“You want a shot?”
My single friend Roy is always looking for a whiskey partner. I winced. In a past life, I’d be in.
“I can’t,” was my excuse, grimacing and nodding at my nine-year-old daughter who accompanied me to our local watering hole for a late lunch and playoff football.
Responsibility makes us evolve. Usually, hopefully for the better. Some of the evolutions are obvious. Stay responsible while you’re parenting. Don’t buy stocks when everybody else loves them.
In my younger whiskey days, “investing” was all about action. Give me that new stock idea. The monthly pick. Be in it to win it.
My older contrarian self finds this exhausting. And self-defeating.
Why buy stocks all the time? Why indeed!
Sometimes the market is low. That was October—a time to buy everything.
Mainstream website MarketWatch.com, a beacon of financial simplicity, showcased a terrified cartoon character who was, I assume, selling her shares:
She sold low. But CNN’s Fear and Greed Index (FGI) was bottoming at basement levels—just 16!—this indicated Extreme Fear among investors:
Three Months Ago: Extreme Fear
There is no Extreme Extreme Fear reading on the FGI. Sixteen is about as low as it ever gets, which was a strong signal that the pedestrians had already sold.
Which was our cue to buy.
Fast-forward to today. Stocks are high. MarketWatch.com is cheering back-to-back “records” for the S&P 500—whatever that means:
Meanwhile, CNN’s FGI is on the edge of Extreme Greed territory. Pundits are pronouncing the stock market “safe” thanks to its rally since October.
Where were these safety announcements three months ago?
Of course there is no Extreme Extreme Greed rating. Stocks are unlikely to go much higher without a breather. Which is our contrarian cue to be patient today.
You won’t hear this sobering warning from other sources. These are the same people who were scared in October. And since they are all now bullish, please allow me to play the role of the token whistleblower in your life.
Be careful.
This is not a time to go crazy. Say no to FOMO. Sit tight. Wait for a little more fear to creep into the market.
I’m sure you subscribe to other financial newsletters. It’s OK—we have an open relationship. But I do want to warn you about any plain vanilla strategy that says you need to buy a new stock every month.
That’s not true. Sometimes, oftentimes actually, we are better off sitting on our hands. At least wait for MarketWatch.com to flash a somewhat-fearful headline. That’s my minimum ask.
Even better if we can catch CNN’s FGI in the Fear or Extreme Fear zone. The latter doesn’t happen often—maybe twice a year. But it’s worth waiting for. Buy when there’s fear, and it almost doesn’t matter what we buy.
Below the cherry MarketWatch.com headlines and index records, there is some turmoil beneath the surface. Many stocks are quietly slumping to new lows. The broader market is being held up by the big names, which is often a warning sign. For example, in 2021 many individual stocks broke down in advance of the 2022 bear market.
“But Brett,” I can hear you asking. “The Federal Reserve has pivoted. They are about to cut rates. What could go wrong?”
Fair enough, inflation is cooling. But what if the economy reheats, taking prices with it?
If the economy keeps humming along, it will “surprise” everyone who is loading up on stocks at record highs. Let’s give them their greedy moment while we wait.
Now I’m not saying we’ll see a return to the October lows. Or even a return to Extreme Fear. I am saying that there are not many dividend payers that we need to buy this month.
A better use of our time and energy today is to prepare a shopping list for tomorrow. I think we’ll see a better time to buy in February or March. Let’s wait for our fat pitch.
Net-net, this is a time for us to crisis-proof our retirement portfolios. The best time to do this is right now—before the market corrects sharply lower!
With the rest of the pack greedy, this is the right time for us to focus on collecting huge dividends with a history of reliability. This is my number one investing secret, and I want to share it with you. Let’s get started crisis-proofing your portfolio together.
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