Category Psychology

Navigating Market Panic: What Surging Bond Yields and Peak Fear Tell Us Navigating Market Panic: What Surging Bond Yields and Peak Fear Tell Us

Navigating Market Panic: What Surging Bond Yields and Peak Fear Tell Us

It's very difficult to know if we're at or close to a market bottom. They rarely occur over the space of weeks - it generally takes months. But I cannot predict when (or what) the bottom will be. However, I think the ~20% correction from the market high (6147) to the low (4834) tells me a large portion of the selling is behind us. For example, we're now starting to see equity exposure significantly reduced and cash levels raised. This is a good sign... as there are a lot less people to sell.

Buying Peak Fear: Why a VIX Above 45 is a Rare Long-Term Opportunity Buying Peak Fear: Why a VIX Above 45 is a Rare Long-Term Opportunity

Buying Peak Fear: Why a VIX Above 45 is a Rare Long-Term Opportunity

It's official... the stock market is now 'on sale'. Panic selling has set in with the VIX trading above 45 - something we have only seen 7 times over the past 25 years. For those who resisted chasing extreme valuations the past 12 months - your patience has been rewarded. Valuations have come down. In turn, the longer-term risk reward is now more attractive than what it was only a couple of months ago. But these are rare times. For e.g., it was the only third time this decade that the S&P 500 shed more than 10% in two days.

Navigating Corrections: Valuation Anchors and the Margin of Safety Navigating Corrections: Valuation Anchors and the Margin of Safety

Navigating Corrections: Valuation Anchors and the Margin of Safety

From the moment Trump announced his blanket 10% tariffs in addition to so-called "reciprocal levies" - it's been an exodus from risk assets. The selling was immediate and sharp - something we've not seen since the pandemic five years ago. However, as I will demonstrate, there could be more to come. And from mine - further sharp selling could set up a great buying opportunity for long-term investors.

Market Volatility vs. True Panic: How to Use the VIX to Identify Peak Fear Market Volatility vs. True Panic: How to Use the VIX to Identify Peak Fear

Market Volatility vs. True Panic: How to Use the VIX to Identify Peak Fear

Are markets panicking? That depends on who you ask. A short-term trader might see the ~6% move lower as significant. On the other hand, those who invest for longer-term (such as myself) see a ~6% move down as nothing at all. From mine, panic isn't here yet. However, there is a measure which can help us identify when markets are overly fearful. And generally - they are great buying opportunities. But we are not there yet.

Market Cycle Analysis: Mean Reversion to Identify Opportunity and Risk Market Cycle Analysis: Mean Reversion to Identify Opportunity and Risk

Market Cycle Analysis: Mean Reversion to Identify Opportunity and Risk

I made a decision to reduce my exposure to large-cap tech a few months ago. The decision wasn't an easy one... these are great stocks. For example, did I sell prematurely? The answer will be more obvious in 6-12 months when the cycle has had sufficient time to play out. For now (as was the case when I sold) - I think the downside risks meaningfully outweighed further upside gains. In this post, I explained how selling is a way of managing your risk. I was ensuring I banked the appreciable gains realized over the past few years. In light of the rotation out large-cap tech we've seen this week - I thought it was opportune to share some thoughts on (a) how I calibrate my portfolio in a changing environment; and (b) when to be aggressive and when to play defense. It all comes back to understand the economic cycle...

The Investor’s Library: 89 Books to Master Market Psychology

"In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time—none" - Charlie Munger. This post includes a collection of 89 books I've read which will make you smarter (and a better investor). Old Charlie also told us ".. if it’s wisdom you're after, you are going to spend a lot of time sitting on your ass and reading". Amen to that.

Market Psychology: Buying Well When Mr. Market is Fearful Market Psychology: Buying Well When Mr. Market is Fearful

Market Psychology: Buying Well When Mr. Market is Fearful

Markets are slowly but surely starting to look better. Yes - they are 25% off their highs - but that's a healthy development. The way we make money is buying well. And with a little patience - we hope they go lower. My S&P500 target remains around 3200...