I wrote Things I Think I Know back in February when the world was… simpler.
Most of what I wrote held up reasonably well through the craziness of the last few months. I mean the advice is pretty basic and sort of timeless but I think most of us at least somewhat questioned even those most basic concepts as we've navigated both panic and euphoria... so maybe some of it ended up looking wrong at one point or another.
One of the lines in there was as follows:
Nothing is clearer than identifying market excesses with the benefit of hindsight. And nothing is more difficult than identifying them in real time.
After going back and reading that post again, I think that’s probably the most accurate statement in there. March was one of the worst market environments we’ve ever seen. I’ve talked about it before but it bears repeating.
Like, seriously bad.
Like, “I wasn’t sure if everything was actually going to be ok” bad.
That’s not totally true… I knew things would be ok but I didn’t think they would be this ok. The market just capped off its most furious 50 day rally in history. So was March the excess or is this it? Maybe both? No one knows.
What I do know is that the last four months have taught me a lot and so, without further ado, here are some things I think I know (pandemic remix)…
Markets are efficient. But they aren’t omniscient.
Sometimes asset prices go totally haywire but they usually don’t stay that way for too long. I wrote F*%k You, Pay Me on March 22nd. One week later, and all of the deals in munis had been gobbled up.
Confidence is the most powerful currency on Earth. If you don’t believe me, look at what the Fed did to the credit markets before they ever even purchased a single bond.
Predicting the direction of interest rates is more difficult than predicting the direction of equity markets. Don’t believe me? Read this.
Buying low is hard because prices can always move lower. Momentum is a powerful force.
Selling high is hard because prices can always move higher. FOMO is a powerful force too.
Don’t bet against the Fed. See: printing press.
Over the short run, I’ve gotten it wrong with some of my predictions. But diversification came to the rescue once again.
Uncertainty breeds bad decision making. But bad decisions are only evident in hindsight.
Hindsight bias is everywhere right now. No, you couldn’t have seen this coming… no one could.
You don’t know how hard some things are until you actually do them. Starting a new business 10 months before the onset of a global pandemic, market crisis, and economic crash presents unique challenges.
You don’t know how easy some things are until you actually do them. Working from home with three children here has been a piece of cake.
Drowning out the noise is hard. Letting the right noise in is even harder.
Never let political beliefs guide your portfolio decisions. There is no drug stronger than political dogma.
It’s almost always expensive at some point to be right. Every strategy falls out of favor from time to time… it’s the sticking with it that’s the hard part.
Changing one’s view on an asset class is impossible for most people. Confirmation bias is almost everywhere you look.
Valuations matter. I know nothing matters right now but just trust me on this… they do.
Timing is everything. But only if you have a short time horizon.
Kindness is more contagious than any virus will ever be. Treating people with decency is a strategy that never goes out of style.