA, Michael Conn, has pointed out, if you write it you own it. Michael argued that since I wouldn’t use the f-word when I talk to my grandfather, I shouldn’t include it in an article that might be read by the likes of my grandfather. (I have got to tell you, though, that while I am sure the likes of my grandfather do appreciate my articles, I have received more than a few emails in which I was told something along the lines of “my mother-in-law recommended that I read your articles” – I know I am popular with mother-in-laws.)

Also, I received a very polite email from a longtime reader who said that “While I enjoy your writing style as well as your stories… I am very sensitive to foul language (reading or hearing) it… and seek to avoid those who use it.”

I never try to appease my readers, other than try to make my articles relevant, interesting, and funny (if possible). I enjoy it when readers disagree with my views, as I usually learn something – even if I am right. As you can imagine, I am not always right (though I would appreciate your not informing my wife that I said so).

Curse words are a poor way to make my readers feel uncomfortable (as I sometimes do, with the best intentions). Also, to be honest, it was a bit lazy of me. I could have dealt with the issue of investor frustration more gracefully.

Oct 14 2014 at 12:57 PM EST

Vitaliy Katsenelson

Tell me what multiple use of the F word adds to your article?

A little class would go a long way here

Oct 11 2014 at 5:54 PM EST

Juan Valdez

I approve of this sitcom and will come back Monday.

Oct 11 2014 at 10:59 AM EST


I like your post and your last one but think it is really much more complex than that. The Fed and other central banks have played a role, but US companies are doing better and doing thing that matter, i.,e., think US shale boom. That was not "created" by Fed. So it become more complex, some is central bank induced madness and some is real, and you must distinguish between the two.

Oct 11 2014 at 9:27 AM EST

Michael Moran