Teddy Bites the Bull
What Is Not Rocket Science
Back in the day, they used to say, “It isn’t rocket science.”
I guess they still say that.
Whatever “it” is, it has to be easier to do than rocket science, which is supposed to be pretty hard. I’ve never tried it. First-year chemistry and physics are as close as I ever got, and that was a long time ago.
They also say the same thing about brain surgery. That is, it is hard to do.
I haven’t tried that either.
To try either one lawfully, you’d probably need a license. At least, you should need a license. I don’t have one.
So, what am I talking about?
The stock market, Stupid. It isn’t rocket science, is it?
Anybody paying attention to the stock market knows that sometimes it goes up, and sometimes it goes down. Over time, it has gone up more than it has gone down. Still, if you’re invested in it, that is, if you own stock, you prefer that it go up, and you don’t like it when it goes down.
How To Make Money In a Sh..ty Market
Recently, the stock market went down. It may continue that way for a while.
Now, it is true that you can make money when it goes down if you know what you are doing. You just need to predict the future accurately. You sell a future. I know. That sounds crazy. But, like I said, it’s the stock market.
To do this, you enter into a contract to sell tomorrow a stock that you do not own today. Tomorrow could be any day after today. You and your buyer pick that future day. If the stock price is down on that future day, you buy the stock for less and deliver it to the guy who promised to buy it at the former higher price. You keep the difference. Neat, huh?
Some investment prognosticators likely have been making money this way recently with the “volatility” in the market these days. Volatility is a term of art in the world of investment finance. It means the s..t is hitting the fan, and the fan is blowing the s..t in all directions…from day to day. In other words, the trend is difficult to discern. Still, it isn’t rocket science.
What Just Happened?
On the day of the 2024 election, the Dow Jones Industrial Average stood at 41,795.
Exactly one month later, it had climbed to 45,014.
But yesterday it stood at 37,368.
What You Wish You Had Done
For a little more historical context, the DJIA stood at 7,626 on January 1, 2009, a few weeks before Barack Obama became the 44th President of the United States.
Gosh, don’t you wish you had bought stock in the DJIA back then?
If you had, 37,368 would look pretty darned good to you today. You would have quintupled your investment in only 16 years. Of course, if you had sold that investment on December 4, 2024, you would have done even better. You’d have sextupled it. Perhaps that sounds a little too racy, but what’s one little tuple between friends?
What To Avoid
On the other hand (these are economic issues I am discussing), if you bought your stock in the DJIA on December 4, 2024, and you sold it yesterday, you would have lost 17% of your investment in four months. That’s not so good.
If you had bought stock in the DJIA a week ago, when it stood at 42,225, you would have only lost 11% on your investment. Of course, it only took you one week to lose it. That would be a shame.
Now, I need to introduce two more terms of investment art: correction and bear. Investment gurus say a stock market downturn constitutes a “correction” when the previous market high decreases by 10% but not as much as 20%. If it decreases by 20% or more, that’s called a “bear” market.
They call it a bear market because, whenever it happens, people go to their cupboards for food, and the cupboards are bare. The same thing for grocery stores. The shelves are bare. It’s a bare market. Get it?
You can readily appreciate that, in the last four months, the market is at least experiencing a correction. The previous high was 45,014, and now its at 37,646, a 17% decline. It’s a hell of a correction. Why? Because it is getting uncomfortably close to the bear. Another day like last Friday, and the bear will be biting the market in its hind end. And isn’t that the way the market seems to be trending?
Ever Been To Alaska?
By the way, have you ever seen a bear in the wilderness?
I have. I lived for over a year in Alaska. I saw grizzly bears. They’re big. I saw them in the wilderness, not at the zoo. Nothing stood between me and them except some distance. I carried a Ruger 7 mm rifle with me in case I got too close. I am glad to report that I have never had to shoot a bear.
If you have read this far, it is only natural for you to ask me this about the stock market: “Why is the bear getting this close at this time?”
The answer also lies in my Alaskan personal history.
When my friends and I were floating down the Gulkana River in a raft, we spotted a grizzly bear downstream as it made its way out of the forest and down to the river. What did we do? We pulled over and waited for the bear to go back into the woods. We did not get too close.
The bear took its time. I believe it was wondering if we would be so foolish or arrogant to just continue floating down the river. Why worry? What could go wrong? But we all agreed to pull over and wait. The bear eventually got bored waiting for us and ambled back into the woods.
The difference in today’s stock market bear from my Alaskan bear is that there does not seem to be any way to pull the raft to shore and wait. The guy in the raft holding the oars says that he is confident that, if we just float by the bear, great things will happen in the boat.
It seems like everyone in the world today is riding in his boat.
The funny thing is, one bear isn’t the only concern. Other animals live in the forest. For one, there are more bears. For another, if there is a forest fire (remember climate change?), all the animals may come running out at once. If there is an earthquake, an avalanche might bust a dam upstream.
In the wilderness, a lot of s..t can happen. In a modern economy too.
You don’t need to be a rocket scientist to figure this s..t out.