Newbies are about to pile into the market. They could get slaughtered.
Has the mood of the herd already shifted?
Could be. Australian stocks continue to rally, and someone sent me this chart that Alan Kohler had on the ABC news earlier in the week.
Yep, that’s the number of Google searches for the phrase “How to Buy Stocks”. It’s totally off the charts.
What’s going on here?
This is a really interesting one to unpack.
First, I don’t think it means it’s time to jump back in. Not by a long shot.
Because we know that if people are searching for “How to buy stocks” it probably means they’ve never bought stocks before. We’re talking about Newbies.
And if you’re a newbie, probably in your 20s and 30s, then you have never seen a recession. You’ve never seen the wheels come off the economy and things get rocky.
Your only experience is the GFC – a sudden crash that came out of nowhere, a massive money printing spree in the aftermath, and then an asset price boom on the back of all that cheap money.
That is the sum of your experience. That’s just how you think markets work.
And you’d be right.
But, as I said, you don’t know how recessions work. (We are very clearly headed for a recession). You don’t understand how economic multipliers work – how every unemployed person is a consumer that’s bunkering down. How every bankrupt firm is another bad debt piling up on the banks balance sheets. How these things go round and round.
My personal view is that if you’re “buying the dip” on a sharemarket, just because it’s come off it’s (massively over-valued) highs, and for no other reason than that, then you risk buying into a vicious trap.
You’ve got to watch the fundamentals. And personally, with unemployment ramping up, the government desperately improvising and trying to provide a backstop to the economy and the labour market, and the case-curve only showing the slightest signs of flattening here and still exploding in the US, it’s just way too early to call the bottom.
That’s just not a gamble I’d take.
But hey, this is Friday. You want a break from the markets. You want half-baked philosophy, and lazily researched psycho-analysis from a well-dressed narcissist.
And so the question I’d ask you is, of all those people who punched “how to buy stocks” into Google, how many of them are actually going to end up doing anything about it?
My guess, based on my experience in this space..?
If you’re lucky.
We all know that crisis creates opportunity. We all know there’s money to be made here.
But then, when people look into it, they realise that it’s actually a bit complex. There’s no simple answers. No such thing as a guaranteed winner.
And that then opens their eyes to the fact that there’s work to do. There’s systems to learn, research to undertake.
It’s too hard. They do a bit of research, and then just give up. For some that will be in a conscious decision to throw up their hands and watch Netflix. For most though, it will be a slow death.
They’ll decide they need to do more research. Ask more questions. Get better data. See how the market’s evolving next week.
But then life gets in the way. The money question moves to the back-burner, then quietly goes off the boil altogether.
And ten years later, they see all the money that other people have, and they screw their face up at the taste of sour grapes.
I’ve been in the game a long time now. I’ve seen it before. We’ll see it again.
But right now, I’m asking you to take a good hard look at yourself. Are you going to pump a few things into Google and then forget about it?
Or are you going to seize this moment? Opportunities like this don’t come around every day.
You might only see three or four in your lifetime.
Are you going to waste it?