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We have discussed many times over the last decade or so how the market's reactions to scary headlines and prognostications of gloom can be described as a "hissy fit". You know, it's like the reaction of the spoiled child who is told they can't have any more candy: stomp out of the room in a huff and whine and complain for hours as if that is going to make a difference. Worse yet, and certainly the root cause of "spoiled child syndrome," the parent gives in and lets the child have what they want only to find the child finds something else to be "pissy" about.
Obviously, given the way markets have acted lately, clearly the markets are the child, and one might argue a combination of the Federal Reserve and the financial media are the parent! As we are about to witness yet another Fed meeting this week, and the paranoid in the financial world are all atwitter about what the wizards of money are going to do with interest rates, one would think the sun rises and sets based on their actions.
It is our belief that the economy suffered greatly by the overdone and excessive "zero interest rate" (ZIRP) policy by the Fed in the wake of the 2008-9 financial debacle, the effects of which served to distort the concept of risk in the minds of investors. Essentially, with zero percent interest rates, time was considered to have no value and, thus, the desire to risk capital over time considerably dried up.
It is our belief that the economy suffered greatly by the overdone and excessive "zero interest rate" (ZIRP) policy by the Fed in the wake of the 2008-9 financial debacle, the effects of which served to distort the concept of risk in the minds of investors. Essentially, with zero percent interest rates, time was considered to have no value and, thus, the desire to risk capital over time considerably dried up.
Just as the Fed has begun to get its sanity about it and taken steps to correct that distortion, the drumbeat has become louder and louder that they should stop raising the target for interest rates, in order to save the economy from certain recession. These calls are coming from the same folks who have been predicting for ten years now that we were sure to be heading for Armageddon in the financial markets and the economy, only to have been consistently proven wrong. No doubt, at some point, there will be a "correction" in the economy, and it will likely be due to the Fed overreaching and raising rates too high. Or it may come from some external shock. Or it may simply be a normal "cycle correction" -- as is perfectly normal in a dynamic economy.
Nonetheless, the violence with which markets have reacted to these fears has amounted to the worst hissy fit we have seen in a few years. Certainly, correcting stock prices are also a normal occurrence in the markets. However, the ferocity of this correction and the wild day-to-day swings (even intra-day swings) have been something to marvel at. We have also noticed that, at least in our portfolios of growing companies, the volume of shares trading has been quite low, given the volatility. It may be part of why we are seeing this level of "manic" market activity. It's been a sort of "buyers' strike," if you will.
All of this reminds us of what our mentor, Dick Taylor, used to counsel: "are you going to let 1% of shareholders tell you what your businesses are worth on any given day?" Those are words by which every investor would be wise to live. And as markets seem to relentlessly be stuck on a downward spiral, remember that this too shall pass, and those who have taken a business approach to investing will be best served, and live to experience the inevitable recovery.
Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.