The stock market is always so easy with hindsight

FT 2011

People often say these days, oh, it was so easy to invest in stocks in 2009 or 2010 and then just wait, do nothing and make loads of money by now (August 2017). It was just so easy and it did not require any wits or guts, you just had to do the obvious – buy stocks back then. But was it so obvious back then?

Let’s take a look at the Financial Times of 22/23 January 2011. In a column Merryn Somerset Webb published in that issue, she wrote about an investor called Ken Fisher who thought that the stock market was hugely overvalued (S&P 500 stood at around 1280) due to QE. Mr Fisher considered himself a savvy investor (and probably he is) holding 17% in cash just in case. Moreover,  he thought the market is going nowhere and that it will only do “big ups and downs that amount to zero”.

What should one make of this?

For starters Mr Fisher could very well say that he was an amazing prophet. The S&P 500 indeed hardly moved in 2011. So if he was speaking of the year that lay ahead he turned out to be exactly right.

However, my feeling is that he had a much broader time-horizon in mind. And his words to me are indicative of the broader market scepticism back then and indeed all the way up until now. To me, Mr Fisher’s words are the epitome of the broader syndrome of the market players being constantly worried when the market is poised to go up. And then tragically investors are usually least worried when the market is about to crash. Like the enthusiasm for stocks in early 2007.

But hey, it was damn “easy” to invest in stocks in 2010 and make loads of money! It was nothing like the situation now with all that uncertainty lurking everywhere.

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