I Was Wrong…In More Ways Than One

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As long-time readers know, I have been writing since September 2009 that the risk/reward ratio for the stock market has been unfavorable. Those calls were made when the S&P 500 was in the 1070 and 1120 range. Since that time the S&P has traveled sideways oscillating to multiple lows in the 1020 and 1040 range followed by a new marginal high as of this writing at 1160.

Regardless of where the market goes from here I was wrong – not just on the market call, but in a much bigger, more important way – and that is what I want to share with you today.

Being wrong on the market call is not that big of a deal. I’m really not attached to it. Everybody who makes market calls will be wrong at times since all outcomes in the market are probabilistic at best. That is just part of investing. Heck, the market might still prove me right by falling from here. It really doesn’t matter because my bigger mistake was in making a market call in the first place. That was the lesson I want to share so let me explain…

I built my wealth using extremely disciplined investment management systems – not making market calls. The approach I have used for more than 25 years is simple to follow and requires zero market forecasting. In fact, while I have made the bearish market calls recently and had money at risk on them, the fact remains that the bulk of my assets have been managed using the same disciplined approach I have followed for 25 years (without any impact by the market calls).

The reason I even made the bearish calls on this blog is because what I teach you is always 100% congruent with what I do with my own money. I put money at risk on the calls, shared what I was doing with you, and it cost me. I walk the talk, and I publicly share the result with you – whether it is good, bad, or downright ugly.

The fact that I even succumbed to making market calls is a fascinating journey with important lessons to share. As an introduction, around 2003 my assets had grown to a point that I believed it was important to diversify into non-correlated, alternative investment strategies rather than rely 100% on my disciplined risk management systems. I thought it was a good idea and it made perfect sense at the time. I spent several years developing non-correlated investment strategies and placing capital at risk to prove them out – the most recent of which resulted in the market calls you received as a subscriber to this blog. The result of this diversification can be summed up in one word – expensive.

As a means of full disclosure, I’ve made this mistake twice – both times for excellent, perfectly rational, well-founded, and thoroughly thought out reasons. The best self-deceptions always appear reasonable at the time, and both times I was 100% wrong. The truth is I would be far wealthier today if I had just followed my proven methods and not sought alternatives. In short, I tried something that seemed real smart and failed. It’s a tough pill to swallow.

On the positive side, disclosing this to you creates the space for you to be human, make mistakes, and still succeed – just as I’ve done. Too many people are so worried about making mistakes that they never try in the first place. There is nothing wrong with screwing up. If you aren’t making mistakes then you aren’t growing and moving forward. We all blow it occasionally, but the key is to learn from those mistakes, control the downside risk, and move forward. You must own responsibility for them, learn the lesson, and not repeat it. Shame on me once, shame on me twice, and I promise you there will not be a third time.

In other words, you will never see another market call on this blog again – ever. I’m out of the market forecasting business because it is a waste of time and energy. It has nothing to do with making money investing and can be highly destructive. I can’t tell you the amount of hours I’ve put into developing these various models over the years, and the net result has been nothing but expense – a huge waste of time and money. Lesson learned. I’ve paid the tuition to the school of hard knocks and now it is time to graduate.

What I teach here is advanced personal finance and simple, disciplined investment strategies that anyone can understand and succeed with. It’s what has worked for me. I’ve experimented with my own money trying the various alternatives and proven what works with investing, what doesn’t, and why – so that you don’t have to. I’ve ventured into the dark forest of complicated investment strategy, made my mistakes publicly, and emerged with lessons worth sharing – which is exactly what I will do for you in future blog posts.

I hope you enjoy traveling the next steps on this journey with me as I take these lessons and convert them into a form that you can benefit from. It should be an interesting adventure.

Oh, and did I mention, NO MORE MARKET FORECASTING…