I spent the New Year in Lake Tahoe, which is one of my favorite and most beautiful places in the world. Heading up to the lake with family and friends for a few days (and leaving my laptop at home) really helps clear my head and let’s me focus on the environment we’re currently living in. I see again and again people trying to compare today’s market to “the average” of a dozen or so bear markets in the past. It’s painful to watch.
It’s hard to remember a time where I saw this much irresponsibility among investors, especially the pros who should know better. These “asset managers” are so busy dealing with investors, compliance, operations, marketing, regulations and whatever else they’re busy doing, that they’ve completely underestimated the amount of risk in the stock market. It’s like they forgot that risk is a real thing.
And what are they doing to justify their actions, or lack thereof? They’re relying on a tiny sample size of prior market declines to “wait and see” what happens. They think they’re “Portfolio Managers”, but they should be “Risk Managers”. There’s a huge difference. [Read more…]