You Can Time the Market, But There's a Catch
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York.
Can you really time the market and what caveat does the host introduce?
Is it possible to time the market? It's not impossible, but it requires a bit of diligence on the part of the investor. We'll explain in a moment. First, these money and market stories you should know. Optimism among U.S. consumers that growth in the economy will produce more jobs and drive the unemployment rate even lower. during the year ahead resulted in a spike in a measure of overall consumer sentiment. The University of Michigan, which conducts the survey, says September's sentiment reading was a second highest level since 2004. Data from the Gordon Haskett Investment House indicates the price of groceries at Whole Foods has not budged much since the chain was taken over by Amazon last year. Analysts priced a basket of 108 items at the end of August 2018.
Now, compared with a similar tally in late March of this year, the analysts found higher prices on 19 items in the basket, while 11 items had lower prices and 78 items were priced the same. There were also fewer sale items included in their basket. Among the items in the basket were Whole Foods 365 brand creamy peanut butter, light balsamic vinaigrette salad dressing, coffee ice cream, Cheerios, Nature's Path buckwheat and wild berry waffles, and Amy's breakfast tofu wrap. And Treasury Secretary Steven Mnuchin has listed a Manhattan home that's been in his family for decades for $32.5 million.
What recent consumer and retail stories set the economic backdrop for the interview?
The 12-room apartment spans two floors with wood-burning fireplaces and a sweeping curved staircase. The Wall Street Journal Real Estate Bureau reports Mnuchin has owned the roughly 6,500-square-foot apartment since 2000, when he purchased it from his aunt. The building at 740 Park Avenue in Manhattan is one of New York's most exclusive addresses. Wealthy families like the Vanderbilts, Kochs, Rockefellers, and Bouviers have all lived there.
It's a question that's not quite as age-old as which came first, the chicken or the egg, but the question, can you time the market, is a mystery that many in the investment community would love to unlock. Jason Zweig writes the Intelligent Investor column for the Wall Street Journal, and he's here to discuss. So Jason, investor Howard Marks has a new book out. It's called Mastering the Market Cycle. And primarily what he says is that when it comes to investing, a good defense is a good offense.
You know, the book really emphasizes that it's extremely difficult to call the turning points in the market, not just the stock market, but the bond market or any financial market, because most of the signals you'll get over the course of an investing lifetime are false signals. They're noise. Because the markets don't change direction in a really significant way all that often. So the reason you want to play defense as part of your offense is because you never really can be 100% sure that the market's going to change direction. So being a little conservative most of the time is a good idea.
And he points out in the book that markets move in big multi-year cycles, as you point out in your story. But investors oftentimes are not able to recognize when those happen. They might misread things or they might take decoys as a serious way to use that in their investment strategy.
If you think about it, over the course of most people's investing lifetimes, we've seen the internet bubble burst in 2000.
Who is Jason Zweig and why is Howard Marks's new book 'Mastering the Market Cycle' relevant?
We had the financial crisis in 2008, 2009. Before that, the crash of 1987. Long before that, a crash in 1973, 74. So in 40-some years, there have been four major turns in the stock market. And over the long sweep of history, that's about roughly how often they tend to happen. So if you're expecting a huge turn any minute, most of the time you'll be wrong.
Why does Jason Zweig say markets are hard to call and what are 'false signals'?
So within those four, over the span of those decades, an investor who might not be as disciplined as they might want to be... would see a day-to-day knee-jerk reaction and think, ah, there's a big turn, and then they might make a mistake that could cost them.
Yeah, exactly.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:05–0:09
2
Can you really time the market and what caveat does the host introduce?
0:09–1:32
3
What recent consumer and retail stories set the economic backdrop for the interview?
1:32–3:39
4
Who is Jason Zweig and why is Howard Marks's new book 'Mastering the Market Cycle' relevant?
3:39–4:08
5
Why does Jason Zweig say markets are hard to call and what are 'false signals'?
4:08–6:05
6
How do investor emotions and hindsight bias distort market timing decisions?
6:05–9:41
Speakers
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