Notes From the Fieldby Martin Weil

Posts Tagged ‘Risk’

March 6, 2015

Sooner or Later … All Good Things Must End



Anecdotal signs are starting to accumulate that this bull market cycle may be nearing at least a pause. More than one client has contacted me of late wondering why they can’t make more money in the seemingly unstoppable rise of the US market. I need to have the chart above laminated and hung next to my desk.

From EcPoFi via The Big Picture

October 17, 2014

BOO! – market corrections are scary

If I were a “talking head” on CNBC or in the financial press, I would be totally puffed up right about now as to how, for at least the last six months, I have been writing that we were due for a market correction in the Fall.  But self-promotion is not my style and an awful lot of people had that figured out anyway.  Everybody gets something right now and then, even me.  I don’t expect this lucky streak to continue.
My outlook a few months back was pretty simple: If bad things are going to happen, they often occur in September-October. The US market had gone too long a time without the slightest hint of fatigue. Well,we have it now. Investors should note that investment-grade bonds have put on one hell of a rally, against all expectations to the contrary.  This provides some counterweight to those with diversified portfolios. 
I have had only a call or two from clients during the recent market sell-off, less than I would have expected given the suddenness and severity of the stock market decline.  The important question of course is what happens next.  A market “correction” can be a 10% decline – we are spitting distance to that – or as much as 20%, another 200 points down on the S&P before we leave “correction” territory and enter a “bear market.”  Here, I am afraid my crystal ball is out of service.  Weather forecasters have it hands down on market forecasters when predicting tomorrow’s or next week’s conditions.
As for my guess, I will stick to my thesis that this is the correction I have been expecting and that buying opportunities are presenting themselves for those who might be under-invested. If the market takes another 10% dive, I would be buying aggressively.  But as I said, that is just my guess.  And I may have already had my one bulls-eye for the year.


September 22, 2014

Risks to Wealth



Pointer by The Big Picture

July 22, 2014

A Correction Will Come – Are You Ready?

As I wrote in my July letter, it has been some three years since the stock market last had a normal correction, a decline of more than 10%. These can be nasty experiences for those who may have accustomed themselves once again to steady market gains. This seems a dirty trick but it is just the way of the market.

A recent study, explored in Jason Zweig’s Intelligent Investor column in the WSJ, finds that individuals become risk-averse very quickly when exposed to the sorts of stresses provoked by sudden market declines. After such rapid sell-offs, markets typically recover gradually, but investors remain fearful of further losses and unwilling to take that risk for the prospect of seemingly small gains.

Exposure to stress makes people more loss-averse and diminishes their overall sensitivity to reward. and if a reward is of low magnitude, [people under stress] often don’t care about it very much.

Mauricio Delgado, a neuroscientist in the psychology department at Rutgers University in Newark, N.J.

There is no way to know whether the next market correction will come next week, next month or next year. But if there is anything that is certain, it is that there is one in our future. Which is why I am stressing that investors “fasten their seat belts,” by which I mean making sure that their portfolios are positioned so that the investor can psychologically (and financially) endure a 15% or greater stock market sell-off without panicking into selling.


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