A walk down memory lane

Yesterday marked the five-year anniversary of the lowest point for the bear market of 2008-2009.  On March 09, 2009, the Dow Jones Industrial Average reached a low of 6,516.90 (today, March 10, 2014, the Dow opened the day at 16,453.10).  The S&P 500 index actually reached its low of 666.79 on March 06, 2009 (today, the S&P opened the day at 1,877.86).

On March 02, 2009, we published a post in this blog entitled "Don't get off the train," in which we wrote: 
As unbelievable as it seems now, there will be a turn in what seems to be a never-ending bear market cycle.  When the markets will turn back up is anybody's guess.  However, when it moves, it can move very rapidly.  [. . .]  This is why we have always emphasized focusing on the business and not the market prices, as we discussed in this previous post, as difficult as it might be in this environment.
One month later, we reflected on that discussion in a post entitled "Don't get off the train, revisited," in which we noted that there were plenty of people who had missed the sudden turnaround in the equity markets which took place in March of 2009 -- and that there were still plenty of people saying the move was just a "sucker's rally" (and we linked to an interview of one well-known investment personality saying that the recent rally was not to be trusted, that the March 9 bottom was not the bottom, and that "we're going to see more bottoms in the next few years").

Since that (incorrect) prediction by that colorful commentator, there has been no shortage of pundits warning that the recovery in the economy and the equity markets was doomed to collapse at any moment, and that investors were in for (as another confident financial personality put it) either a "nasty correction or years of treading water."  You can see on the S&P chart above where the markets were when we commented on that dire prediction -- and you can see where the equity markets have gone since that prediction and the returns that those who listened to those market predictions would have missed, had they taken that (incorrect) prediction to heart and stepped "off the train" based on what the pundits were saying.

During just about every dip in the chart above, there were serious-looking commentators standing by to deliver confident-sounding predictions of another "double-dip" recession, meltdown, or return to the 2009 lows.  Some of the posts we wrote in order to try to inform our readers of what they should really be paying attention to are listed along with an arrow pointing to the point in time at which we published them.  Those include "Double-dip ahead?" "More data says 'no recession.' So why is everyone so uneasy?" "Who is right, Bill Gross or Jeremy Siegel?  Answer: George Gilder"  and "Rip Van Winkle, revisited."

The point of this walk down memory lane is emphatically not to try to establish our ability to predict the market direction better than the talking heads you see on the financial media outlets.  We have always disavowed any ability to "call the market" correctly, year-in and year-out for decades -- and we don't believe anyone else can do that, either.

Instead, we believe that the lesson investors should take from the above record is that they should give up on the "persistent delusion" of trying to time markets, which (as the above chart shows) can be just as dangerous as trying to time trains!  We even wrote a post making that exact point, along with a graphic video that should drive it home quite strongly, entitled "Market-timing and train-timing," in which we said: "trying to time markets is a lot like trying to time trains: if you make a mistake, you can get flattened."

Today, on the fifth anniversary of the turn in the bear market, it should come as no surprise to find plenty of articles noting the occasion and ringing alarm bells that the "party could soon be over." We hope that readers of this blog will quickly recognize that the authors of those articles are reinforcing that "persistent delusion" -- and will waste little time with such "stock market guessing."  

We believe that time invested in finding well-run businesses positioned in front of fertile fields for future growth is a much better use of investors' time than listening to the prognosticators who can always find a host of reasons to back up their often-incorrect predictions (you can see the performance of the TFCM Core Growth Strategy here for an example of how our portfolio of well-run businesses has performed since inception).

We might even add that reading back issues of the Taylor Frigon Advisor might be a better use of their time as well!