At least once a week these days I come across a news item about some illustrious figure in the world of finance calling for a major collapse in the stock market. Whether it's George Soros doubling his negative bet against the S&P 500 or Carl Icahn warning of a coming day of reckoning, you don't have to look very hard for scary, "the end is nigh" headlines in the financial press. In fact, if I didn't know any better, I'd think the market was down double-digits from its all-time high instead of only 4% with all the pessimism floating around out there. While I respect many of these men and women and am fairly confident they are much, much smarter than I am, I also believe the market itself is much smarter than any of us and will therefore continue to let the market do most of my thinking for me.
Of course, I know that reading these types of fear-inducing headlines can make anyone with some money in stocks a little queasy, but you have to understand that the big names making these calls are largely in a much different position than your typical long-term investor. First of all, they are usually managing some hedge fund or other investment vehicle where they are being paid large fees to make big bets on world markets, so they very much have an incentive to go against the grain and try to make that contrarian call that's going to prove to investors that they know something the rest of the market does not. It's hard to justify that high fee structure when all you're doing is watching the indices drift sideways along with everyone else, and you have to figure there's a fair amount of pride and prestige involved too, as everyone in this business wants to be known as the one who predicted the big market move before it happened.
Before you go and sell out of positions that may have taken years to accumulate, just remember that you're probably on a different playing field as these titans of finance and aren't beholden to a group of investors to hit a home run every quarter. Instead, you are able to take what the market gives us, play hard during the good times, and let the market lead the way during these uncertain periods.
And we're definitely still in an uncertain period, as the major indices can't seem to make up their minds as to where to head next, leaving us drifting once more.
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