never sell Archives - Bankers Anonymous

Stock markets worldwide will drop significantly tomorrow, and throughout the rest of the week, as US and global investors recalibrate their expectations of the United States due to the little-anticipated Donald Trump victory in today’s Presidential election.

Stock Market

From an individual investor perspective, I suddenly have deep regrets about two pieces of 100% rock-solid advice I’ve given out about personal investing in the stock market. The first is that there’s no particular advantage to owning ETFs over mutual funds, since nobody should really need to trade their personal stock holdings in the middle of the day. ETFs allow you to trade at any time when markets are open, whereas mutual fund investors can only trade based on the day’s closing price. But I’ve never believed any individual investor should be in a such a hurry to sell that a mid-day trade is better than an end-of-day trade.

With the victory of Donald Trump, I’m really sad that I have to wait until the end of tomorrow to sell stocks, rather than mid-day.

Implicit in this comment is my second deep regret. My advice has always been the Winston Churchillian rock-solid “Never, never, never never sell.”

But of course now I want to. It will take all my will-power to do nothing, as I watch stock market values plunge tomorrow.

******

In a seemingly unrelated vein, (but is it?) my favorite Tracy Chapman song “Why” goes like this:

“Why do the babies starve when there’s enough food to feed the world?

Why are the missiles called Peacekeepers, when they’re aimed to kill?

Why is a woman still not safe, when she’s in her home?

Love is Hate. War is Peace. No is Yes. We’re all free.”

No Gridlock

It’s both a cliche and a truism that Wall Street prefers gridlock in Washington. Gridlock is predictable. Gridlock is stable. It prevents wild swings in policy. A divided Executive and Legislative branch tempers drastic or rapid change in regulations.

With a newly elected and strongly Republican House and Senate, and Donald Trump appearing to have a “mandate” for his bat-shit crazy ideas, whims, and personal vendettas, who is going to be the check and balance on the worst ideas from that side of the aisle? Like Trump’s fiscal spending plan, for example, estimated by a bipartisan budget group to add $5 Trillion to the federal deficit? Like Trump’s continual threats to unilaterally alter trade agreements or punish our most important trading partners like Mexico and China?

******

Tracy Chapman continues singing in my head:

“But somebody’s gonna have to answer

The time is coming soon

When the blind remove their blinders

And the speechless speak the truth.”

******

US Treasurys

US Treasury bonds typically live in what the kids on the show Stranger Things would call The Upside Down. Meaning, if stocks go down, bonds go up. When stocks go up, bonds can go either sideways or down. And that’s what’s happening with a Trump victory tonight. A huge bond rally is happening right now, overnight, as I type this at midnight on Election night.

But also, this rally in US Treasury is a totally bonkers reaction to a Trump victory, since Trump actually threatened to renegotiate US sovereign debts, if need be. No responsible financial or political US leader has ever made that threat. We’ve never defaulted, or threatened to default. Alexander Hamilton’s lasting contribution¹ to our country’s strength is our rock solid credit, ever since 1789. Threatening US Treasury default is the kind of Third-World bush-league bullshit disruption that bond people don’t appreciate, and which I wrote last summer would have unknowable but possibly catastrophic consequences for our country, which actually is heavily indebted but treated like a safe bet in world markets. Until now.

Back to you, Tracy:

“But somebody’s gonna have to answer

The time is coming soon

Amidst all these questions and contradictions

There’re some who seek the truth.

Love is Hate

War is Peace

No is Yes

We’re all Free.”

Why?

Post read (562) times.

Outside of inspiring Ron Chernow and Lin-Manuel Miranda’s book and show, respectively ↩

In November I took my five-year-old’s life savings (mostly tooth-fairy money and birthday gifts) and bought her 4 shares in Disney stock via a custodial (UTMA) account.

Fellow readers of If You Give a Pig a Pancake will already be familiar with the idea that certain actions lead inevitably to reactions. You see, if you give a pig a pancake, next thing you know she’s going to want syrup. And if you give her syrup, she’s going to get all sticky and ask for a bath.
And if you buy Disney shares with your five year-old’s tooth-fairy money, next thing you know you’re going to walk into her room to say good night, and…

“Daddy?”

“Yes, Sweety?”

disney_shares

“I want to sell my Disney shares.”

“Um, what? No. No! NO! Stop!”

“But I don’t like that all my money is gone from my bank.”

“Gah!”

You see, right there, that’s the problem with five-year-olds and their stock portfolios. They buy the thing and then they want to sell it.

Actually, no, that’s not the problem of five year-olds.

That, right there, is the problem with all people and their stock investments. They want to sell them. They don’t like that the money leaves their bank account. And the value can go down. I’m here to say: Don’t sell. No matter what.

The whole darn thing won’t work if you sell.

Magical Fairy Dust

You see, stocks produce magical pixie dust if you treat them right. Buy them in diversified bundles (like a mutual fund!) Then treat them with benign neglect over the next, say, thirty years, and you will be rewarded with a pot of gold at the end of the thirty-year rainbow. Tinkerbell herself couldn’t produce anything more magical than your diversified – hopefully low cost! – mutual fund.

magic_fairy_dust

Ok, let me stop here for moment. Maybe pigs, pancakes, pixies and pink castles are not getting the message of NEVER SELLING across strongly enough.

Let me change the channel so abruptly you will be left breathless. For our next analogy, let’s go to the darkest moment in Western Civilization over the past century.

Never Give In

I’ve been reading a lot about Winston Churchill’s life lately. I can’t recommend William Manchester’s three-part biography series The Last Lion highly enough. Summarizing 3,000 pages of Manchester’s biography into a three-word motto for Churchill’s life would go like this: “Never Give In.”

In 1940, when the Nazis controlled all of Europe between Norway and Greece, with America isolationist and Russia in a cynical alliance with the Nazis, and only the British, alone, standing against Hitler, Churchill never gave in. As he said in 1941, before the US entered the war:

“Never give in, never give in, never never never – in nothing, great or small, large or petty – never give in except to convictions of honour and good sense.”

The Nazis embodied the darkest, mostly beastly version of humanity. They built the greatest military force Europe had ever seen, fueled by sadism, racist ideology, and terror. First Czechoslovakia, then Poland, then Norway, Holland, Belgium and finally France succumbed in mere weeks to brutal blitzkrieg invasions. Imagine today’s ISIS, only they had already conquered all of Europe, with the largest and best-trained army in the world, led by a charismatic psychopath fulfilling his long-promised destiny of racial genocide.

dunkirk_evacuation
England, with Churchill at the head, stood alone. Prominent members of the British government in 1940 called for making the best peace compromise possible with Hitler. Hitler himself assumed Britain would ask for a peace settlement, so he could focus on conquering his next goal, Russia.

Churchill never wavered.

On June 4^th, 1940, having lost ally France in a matter of weeks, and having barely escaped with the tattered remains of the British Expeditionary Force from Dunkirk, Churchill never considered capitulation to the Nazis. He relayed the defeat to the House of Commons, but said:

“We shall go on to the end, we shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall never surrender.”

Never Sell
Bucked up by that example of Churchill’s spirit, let me re-summarize my approach to stocks: “Never Sell.”

“Never, never, never, sell.”

never_give_in

Can I be any clearer?

But, but, but

But interest rates are going up!

But the Democrats (or Republicans, or Trumpians or whomever) might win and everything’s going to collapse!

But oil prices!

But ISIS!

Stop being a five-year-old. Be Churchill.

Incidentally, at times, she unveils her stubborn Churchillian resolve to never give in, like when I ask her to put on her shoes when we’re already late to get somewhere.

Can you picture me, scaring the living daylights out of my five year-old with this Churchillian bedtime story about never never never never selling? Don’t worry, I didn’t do that. (As far as you know.)

I can assure you of this: She will not be selling her Disney stock.

Please see related posts:

Tiny person owns tiny piece of a big company

Daughter’s first stock investments

Mutual funds v ETFs

How Much Do Costs Matter?

Post read (562) times.