Fear filled with reasons

What follows is an apocryphal sound bite from financial media inspired by the events of a day in mid-July 2021. This quote could very well take place on any given day, a few dozen times per year, with dates, parties, and events interchangeable:

A seven-day positive streak in the markets was broken with the news that Google is being sued for anti-competitive practices related to the operation of their app store. As this news broke, we’ve learned that the Japanese government decided to ban spectators from the upcoming Olympic Games because of the worrying surge in COVID cases. Additionally, labor numbers, employment numbers, news of a hurricane approaching the Atlantic coast, and a half dozen other things that are freaking us all out has led to a several-hundred point drop in the Dow Jones index.

Like I said, replace Google with Apple, replace Tokyo and Olympic with Europe and tourists, and you’ve got a whole new news day filled with reasons to be fearful. Reasons to be negative.

But are these reasons filled with fear or fear filled with reasons?

Often and especially after sequential days of positive movement in the indices, the market turns negative and starts to look for reasons to justify that negativity. The usually turn to macroeconomic indicators or force majeure headlines like extreme weather or, in the case of 2021, COVID numbers. If we see beyond this “fear filled with reasons” tendency, the mindful investor can capture the opportunity to open or add to a position otherwise avoided due to high valuations.

In order to identify these moments of market inefficiency, it’s helpful to identify what it is that you DO fear.

Here’s what I fear:

  • Long-term economic decline
  • Permanent decline in birth rate
  • Lack of faith in business and industry
  • Hyperinflation
  • Threats to democracy and the rule of law
  • Large-scale war that includes nuclear and/or biological weapons
  • Irrevocable ecological destruction brought about by climate change

Of these items, the only ones I’m legitimately concerned about are war and climate change. War could very well happen tomorrow and there’s nothing I can do about it. And if my orbit does become impacted by weapons of mass destruction, I’ve got bigger problems than my portfolio balance. Climate change probably won’t permanently impair our way of life until well after I’m dead. So, from an investing perspective, I don’t have any reasons to be fearful.

The media and the market will give you as many reasons to be fearful as you have time to dream up. Incorporate them into your investing strategy at your own peril.

In two ways, these actors are doing you a favor.

First, they are forcing you to envision the near future as something other than what it is—relatively safe and relatively predictable. The day journalists get on the news and say “Everything’s swell” is the day I will head for my basement closet.

Secondly, every time someone, whether a media personality, a politician or a fund manager gets on TV and enumerates the things you should be scared of, they present a buying opportunity for those of us fortunate enough to know what we know.

The world is relatively safe, relatively predictable, and over 80% of Google’s revenue still comes from advertising. Buy $GOOG.