{"id":21505,"date":"2021-07-03T10:46:48","date_gmt":"2021-07-03T05:16:48","guid":{"rendered":"https:\/\/www.fundsindia.com\/blog\/?p=21505"},"modified":"2021-07-03T10:46:50","modified_gmt":"2021-07-03T05:16:50","slug":"humbled-by-the-markets","status":"publish","type":"post","link":"https:\/\/www.fundsindia.com\/blog\/mf-research\/humbled-by-the-markets\/21505","title":{"rendered":"Humbled by the Markets"},"content":{"rendered":"\n
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It is inevitable that at some point in time during your investment journey you will hear this warning…<\/p>\n\n\n\n

The EXPERT who predicted the last market crash is predicting the next one!<\/span><\/strong><\/h2>\n\n\n\n


Now here is how the template typically looks\u2026<\/p>\n\n\n\n

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Now that you are familiar with the \u2018scare-the-wits-out-of-you-template\u2019 used by the media, let us move on to the most important thing – YOUR REACTION!<\/p>\n\n\n\n

Here is a quick peep into your mind voice<\/p>\n\n\n\n

OOPS! Let me EXIT my equity exposure immediately. If this famous investor who predicted the last crisis is warning again, this must be serious.<\/span><\/strong><\/h2>\n\n\n\n

Now this is exactly how most of us would respond. 

If you are nodding your head, welcome to the rest of us. <\/p>\n\n\n\n

Getting worried when you hear something like this is perfectly OK. This simply means that – You and I are Human<\/em>!<\/p>\n\n\n\n

To get cautious and wanting to move out your hard-earned money out of equities is the obvious first instinct. After all, who wants to endure a market crash when there is a clear warning about what is coming.<\/p>\n\n\n\n

But hang on\u2026<\/p>\n\n\n\n

There is something which these headlines never tell you.<\/p>\n\n\n\n

WHAT REALLY HAPPENS IF YOU LISTEN TO THEM?<\/strong><\/h4>\n\n\n\n

Before you decide to pull the plug, here is a humble reminder of what really happens… <\/p>\n\n\n\n

Experts in March 2020 when the markets had crashed… <\/span><\/strong><\/h2>\n\n\n\n
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Source: JP Morgan, Creative Planning<\/p>\n\n\n\n

What happened post that\u2026<\/span><\/strong><\/h2>\n\n\n\n
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Now if you thought this was a recent phenomenon, hold your breath.<\/p>\n\n\n\n

Presenting to you<\/p>\n\n\n\n

Experts since 2008\u2026<\/span><\/strong><\/h2>\n\n\n\n
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Source: Jboorman via Twitter, JP Morgan, White Oak Capital <\/p>\n\n\n\n

What happens when you follow their advice?<\/span><\/strong><\/h2>\n\n\n\n

Michael Sembalest from JP Morgan has done an interesting research where he has calculated the opportunity loss if you had followed the advice of the popular market forecasters.<\/p>\n\n\n\n

Here is how it looks<\/p>\n\n\n\n

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Source: Link<\/a><\/em><\/p>\n\n\n\n

The above chart shows the consequences of listening to their predictions. <\/p>\n\n\n\n

Each bar shows the portfolio value derived from reallocating from equities to diversified fixed income on the date of the forecast, with a starting portfolio value of $100 on 01-Jan- 2010 till 13-Nov-2020. The chart compares the resulting portfolio values of the different doomsday forecasters (Roubini, Rosenberg, Gundlach, Faber & Achuthan, Wiedemer, Stockman & Edwards, Schiff & DeMark, Levy, Icahn, Hussman & Soros, Johnson & Krugman, and Janjuah) to the portfolio value as if one had invested in the S&P 500. <\/p>\n\n\n\n

All of the portfolios for the experts are around $200 or lower, while the S&P 500 portfolio value is approximately $350.<\/p>\n\n\n\n

Even a Broken Clock is Right Twice a day!<\/span><\/strong><\/h2>\n\n\n\n

But despite overwhelming evidence against them, why do they still try to predict the markets?<\/p>\n\n\n\n

The idea is simple. <\/p>\n\n\n\n

Step 1:<\/strong> Predict a market crash<\/p>\n\n\n\n

Step 2:<\/strong> If it happens soon, claim credit, write books, give interviews.<\/p>\n\n\n\n

Step 3:<\/strong> If it doesn\u2019t happen, no worries. Repeat Step 1 every year till you get it right. <\/p>\n\n\n\n

Here is how that works…<\/p>\n\n\n\n

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Jeremy Grantham<\/strong><\/p>\n\n\n\n

Let us take the example of Jeremy Grantham, a reputed British investor and co-founder and chief investment strategist of Grantham, Mayo, Van Otterloo & Co. LLC (GMO), a Boston-based asset management firm. The firm oversees $100B for clients. GMO had more than USD 65 billion in assets under management. <\/p>\n\n\n\n

He has been described as a ‘perma-bear’, and was among the first pundits to warn about the 2008’s Global Financial cirsis. Also, his net worth is roughly USD 1 billion as of 2021.<\/p>\n\n\n\n

Here goes his latest warning in the start of 2020, which got a lot of coverage.<\/p>\n\n\n\n

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But what about the earlier warnings…Ah never mind…<\/p>\n\n\n\n

Jeremy Grantham’s predictions during the greatest bull market ever in US…<\/p>\n\n\n\n