Chill

Last week Joe Biden lost the debate with Donald Trump. The former president spewed lies. The current one was unable to counter. Trump had nothing to lose – people expect him to be weird. Biden had everything to lose – and pretty much did.

Then, yesterday, the Supreme Court (replete with Trump appointees) ruled that presidents can have immunity from prosecution for official acts. This broadly expanded executive powers and moved America more towards monarchy. More specifically (and intended) was the derailing of criminal charges Trump faces for trying to throw the 2020 election result.

Well, it’s been a bad few days for Biden and the Democrats. The narrative that an 81-year-old is too old to govern but a 78-year-old is fine underscores the wackiness of our times. Meanwhile in France the far-right, anti-immigration cabal headed by Marine Le Pen scored big in voting on the weekend. In another week those guys may control the country, turning President Macron into an irrelevant garçon.

So there ya go. Populism’s winning. Look at the latest betting odds on PredictIt:

Does this impact how you invest? Should you prepare? Do something, like store tuna in a basement, get a generator, go to cash, get a really big dog, plant veggies or move to… I dunno… Terra del Fuego?

The world seems volatile. Trump winning. Or losing. Protectionism killing global trade. Ukraine and Gaza. Putin and Xi. Taiwan in the crosshairs. Kim’s nuky Korea. Killer drones. Cat 5 storms. Now slaughterbots. Wasn’t 2024 supposed to be, like, a nice year?

Well if you’re into the S&P 500, for example, it’s been just fine. You’re up more than 15%. Even the TSX has gained. Preferreds are good. The Mag 7 have been awesome. The Nasdaq has gained 21%. Inflation has been contained. There is no recession on the horizon. Our CB dropped rates once with two more to come. The fed is sounding dovish. Corporate profits rebounded. And investors are so far ignoring the angst in Washington.

So, do nothing?

Here’s some data from Jeff DeMaso, of The Independent Vanguard Advisor (which I learned about from NYT writer Jeff Sommer). Imagine three investors, each with ten grand in 1977. They could choose to invest in US stocks, or go to cash. One held stocks only when a Democrat was president and otherwise retreated to cash. Another bought stocks only when a Republican ran the country. The third didn’t care and she stayed in stocks regardless of who was in charge.

By the way, since 1977 Republicans and Democrats have sat in the Oval Office for almost exactly the same period of time (24 years)

This is what happened between then and a few weeks ago:

• The Democratic-only portfolio, $849,016.
• The Republican-only portfolio, $162,578.
• The utterly apolitical portfolio, $1.6 million.

As the author notes, correctly: “What is clear is that stocks prospered under both political parties, and that by staying in the market through 12 presidential terms, the apolitical investor benefited from the marvelous effects of compound returns with reinvested dividends in a generally rising market.”

Fair enough. But what really rattles people, and throws them off their game, is not political change but precipitous declines. Because fear is the greatest motivator, when things go down people worry they’ll hit zero. Above all else, humans hate losses. You can take a bullet or have your partner romance the pool boy, but seeing your portfolio shrink in a day or two is fatal.

And consider what’s happened since 1977. Inflation at 13%. Mortgages at 20%. Y2K. Nine Eleven. The dot-com crash. Persian Gulf War. Afghanistan War. Israel-Hamas War. Ukraine-Russia war. The Credit Crisis. The US real estate meltdown. Covid. The nastiest stock crash ever in 1987. In fact, three of the 5 worst days in market history have taken place since 1977. Two of them in 2020.

Inevitably, declines breed fear and remorse, which leads to selling. People routinely turn paper losses into real ones, when just ignoring current events would have kept them safe. In the pathetic 16-year history of this questionable blog, it’s happened over and again. When Mr. Market takes a dump, the Chicken Littles in the steerage section flock together and commit suicide. Never fails. Emotion is the enemy of successful investing (which is why DIYers are at greatest risk).

The point of today’s post is this: chill.

Events of the second half of 2024 are likely to be stormy (her, too) and scary. There is no good outcome to the US election. Europe is on a dangerous path. Putin and Kim are plain nuts. Xi wants to rule the world and has a real estate crisis to deal with. Populism is clashing with fascism and globalism. What could go wrong?

A simple rule of thumb is to control what you can and ignore the rest. You can save and invest in a balanced way. You can load up your tax shelters. You can shun debt. You can live within your means, stay (or get) married, become healthier and keep the hell away from Reddit. Oh, and get a dog. If you talk about ‘stocks’ he’ll think you said ‘socks’. Much better.

About the picture: “To your call for canine pics, attached is a photo of Muffin,” writes Mike. “She is my retirement project and is quite proud in the picture as she finally caught a ball! LOL. I have enjoyed your blog for about 9 years and, mostly agree with yourwords, but  sometimes not, but that is life. You are a braver man than I, and demonstrate more patience and tolerance in your handling of the comment section. Keep up the good work & be happy.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.