Read of the day: Risks & Opportunities

I like this post from Josh Brown about the inevitability of the market cycle and learning to love it.  If there’s one thing that’s certain in the investment world it’s that markets cycles never really change that much.  The market spends most of its time fooling most of the people most of the time.  Just when you think you’ve got it figured out it does exactly what you wouldn’t expect.  Guys and gals have been trying to figure this puzzle out for centuries.  So, rather than let it eat you apart, learn to love it:

“The next crisis is coming. The seed has already been planted in some remote corner of the financial realm.

That seed is germinating deep beneath an obscuring layer of thick, black soil.

It will sprout and be ignored someday soon, breaking just above the surface while the people walk by obliviously.

Then it will be noticed and denied, dismissed as unimportant.

Then it will shoot skyward, its dense canopy blocking out the sun.

Then we will all acknowledge it as being the major risk – we will become convinced that it will get much worse and we will all be doomed.

And in that moment, the risks of that crisis will have become too widely acknowledged to pose any actual danger. And just as always, the arrival of this new crisis will have opened up a massive opportunity for those who’ve kept their heads.

This process will play out repeatedly for the rest of your life. Learn to love it.”

Read the full piece here.


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Ryan Melvey

    Very succinct. I think being diversified at all times is the only way to protect yourself. The market is incredibly deceptive and the media barrage is no help either.

  • Mercator

    Over the last 5 years, Washington has repeatedly pumped borrowed money into the economy to fill the void of the last crisis. Deficit spending and a levitating economy seems to have normalized in the psyche of the average investor and leadership in general. IMHO, that is the root system of the next crisis.

  • Old Dog

    No one has EVER successfully timed the market for more than a short amount of time.

    But just as everyone thinks they are a better than average driver they also think of their investment and market timing ability.

    This is what drives Wall Street, indeed pays the bills on this site.

    Churn baby, CHURN!

  • Tom Brown

    I don’t like his sprouted seed metaphor because I think it reeks of one of the things I hate about daily news reporting on the market. How many times have you heard the shortest news blurb on when they say something like this:

    “The market was down today on news of X.”

    How in the world do they know that X caused the market to move down? Who’s the market expert that wrote that news copy? But you hear it all the time! No matter what the market does, up, down, flat, it’s usually followed by a simplistic explanation of why that was.

    I think Josh, with that metaphor, is just projecting forward to that future crisis and imagining how we’ll all look backwards, and then pronounce definitively, “Ah, it must have been X that caused this!”

  • rp1

    “This process will play out repeatedly for the rest of your life.”

    And the true risk is that it doesn’t.

  • Adrian

    I think the last crisis was prolonged because of the pessimism and lack of confidence as news today (especially the bad one) will reach much more fast to the consumers then in the past and affect the buying decisions. For some psychological reason we tend to be more receptive to the bad news then to the good news.
    I guess if people where not so scared about the bad news in media the world economy would have got on the right path a lot sooner.
    This created a lot of noise and fluctuation in the world economy that “surprised” a lot of people, including me.
    On the happy note, because economy was depressed so long I see more potential in the future for the upside so stay tuned ladies and gents.

  • Mike Bell

    Well said. Please tell the Japanese that it’s just a bad cycle.

  • Shawn James

    I am agree with “Risks & Opportunities”. I came through some interviews and blog posts regarding “New Recession may hit world again in 2015 or 2016″. I don’t know, it will be true or false but this news is creating Base, ground for long term investors.

  • GreenAB


    who´s gonna bail the markets out next time?
    with all the stuff we´ve done (abandoning accouting rules, expanding central banks balance sheets to the trillions, rates at zero forever, nationalizing big companies).

    everybody knows that central banks and the government will be there at the slightest weakness.
    so another financial crisis then means that confidence in those two backstops will be gone completely. what else can be done to bring it back?
    will there be any consequences from years of intervention?

    i truly fear that the next crisis will not be about catching opportunities but survival of the system itself.

    and if it holds together the trick could be to have patience, a lot of patience. the last crisis lastest a mere 1 1/2 years from top do bottom. let´s see who has the to power hang in there if the market undercuts major lows and a bear market plays out over 2,3 or more years.

  • Explorer

    Using a 3 month end of month moving average allowed people to make profits in the Japanese stock market all the way down. See Doug Short’s post on the Nikkei and S&P and moving averages. (S&P a 10 month sma has gained good results over a long period).