*IMPORTANT: this article is for entertainment purposes only. It does not seek to endorse any given investment product or investment strategy. Be diligent, and above all else remember to never sue investingideas.ca if your emotions lead you in the wrong direction.
There is more wisdom in your body than in your deepest philosophy.
Friedrich Nietzsche, Thus Spake Zarathustra
There is no shortage of people out there who will tell you to to keep your emotions out of investing. To disregard your feelings when investing. In fact, when you look up “investing feelings” on google, almost all of the top hits are about how to avoid emotional investing.
I don’t agree with this. At least not as universal advice. If you have spent a significant amount of time paying attention to the stock market, you begin to develop a feel for what is going on. You can’t really help it. We all have feelings, and when you spend a significant portion of your day concentrated on something like the stock market, bond market, or FX market, you develop feelings about it.
This is similar to how a hockey player might have high “hockey IQ”. This means that they understand what is happening at an intuitive level. Ask yourself: has the hockey player always been like this? No, that would not be possible. The way that you develop this intuition is by rote learning, by sound principles, by practice and conscious thought. When you learn to skate, it is unnatural and stressful. Left foot – push, right foot – push. Over time it becomes part of you – ingraining itself into your body. Soon you’re scoring wicked top shelf wristers, and you don’t even know how you’re doing it.
That being said, I do not claim to be the NHL hockey player of investing. I haven’t put in 10,000 hours into analyzing the markets. Yet, I believe that my feelings are worth expressing. So indulge me if you will – here are my unfiltered feelings about the state of the market.
My Feelings about the Market
Low Value
I feel like there is increasingly low value in the TSX. By that, I mean that stocks are looking overpriced. Furthermore, I feel like everyone knows it. I feel like a lot of the good news is priced into the market, such as vaccine progress and increasing economic production.
As many people have pointed out, we are at a point where “good news is bad news”. If the economy recovers too quickly, for example, the Bank of Canada will have little choice but to raise interest rates. This is looking increasingly likely. When interest rates are raised either in Canada or the USA, the stock market will react negatively. Therefore the good news – increased economic prosperity/output – will result in bad news in the form of an interest rate hike.
This market pricing makes me uncomfortable with the amount of money that I have in the stock market. I hope that by investing in value companies (increasingly few and far between) I can circumvent any major market correction.
COVID is Done For
Something that is definitely priced into the markets is that the coronavirus pandemic is almost over in Canada. With widespread vaccination, I feel this is the case. At least I hope it is.
I feel like the first dose vaccination plan is nearing the end, as Canada prepares to offer all adults a vaccine. I am hopeful that pharmaceutical companies now have sufficient knowledge to deal with SARS-COV-2 variants.
Inflation – Real and Present Danger
I feel that inflation will be a prominent factor in the coming year or two, especially in Canada and the United States. Warren Buffett feels this way as well, saying on May 3rd 2021 that (according to CNBC):
“We are seeing very substantial inflation”
…
“We are raising prices. People are raising prices to us and it’s being accepted.”
Warren Buffett
There are a couple of factors to this. The release of massive savings into a reopening economy may lead to inflation. Printing of money to support the COVID-19 afflicted economy is another prominent factor.
I feel that inflation is already higher than the official CPI indicator because of the cost of houses. As you may know, houses are not included in the Consumer Price Index which is used to measure inflation in Canada. Therefore, the recent highly material house price increase is not included in the recent inflation stats which the Bank of Canada uses. The price of fuel is also sharply rising as of late.
Cautiously Optimistic on Precious Metals
I feel cautiously optimistic when it comes to precious metals such as Silver, Platinum, and, everyone’s favourite, Gold. I see these as time tested stores of value in a time of uncertainty. Uncertainty is here to stay for a while.
For one, the place of the United States as the unquestioned world superpower will increasingly come into question in the coming years. Along with this, the US Dollar’s place as the de-facto world currency will be called into question. Increasing concern about inflation around the world will couple with this to keep precious metals an attractive asset.
Having said that, with the sharp price increase in Gold in the last two years, the contrarian in me feels cautious.
What’s Happening?
Been dazed and confused
For so long, it’s not true
Led Zeppelin
I feel unsure as to what comes next. What comes after COVID-19? What is the next news story to move markets? I feel dazed and confused. I think a lot of the world feels this way, including market movers.
I feel that we are in a time of change. The trends will become increasingly clear in the coming months, and more sound investment decisions can be made then. I feel it is prudent to wait for more visibility and to continue to invest in value companies.
So there you have it: my honest feelings about the financial markets. I hope that you can get in touch with your feelings and emotions, and strike a proper balance between thinking and feeling – Yin and Yang.
Until next time,
Happy Investing
I think, that you are not right. Let’s discuss. Write to me in PM, we will talk.