Toll-free: (877) 631-6311 | Local: (602) 626-3100 |
Office Open
.(JavaScript must be enabled to view this email address)
Time Takes Time

Time Takes Time


People think a lot about price in markets, but they don’t think much about time.

Case in point: the coronavirus crash of March 2020. Stocks dropped 35% (which would rank it among the top great bear markets in history), but they only stayed down for a couple of months. I’m sure most people do not consider it to be one of the great bear markets in history. It happened so fast that nobody sold, and then everyone was bailed out. It ended up being a hiccup in the context of a great bull market.

The financial crisis was admittedly terrible, but not as terrible as you think—from the top in the summer of 2007, to the bottom in March of 2009, it was only 21 months. That’s much shorter than the Great Depression, and even shorter than the dot-com bust which lasted three full years. I remember that well, and in some respects, the dot-com bust was worse because it seemed to go on forever.

Introducing The Wartime Portfolio from Jared Dillian - 7 moves to make right now to protect your portfolio from geopolitical uncertainty.

Click here now to see the details.

 

If we are going to have a bear market, pray that it is short. Not shallow, but short. Time is what influences investor behavior. After the dot-com bust, nobody day traded again for 20 years. No one had the appetite for it. We’ve seen a couple of these cycles play out in the crypto markets as well, where you have long periods of “crypto winter.”

This brings up some interesting behavioral finance points. If you find yourself in the midst of a bear market, and you haven’t sold, it is probably a good idea not to sell. Just ride it out. I did hear some stories of people panicking out of stocks on the lows in March 2020. Oops. You see, time heals all wounds. There aren’t too many trades that can’t be fixed by time. Sure, some companies go out of business and disappear, but many don’t—like our friend Crocs (CROX) here.

CROX was the ultimate fad stock that took a dirtnap, traded below a dollar, and then had a second incarnation. If you are down 95% on your investment, there isn’t any need to sell, unless seeing the ticker every time you open your brokerage account is depressing you. Just hang on, and maybe it will be worth something. I can assure you of this: sometime, far in the future, those Beanie Babies will be worth something.

Like what you're reading?

Get this free newsletter in your inbox every Thursday! Read our privacy policy here.

As for the major indices, there has only been one time in history when stocks went down and stayed down: 1929–1946. Not to be pedantic, but if you were willing to wait 17 years, you would have recovered your losses. I have had some big losing trades in my career that I waited out simply because I had the patience. Of course, professional money managers cannot do this—they’ll get the tap on the shoulder. But you can do this if you have the patience and intestinal fortitude.

Stuff takes time to work. Lots of people, myself included, put on a trade and expect it to go up immediately. In fact, I recently had a trade where that happened. Fell ass-backwards into money. But it usually doesn’t work out that way. You put in a trade, it goes in your mush, you’re down 5%, 10%, 15%, and then you’re faced with choices. Do you wait it out? Do you buy more? Do you have discipline and cut your losses?

By the way, I am not discouraging you from having discipline. It is good to sell things that have dropped 5% because they will often go on to drop 15%, and then you are faced with those uncomfortable choices. But I’m a big believer in giving trades time to work. You do all this research on a stock, your conviction is high, you put it on, and then you take a drawdown. Demoralizing. Do you sell it and throw all that research out the window? Or do you have a little patience with it?

Good investors have patience—they recognize that ideas take a long time to play out. And that’s not just true of the downside. It’s true of the upside, too. People have a 10X idea, they buy the stock, and then sell when it goes up 30%. And then it goes up 10X. Remember, do what works. If you have a trade that is working, do more of it. Buy more. Have the courage to be a pig.

One thing that helps with time is distance. If you’re being patient with a trade, best not to look at it at all. Don’t look at it for a few weeks. Go out and wash your car, or mow the lawn, or read a book. Let the market do the work for you. Looking at it every five minutes isn’t going to make it go up. Quite the contrary, it’s going to make you miserable, and then when it does go up, you’re going to sell it immediately. Put down the phone.

Hey, last chance to come to my party in NYC on Friday, at Doux Supper Club from 7 pm to midnight! Get tickets by clicking here, or pay at the door.


Jared Dillian

Suggested Reading...

Soft Now,
Hard Later

 

Learn How to
Get Rich Slowly



The 10th Man - Jared Dillian

Recent Articles

Archive


Town Hall Event: Earning Yield With Crypto

The 10th Man

Fundamental investing and technical analysis are vulnerable to human behaviour—but human behaviour itself is utterly predictable and governments' actions even more so.

Read Latest Edition Now

What you always wanted to know about investing, but that you didn’t know to ask

Get Jared Dillian's The 10th Man

Free in your inbox every Thursday

By opting in you are also consenting to receive Mauldin Economics' marketing emails. You can opt-out from these at any time. Privacy Policy

Get in Touch

PO Box 192495,
Dallas, Texas 75219

Toll-free: (877) 631-6311
Local: (602) 626-3100

Copyright © 2022 Mauldin Economics, LLC. All rights reserved.
×
The 10th Man

Wait! Don't leave without...

Jared Dillian's The 10th Man

Instinct and financial experience combined by a former Wall Street trader and served in one of the industry's most original, entertaining, contrarian voices. Get this free newsletter in your inbox every Thursday!

By opting in you are also consenting to receive Mauldin Economics' marketing emails. You can opt-out from these at any time. Privacy Policy