Chris Ciovacco | Jul 11, 2017 12:45AM ET
A Simple And Powerful Concept
Eckhart Tolle’s New York Times Best Seller The Power Of Now has sold over 3 million copies worldwide and has been translated into over 30 languages. The basic premise of the book is captured in the excerpt below:
“Nothing has happened in the past; it happened in the now. Nothing will ever happen in the future; it will happen in the now.”
The Twin Thieves: Fear and Regret
Our entire investing lives have taken place in the now. We have never executed a buy order in the past, nor have we ever executed a sell order in the future. However, we have all wasted a considerable amount of mental energy thinking about the past or worrying about the future.
The Past Is Yesterday’s News
Investors cannot go back in time. Dwelling on the past can expend a tremendous amount of emotional capital that could be used to make sound and rational decisions in the present.
“Sometimes letting things go is an act of far greater power than defending or hanging on.”
Eckhart Tolle
No One Can Predict The Future – So Why Waste Time And Energy On It?
Since economic and market outcomes are based on the future actions of millions of consumers and investors around the globe, logic tells us no one can consistently predict where the economy and markets are headed. If the best football handicappers don’t perform much better than a coin flip when trying to predict what will happen when 22 players compete for just 60 minutes, how can we expect someone to accurately forecast the actions of millions of consumers and investors 12 months in advance?
How Can The Now Help With Investing?
Would you rather invest based on a forecast with 50-50 odds or would you prefer to invest based on information known with almost 100% certainty? The future is very uncertain, but we can understand the current profile of the financial markets and economy with near 100% certainty.
What Are The Facts Telling Us In July 2017?
Given the future is highly uncertain, investment odds can be improved by allocating capital based on facts, and adjusting when the facts change. This approach relies on present day facts, rather than uncertain forecasts of what may or may not happen. This week’s video looks at present day facts and compares them to the facts near major bearish turning points. Even in the present day context of ongoing concerns about North Korea, the Fed, and economy, the video shows numerous examples of the power of staying in the now.
After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.
Was The Economy The Same In 2007 and 2009?
One method to stay in the investing now involves monitoring and adjusting. Do you believe there were discernible differences between the market’s technical profile when stocks peaked in October 2007 and when they bottomed in March 2009? Do you believe the known economic data was discernibly different before and after the financial crisis (October 2007 vs. March 2009)? If the answers are yes, then it is logical to assume there were discernible incremental changes in the hard evidence between the S&P 500 in October 2007 and March 2009.
1982: Would You Have Predicted An 18-Year Rise In Stocks?
If your self-talk is something along these lines, “Stocks cannot go up given all the problems in the world today”, then ask yourself how many people felt the same way in 1982?
The events below took place in 1982, or in the first year of an 18-year bull market in stocks:
Investment Implications
The concept of staying in the now is based on probabilistic outcomes, or if you prefer probabilistic forecasting. Probabilistic forecasting is based on known information rather than where someone believes the data or markets will be in the future. When the “knowns” change, adjustments can be made in the now. As shown in the video above, the present day facts still favor good things happening relative to bad things happening, which is reflected in our growth-oriented investment allocations.
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