Articles by Nick Massey

One of the most dangerous emotional issues in investing is called “FOMO,” or the fear of missing out. It’s probably responsible for a large percentage of losses from investing in things people don’t understand or didn’t at least understand the risks.

Recently, there was a very significant day in stock market history. Thirty-five years ago, October 19, 1987, was one of the most dramatic days of all time in the financial markets. The Dow Jones Industrial Average dropped 508 points, or 22.6%, that day. The Dow went from 2,246.74 to 1,738.74, the largest one-day percentage drop in history. It wiped out 14 months of gains in only a few hours. Black Monday destroyed $500 billion of stock values and $1 trillion worldwide.

Well, it looks like the Federal Reserve is not kidding around in its attempt to kill inflation. The problem is there can be a fine line between slowing the economy to lower inflation and slowing the economy into a recession. In my opinion, we’re already in a recession, and the administration just hasn’t admitted it yet. In his prepared speech from Jackson Hole, Wyoming, in August, Federal Reserve Chairman Jerome Powell said, “Yes, the Federal Reserve has, in fact, been squeezing inflation out of the economy,” and it would continue doing so “until the job is done.” He has continued to reiterate that statement without wavering.

One of the most common questions I get asked is, “When should I start taking my social security?” Like most people, I’m sure you paid a lot into the system over your working lifetime, and you want to get the maximum amount for the longest period of time. So, do you take the benefits early, or do you hold out until full retirement age (currently 66 or so)? Or do you hold out even longer, perhaps to age 70, for an even larger payout?

Unless you’ve been living on another planet, you certainly know that we are experiencing the highest inflation in the U.S. in 40 years. The latest Consumer Price Index (CPI) figures came out on July 13th, indicating year-over-year inflation of 9.1 percent. Ouch! You don’t need to be an economist to know that or to read economic news. You know it every time you fill up your gas tank, go shopping for groceries, or almost anything. I don’t know when it is going to come down to a much better level, but I suspect it isn’t any time soon. A question I often get is, “where can I put my savings money that is safe and can at least keep up somewhat with inflation.” Funny you should ask. It’s not often that the U.S. government offers a financial gift. But when it does, it’s your job to take it.

There is an old Wall Street expression about market timing that says, “It’s not about timing the market. It’s about time in the market.” People think a lot about price in markets but don’t think much about time. For example, think of the Coronavirus crash of March 2020. Stocks dropped 35 percent (which would rank it among the top great bear markets in history), but they only stayed down for a couple of months. I’m sure most people do not consider it one of the great bear markets in history. It happened so fast that nobody sold, and then everyone was bailed out. It ended up being a hiccup in the context of a great bull market.

Volatility and uncertainty are not uncommon in the stock market and the economy. But that is even more so now. Inflation is running hot, wages aren’t keeping up, tech earnings are slowing down, and rates are creeping higher. Those are the things we know, and because the equity markets are forward-looking, it makes sense that these things are largely already priced into stocks. And yet we’re still waking up to sharp volatility and ugly down days. Welcome to my world.

Earlier this year, I wrote a story about my first year in the investment business, 45 years ago in 1977. I got a lot of interesting feedback on it, and most people seemed to enjoy the story and the history lesson. So I think I might do a few more stories like that this year. (At my age, you become a walking history book, if you can remember it.) As you may recall, in those days, most of the newer brokers were in cubicles in an open area in the office, which we affectionately called the “Bull Pen” for obvious reasons. It was loud and chaotic.

I would imagine that you have been losing sleep and wondering what the heck ever happened to LIBOR.  No? One of the most important numbers in finance died at age 52. Actually I’m kidding a little bit, but not entirely. LIBOR stands for the London Interbank Offered Rate as determined by The Bank of England. It became an international benchmark for short term interest rates and a reference point for many types of loans.

A famous quote from one of the great philosophers of our time, Yogi Berra, was, “Predictions are tough, especially when it involves the future.” I find myself thinking about that a lot lately as people ask me what is going to happen with the economy, interest rates, investments, etc. With all the uncertainty in the world now, I almost feel like walking around with a name tag that says, “I don’t know.” As I write this in mid-March, the uncertainty is off the chart.