Though Unsettling – Market Corrections Provide Buying Opportunities From Panicked Sellers

November 6, 2018

Despite less than six weeks elapsing since the last edition, a tremendous amount has happened. Markets, politics, and economics have dominated our various screens.

The civility of public discourse has reached new lows, equity markets appear to have established some interim lows, and the noise from the US mid-term elections have reached 150% of tolerable levels. Thank goodness tomorrow is Election Day. Perhaps we can return to some level of normalcy, or am I too optimistic?

Just before every major election, the hysteria reaches deafening levels, and this undoubtedly unsettles those involved in capital markets. While the US economy remains in juggernaut mode, broader US stock valuations were a little stretched – and some sectors, especially big tech, were very optimistically priced.

Canadian stocks were much more reasonably valued prior to the mid-October volatility, yet still declined with US indices. Capital is flowing out of Canada, at least as it relates to major investments in our resource sector, thanks to our exalted political leaders. That’s not a political statement; it’s a summary of current reality.

Pullbacks within uptrends always challenge our fears. As we climb the proverbial wall of worry, stumbles and setbacks are inevitable; they’re also necessary and downright helpful for patient and disciplined investors. Though unsettling, declines like the one we recently experienced allow our portfolio managers to buy back into full positions they had previously trimmed during strength. Sometimes entirely different and better upside opportunities arise, and pullbacks/corrections provide the cover for our calm portfolio managers to buy these companies from panicked sellers. It’s all about temperament.

While we certainly didn’t plan it this way, the timing of our Straight Talk for Retirement Success workshops was serendipitous. The theme was how to bullet-proof your retirement plan in advance of the next financial crisis, and still generate solid returns in the interim. I focused on a series of very specific strategies that help to generate incremental positive returns AND reduce downside market volatility, as well as how to create a contingency plan in advance of the next financial crisis. It was all about how to avoid being the bug on the windshield yet again.

These workshops were very well-attended, and based on numerous requests from our newsletter readers and the MoneyTalks audience, we decided to record the last session here in Calgary.

I encourage you to download/print the self-assessment form and to realistically assess your current strategies versus those I speak to in the workshop. If you’d like to request a confidential review of your current portfolio and retirement plan, simply reply to this email.

You’re also welcome to forward this note onto others who may have been asking you what you’re doing to protect and grow your portfolio. We know that many people are unsettled by the current environment and are looking for practical and realistic solutions, so perhaps our workshop might be helpful for them?

Speaking of unsettling, the current hyper-partisan screeching around the US mid-term elections is almost over. Thank goodness. Will the “Blue Wave” of Democratic dominance actually manifest itself? Earlier in the year, those on the Left were chortling about taking back control of both Houses of Congress. Not much mention of anything positive they might do with that power, curiously enough. They’re sounding much less confident in recent weeks, though.

Today it appears much more likely that the Republicans will hold – perhaps build – their slim Senate majority, and the Democrats look poised to tip the balance in their favour in the House of Representatives. If memory serves me correctly, the Democrats need to pick up 23 more Congressional seats to gain control. This is really only ever about control, i.e. power. It’s the same for both sides.

Many of these “toss-up” seats are within the “normal margin of error” for pre-election polling, so who knows? And who really knows what the true margin of error is for polls anymore? Does the obvious social stigma of voting for Trump (being smeared as racist, misogynist, homophobe, Islama-phobe, bigoted redneck, white nationalist, transphobe, etc.) cause some people to conceal their voting intentions from pollsters?

Given the level of smearing, it wouldn’t shock me if many people would prefer to publicly disassociate from Trump. He’s now seemingly responsible for all political violence in America – at least according to every media outlet left of Fox News, which is to say > 80% of media. Decent people (i.e. most of the population) abhor the ideas that Trump supporters are accused of espousing, so why risk being labelled as one of these “Deplorables?”

The 2016 election of Donald Trump surprised all the mainstream pollsters, and stunned the mainstream media pundits on election night. Did social stigma contribute to the polls being dead wrong? The pain of losing an election that was supposedly easily won was on full display in the weeks afterward. And apparently these are still open wounds for those on the “Loud Left” as evidenced by their vitriol. Losing power when you were already making plans must have been devastating.

Naturally, the folks on the “Loud Right” are matching or exceeding the rhetoric on the Left, generating their own talking points – some accurate and others caustic and/or incendiary – and the vicious circle of partisan politics continues its escalation. Neither party impresses me, despite the fact that I am a small-c “conservatarian.”

In my September newsletter, I mused about whether or not the Democrats had overplayed their hand with the accusations of then-Supreme Court nominee Brett Kavanagh. It felt like a carefully planned last-minute bombshell to both derail the confirmation process itself and to also gain the upper hand in tomorrow’s mid-terms. They failed on the first objective. Jim Dines famously said, “Over-efforting creates countervailing forces,” and that’s what it felt like to me. No one is ever right 100% of the time and only time will tell if my intuition was accurate on this subject. We’ll know shortly.

Whatever the electoral outcomes are, my deepest hope is that we can get back to reasonable conversations about important subjects that require actual solutions. I know that many politicians would rather perpetuate the problems (as galvanizing issues) than find and implement effective solutions. If there are no problems left to solve, then how to attract votes? The current discourse is socially toxic and has become quite literally deadly. Real leadership on this matter is necessary to re-stabilize volatile America. Leadership from everyone involved.

I’m looking forward to attending my fourth World Economic Conference in Orlando. Martin Armstrong’s insights and his computer’s unbiased analysis will be very helpful in the volatile times ahead. Hopefully we’ll also hear some good news in respect of the full Socrates system getting launched. Everyone’s patience has been tested by the delays, and it would be nice to be able to move forward.

Patience and Discipline are accretive to your wealth, health and happiness; so focus on these.

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