☕ Worried about the selloff? Where markets go next

Howdy! 👋 

The markets are getting hammered again this morning, and there’s a lot of fear creeping in around the edges. 

So, let’s talk about that for a New York minute. 

Why the selloff and why now? 

The markets are all about psychology right now. 

Nothing else matters until that’s sorted… not the Fed, not earnings, not politics. 

Nothing. 

The big money got spooked when Michael “Big Shortimus Predictimus” Burry filed his 13Fs … and the computers they use sprung into action with ginormous sell programs that are once again racing to the bottom this week. 

I’ve been telling you for years that computerization would introduce unprecedented volatility. The rise of “passive investing” too – meaning the widespread proliferation of funds.  

Now it’s time to reap the whirlwind. 

The machines don’t care about valuation, fundamentals, or your retirement timeline.  

They care about flow.  

Passive products – like index funds, ETFs and mutual funds – don’t care about price either — they buy because money comes in and sell because money goes out.  

Full stop. 

That combo turns every wobble into a whip-saw.  

Every twitch into a tailspin. 

And the worst part? 

Big money knows it, but the weak money feels it. 

This isn’t new, despite what you might think. 

Our brains have always processed recency bias, but social media, the 24x7 news cycle and near instant availability of information have made it dramatically more challenging. 

Get (and keep) your emotions outta the equation before they kill your portfolio. 

Proven tactics like dollar cost averaging and its lesser-known cousin value cost averaging into world-class names on your buy list is the way to turn panic into profit potential.  

You DO have a buy list… right??!! 🤷🏻‍ 

The OBA Family, btw, knows all about those things and, most importantly, which companies can be “calmer” ports in the storm – be sure YOU do, too! 

Keith’s Investing Tip: Volatility isn’t a threat, but a big ol’ door opening. Put another way, when the algos start tossing the furniture, you want to be looking for an entry, not an exit. 

How low can markets go? 

Unknown – and anybody who tells you otherwise is talking out of an unmentionable part of their anatomy. 

How much farther the markets fall is a function of how much leverage is still in the system – meaning how much money the big traders have borrowed. They’re usually up to their eyeballs in debt because that’s how they magnify returns. 

They’ll sell down until the VaR – value at risk – is below thresholds that would otherwise result in a big, hairy margin call. 

And they’ll start with tech because it’s a) easiest to unload and b) usually the highest leveraged holdings with the most “vig.”  

Should you worry? 

That depends on what you own and how you own it. 

• If the answer is you’re a speculator and you own a lot of crap stocks, good luck with that. You could be in for a rough ride. 

• If you’re an investor and the answer is the world’s best stocks, your portfolio will undoubtedly come under pressure but, odds are, will fall less, stabilize faster and – the best part – will come roaring back sooner rather than later.  

The markets have a very defined upward bias, and it’s critically important you play to that right now. 

Personally, I am not the least bit worried. 

Neither are world class investors like Ron Baron who said point blank that the tech selloff is an opportunity – and my favorite part – that he’s never selling his Tesla stock. (Read) 

Mary Callahan Erdoes, CEO at JPMorgan Asset and Wealth Management, says investors should be focused on opportunities ahead rather than worrying about whether AI is a bubble currently. (Read) 

I agree. 

To which I’ll add that, “Investing in optimism beats cowering in pessimism.” 

The right mental framework matters most 

Let me be blunt. 

Most investors fail over time because they worry about moments in time because they lack a proven, long-term framework to get ‘em through short term noise. 

The good news is that this is a totally fixable problem. 

Find people who know what they’re doing and learn.  

If that’s me, cool beans. People tell me that what they’ve learned by being part of the One Bar Ahead® Family has changed their life AND their financial future. If it’s somebody else, that’s also cool beans.  

Either way, the point I want to make is that volatility is a travelling companion, not something to fear. So again, find an expert who resonates and who has the chops and, again, learn. 

What to do now 

This is as simple as it gets. 

People tell me all the time that they’re going to wait for a “pullback” or a “correction” to buy. 

Well, here we are. 

Do not be the one chicken in the barnyard who loses out. 

Keith’s Investing Tip: Chaos always creates opportunity and the more of the former there is, the more of the latter you have. 

What about hedging? 

I get that question a lot, especially on days like today. 

Most people misunderstand hedging, believing that it’s going to help prevent losses. 

Hedging, when done properly, is how you stay IN the game. 

To that end, I penned a quick 5-minute guide to hedging without options a few years ago to help people get through volatility like we’re experiencing now. You can check that out here if that’s of interest. 

Frankly, though, I’m simply going to stick to my bippies. 

This isn’t rocket science. 

Buying great companies, dividends, reinvesting and simple tactics keeps me on offense even if I’ve got to think defensively to do that. YOU can easily do the same thing if you want to. 

Keith’s Investing Tip: When the crowd panics about spending during a tech revolution, history shows very clearly that’s usually your cue to lean in, not back out. The future belongs to the companies laying track, not the ones waiting at the station. 

Speaking of which, I’m going to be sitting down on Sunday with the venerable Suze Orman for a special interview via YouTube. You’ll be able to watch that on Suze’s channel and mine. 

Frankly, I hope you do. 

There’s a lot of misinformation, hype and hoopla making the rounds. 

We’ll be setting the record straight and hopefully, injecting some calm confidence you’ll find helpful, too. 

Bottom Line 

The markets are the only store on earth where people fear a sale. 

Now, I’m going shopping. 

You? 

As always, let’s MAKE it a great day and finish the week strong. 

You got this – I promise! 

Keith 😀