For some, following the stock market sounds about as exciting as watching paint dry. Not for me, though. I view it as a continuously unfolding source of entertainment and surprise. Like the longest-running Netflix series in the world, with thousands of new twists and turns every year.
A snapshot
Silicon Valley Bank, Signature Bank, and First Republic Bank collapsed this year. These three financial institutions had more in total assets when they failed than the combined 25 banks that went under in 2008!
On top of that, Credit Suisse is no more. The 166-year-old bank that helped build modern Switzerland was rescued by its fiercest domestic rival.
All this in two months.
Who on earth predicted any of that? Nobody, that’s who. Certainly not me.
So when it comes to the stock market, I have absolutely no idea what’s going to unfold next.
Of course, I have a portfolio of stocks I think will do well over time. All investors do, don’t they? But the road to realising those potential future gains is likely to be more eventful and random than I can envision today.
One thing I can say with certainty, though, is that Mr Market will have tantrums and meltdowns, as is his way.
Objective?
If you roll dice, you know that the odds are one in six that the dice will come up on a particular side. So you can calculate the risk. But, in the stock market, such computations are bull – you don’t even know how many sides the dice have!
Nassim Nicholas Taleb
The stock market is awash with data and figures. Charts and indicators. Ratios and metrics.
To many, this gives share prices an almost scientific quality, like readings from a precise weighing instrument in a laboratory. Every stock is efficiently priced to perfection. Such theories have won Nobel Prizes.
Are these theories correct? Nobody knows for sure.
But given the global equity market has grown to be worth $107trn today, we know it works.
So on we go.
Opinions
A lot of investors believe Tesla stock is overvalued today. Those same people probably believed that to be the case 10 years ago, before it went up 3,327%.
I read a report recently arguing Tesla stock could be heading to $0. Meanwhile, permabull investor Cathie Wood predicts the stock could reach a $6trn valuation over the next four years.
Everyone seems to have an opinion. Most of those views are probably knee-jerk, biased, incomplete, or uninformed. But this diversity of thought makes such lively debates entertaining.
Open invitation
Warren Buffett has been investing since he bought his first stock in March 1942.
Over those eight decades, the Oracle of Omaha has gathered deep wisdom and amassed an encyclopedic knowledge of hundreds of businesses. Yet even he’s the first to admit that he has absolutely no idea where stocks go next.
But one thing worth noting is that the day Buffett bought his first shares, the Dow Jones Industrial Average index closed at 99 points. Today, 81 years later, it trades above 33,300.
So despite all the day-to-day drama, we know the market goes up over time. And it’s open to anyone who wishes to get involved. Just don’t forget to bring popcorn.
