3 Things 9-20

09/20/2021 Although MAS is a financial services company, not everything published herein will be about numbers or investing. But no matter the topic, we hope for three things: 1) That you find the time you spend engaged worthwhile. 2) That you’ll reach out to us for help in any of our areas of expertise if something we discuss creates an urging in you to do so. 3) That you’ll share this with somebody new each time you read it. Thing One Farrell's 10 Rules Bob Farrell is a Wall Street investing legend who, beginning in the 1950s and lasting for several decades, pioneered the use of technical analysis and psychology (investor sentiment) to better understand how stock prices would behave. Over that time he shared many nuggets of wisdom about what he'd observed. Below are what became known as his 10 Rules:

  1. Markets tend to return to the mean over time

  2. Excesses in one direction will lead to an opposite excess in the other direction

  3. There are no new eras — excesses are never permanent

  4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways

  5. The public buys the most at the top and the least at the bottom

  6. Fear and greed are stronger than long-term resolve

  7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names

  8. Bear markets have three stages — sharp down, reflexive rebound, and a drawn-out fundamental downtrend

  9. When all the experts and forecasts agree — something else is going to happen

  10. Bull markets are more fun than bear markets

When the going gets tough in the stock market, which it undoubtedly will eventually, remember these rules and also remember there are people who can help you work through those tough times in a systematic way when your resolve weakens and you want to cut and run.

Thing Two More on Education and Investing Last week we talked about the sad state of affairs, nationally, in the area of math and reading proficiency among black eighth-graders. It's worth noting that there are at least some people in education who aren't afraid to state publicly that there's a connection between that and some of the financial problems individuals and groups in our society face. The following is from an article in the Wall Street Journal written by Barton Swaim. The text in quotations is from two professors, Benjamin and Jenna Storey, at Furman University: Many critiques of liberalism and modernity quickly become critiques of the free market. It’s a tempting solution because the market is something you can change or rearrange by force of law. The Storeys don’t take that view. “The problems we’re facing right now are not fundamentally economic problems,” he says. “They’re fundamentally educational and philosophical problems. The way forward is a multigenerational project, and it’s going to begin in schools.” Amen. In light of all the data, it's hard not to argue that the stranglehold that public school systems have on our children's education must be relinquished - unless you're someone who is currently benefitting from the system and can't see how you'd benefit more from a new one. It should be noted here that this is not teacher-bashing at all. Although there must inevitably be bad teachers, like there are bad things in every category of things, the assumption going in is that most teachers are good and are capable of helping educate our children. It's the system that is rotten. In the new system, choice needs to be paramount - for the teachers and the students. If we're going to improve the financial outcomes of "marginalized people", we going to have to improve the educational outcomes of those same people. The chart below from Pew research helps frame the challenge. We know that the most affluent among us are invested in the markets. At the highest level that's 52% of households. We have to get to work educating the other half. At least initially, that education will have nothing to do with stocks and bonds. But we'll never get to those subjects with people who cant read and write. Please tell that to the next person who suggests that the way to prosperity is by taxing the rich. Explain to them that it's about the creation of wealth, not the confiscation of it. And then let them know that increasing taxes doesn't create wealth it just takes wealth from one pocket and puts it in another to be spent. Then, if you can get them to at least accept that premise, share with them the chart below and explain to them that almost half the country isn't investing. And then tell them that rather than vilifying the rich and discouraging them (by the various disincentives to accumulating wealth that are being proposed by politicians), we should be encouraging more people to learn how to become wealthy. That will have the added benefit of revealing to anybody who's paying attention, that things like skin color and birth class aren't the real barriers to individual prosperity. The lack of knowledge is.


Thing Three Just A Thought “You can’t have a better tomorrow if you are thinking about yesterday all the time." - Charles F. Kettering