I couldn’t help but laugh at a reader comment earlier today because it sounded almost exactly like a conversation I had with an institutional equity salesman the other day. The reader commented:
“The playbook for this market is simple:
1) Buy any dip greater than 0.25%
2) Go all-in on Friday afternoons in anticipation of the Monday rally.”
This probably wouldn’t have intrigued me were it not for a conversation I had with a good friend of mine the other day. This institutional equity salesman said he had received the same order from several of his clients. He told me:
“They’re telling me to buy every dip.”
Of course, buying the morning dip and the Friday close has almost become a no-brainer over the last few months. Apparently, the stock market has turned into an easy game. Whether that is comforting or the absolute most frightening thing in the world is beyond my realm of knowledge, but history has proven that when one strategy or mindset starts to dominate it always breaks down in horrific fashion. As Howard Marks says, however, timing is of vital importance and the market can always remain irrational longer than you can remain solvent….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.