December Idea of the Month: What to Buy During Complacency?

Latest thoughts for the Irregulars

By Travis Johnson, Stock Gumshoe, December 12, 2016

Astute Irregulars may notice that I didn’t formally talk up an “Idea of the Month” for October or November, though I did post some Friday File articles that were similar in intent to our usual Idea of the Month pieces and I did make one or two small buys over the past couple months.

There’s a good reason for the lack of an “Idea of the Month” endorsement — I’ve not been overwhelmed with the desire to buy anything new over the last month or two as I watch the markets try to forecast what the world will be like under a new president, and as the fluctuations begin now that we know it will be President Trump.

Piled on top of that are concerns about whether other similar “populist” moves in Europe and elsewhere in the world will continue to snowball into a dissolution of trading blocks, actual trade wars that hurt everyone, or bring big currency shifts… and, of course, the reminder that the potential business-friendly changes that President Trump has talked about are still ideas and still mostly absent detail, they are not legislative proposals or bills and they are far from having actual economic impact (though the impact of changing sentiment is, of course, very clear over the past month).

A lot will change as we digest things over the next six months… and the biggest drivers of stocks so far have probably been rising long-term interest rates and hoped-for infrastructure spending… but rates are likely to moderate after this rapid jump, and big infrastructure spending is extremely long-term and doesn’t usually bring immediate economic growth — particularly when unemployment is already very low.

This is all big stuff, and we’re not going to understand it very quickly or very soon — particularly because the typical investor’s news cycle is 24 hours and we are constantly looking for actionable information. Bit changes may be coming, and we feel the need to DO SOMETHING.

Often, that’s when I make a mistake. The bias toward taking action is usually a problem for most investors, and that’s true for me personally as well. Doing something feels good, it feels like we’re making progress and having an impact on our financial destiny and (maybe) improving our lot… but when it comes to investing, at least the way I try to practice it with a long-term focus ...

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