Most financial press opinions can be dismissed out of hand. They don’t know what they are talking about, they don’t know your plan, and they are far to sensationalist to be of any real value to ordinary people.
This is NOT the case with Jeremy Grantham. He is one of the adults in the room and he is offering us an early warning of a “melt-up.” And, at least for the moment, no one seems to be listening.
If he is right and we do experience a “melt-up” or what I have heard expressed as a “Blow Off Top…” be very careful about being “THAT” client.
Investors don’t like to lose money, but when we lose money we tell ourselves a story that it’s OK… because everyone lost money.
What we really hate, more than anything else, is hearing about our sister’s friend whose investments were up 35% when ours are up merely 18%. We take THAT difference personally and we believe it suggests a flaw in our thinking. We confuse lagging outcome with poor process. We missed something that she obviously saw. We feel stupid. We… covet.
But markets are still unfolding.
The interesting thing about bubbles is that there is very often a melt UP before a pop. And that melt up feels like and is reported as a “new paradigm.” The Financial Press will parade everyone with big returns in front of the camera and they will, every one of them, tell us how they uniquely perceived the opportunity that the rest of us missed.
Of course, that isn’t the whole truth because… markets are still unfolding. When the bubble pops and their portfolios are down (because their risk dial was always turned to HIGH), we won’t hear from them again… there will be no mea culpas.
We who are disciplined diversifiers will ignore them as the greater fools they are. But our clients are watching. And, this is THE moment when intelligent, well-meaning clients are prone to abandon their comprehensive financial plans and their disciplined investment process to chase the dream of returns being had away.
This is also THE moment when a behavioral advisor is the most important and can do the most good in their client’s lives by helping them stick to the process.