For thirty years before I was born, the San Francisco 49ers toiled in relative mediocrity.  You could have counted the total playoff appearances on one hand.  Lost in the sports media wasteland of the West Coast, they gave the rest of the world little worth paying attention to.  I suppose this is the story of most sports franchises in most places.  But it all changed in that magical year, 1979.

My earliest football memories are of the 49ers winning Super Bowls.  It’s all I knew.  Year after year my team made the playoffs.  They won 5 Super Bowls.  The 49ers were so good for so long – we all had it so good for so long – that when the end finally came and stole both our breath and our hall-of-fame quarterback, the only proper response we could muster was denial.

“It’ll be OK.”

“We’ll come back.”

“All they need is a new QB.”

Two decades of dominance had re-written our definition of normalcy.  It was time for reversion to the mean.

But we didn’t just revert to 8-8.  As reversionary phenomena tend to go, we plunged far below the historical trend line.  In the decade to follow the 49ers would not just field some bad teams, but some of the worst teams of the modern era.

We all suffered in silence and other franchises watched our denial give way to anger, bargaining, and ultimately depression.  Some of us gave up and turned the TV off on Sundays.  We found other things to talk about at our weekend barbecues.

The exact same thing happened in the stock market, of course.  We had it so good for so long.  Our world imploded and the last decade has given us a new definition of normal.  We reverted well through the mean into the land of extreme negativity and market depression, but today we’re finally starting to adjust.  We see the world a little more clearly now and have a better sense about the risks and rewards.

We all enter the market as children.  We study history and we pay attention to the late night stories our fathers share, Glenlivet or Budweiser in hand, of the grisly struggles of yesterday.  But we all enter the market as children.  We write our own history and the stories that we’ll some day tell our sons will inevitably be our own, not the ones of our fathers.

Every cycle begins and ends with hope.  This has all happened before and it will all happen again.  Sports teach us this.  Literature teaches us this.  The Buddha teaches us this.  We try and teach others about this but the only way they ever learn is to experience it for themselves.

Read more →

Step one: don’t fall asleep.

It’s easy to let the markets lull you to sleep when there isn’t much going on.  You may be thinking that this summer has featured a dearth of exciting, market-moving news.  But the same narratives are still playing out all around the world.

Europe hasn’t changed.  Greece’s exit from the Eurozone is inevitable.  Spanish and Italian debt are still tricky issues.  The U.S. economy is still “meh.”  The Fiscal Cliff still looms (more on that in a minute).

Here’s a chart:

The thing about these dead periods is that they always, always precede periods of action and movement.  Ten times out of ten.  And because of how general investor psychology works, the eventual period of action is often ugly action.  Storms are what usually follow patterns of calm.

I’ve been writing for a while now about how I’m of the belief that it’s going to be a bumpy fall.  I’m not sure I want to be long the market heading into the usually-volatile months of September and October

Step 2: Build an Action Plan

In the meantime, here are some things you can do:

Read more →

It’s been a fairly quiet week in the markets.  Tomorrow’s jobs number could make some news, but that’s about it.

Remember: Europe is every bit as a big a mess today as it was a few weeks ago.  The U.S. economy is every bit as weak.  The long-term fiscal-political trajectory is every bit as concerning.

Weeks like this should serve as a reminder that most of the time, the market drives the headlines.  Quiet market?  Boring headlines.  Dynamic market?  Bombastic headlines.  Only when extreme, out-of-nowhere events occur do headlines actually drive the market.  Hopefully this is all just academic for you, because attempting to trade the broad market on macro headlines is a recipe for disaster.

In the meantime, let’s take a look at a story I’ve been watching closely all year.  You might have heard of it.

The election!

How will the election affect the stock market?

Election years fascinate me.  Especially these days when so much of what drives the economy depends on policy and politics.

Stock market bottoms tend to occur during the first two years of a president’s term, not the last.  In fact, on average, the very bottom occurs on average just before the mid-term elections.

Read more →

Climate change.

[dramatic pause]

I haven’t even said anything, yet you have already formed a dozen conclusions, adopted a defensive posture, and entrenched yourself into well-defined position.  Gloves up.  Few topics can do that with the mention of a single pair of words.  Amazing, no?  But that’s all it takes.  I just have to type two little words and every single one of you is ready for battle.

Somewhere along the line climate change stopped being a scientific issue and became instead an ideological one.

I don’t know exactly when, where, or how that happened.  It’s been this way for a while.  I can’t seem to find a distinct, obvious turning point.

The linkages between environmental causes and the Democratic party have existed for a long time — certainly before I arrived here on Planet Earth — and I’m not entirely sure where that linkage originally came from.  If you look back a little further, you have Teddy Roosevelt.  I challenge you to name a single president in U.S. history to do more for conservation efforts than him, and he was a Republican.

Red team: you have every bit as legitimate a claim to an environmentally conscious heritage as the other guys.

Read more →