For me, 2021 marks 28 years of being an investment professional. That's a lot of years...
I experienced my first Melt Up back in late 1993. And I experienced my first "Melt Down" soon after in early 1994.
The way up in 1993 was euphoric. The market rose 123% that year. But the way down was devastating, with stocks falling around 30% in under three months.
That particular Melt Up was in Hong Kong. I was a broker back then, specializing in foreign stocks and bonds. And I decided at that moment that I never wanted to go through an up-and-down ride the same way again.
In 1996, my childhood friend Porter Stansberry and I started writing investment letters together. And I traveled to China for work for the first time that year – a quarter century ago.
I thought about all of this experience recently, after I had a long talk with a brilliant young man in his early 20s. Despite his young age, he's already teaching master's level classes at a university. I love talking with him... He will succeed at whatever he chooses – without a doubt.
Our conversation made me realize one thing, though... It made me realize how little perspective he has in investing. And in times like this, perspective and experience are key.
Let me explain…
First, I want to be clear – saying my friend doesn’t have perspective isn’t a knock on him. It just is what it is.
The flip side of that is, our conversation reminded me just how much perspective I have after all these years. The young man is brilliant – but he doesn't know what he doesn't know.
It made me feel a bit like Tom Brady in the playoffs... My arm strength and running speed might not be what they used to be. But I have strengths that are far more important: Experience. Cool under pressure. And maybe most important... perspective.
I have seen it all. For better or worse, there is no situation on the field that can rattle me today. Whatever "it" is, I've seen it before (or something like it), and I can deal with it.
If you have only been reading my writing for a few years or less, then you haven't really needed a cool head – yet. With the exception of the start of the pandemic last year, we haven't had too much fuss.
We've been bullish and right on U.S. stocks for many years. We've been bullish and right on China-related stocks, as well as the great boom in U.S. housing prices. I hope you have participated in all these massive moneymaking ideas.
We have simply been winning – for years now. That's why we haven't needed much of a cool head in our investments.
But here's the thing: We are likely to need one later in 2021.
I realize that seems like the last thing you’d expect given the “everything goes up” world we seem to be living in today.
You certainly don’t need a cool head when everything works. But it can’t – and won’t – be like that forever.
If you have your own perceptive and experience, that’s great. You’ll need it. But if you don’t, then now's the time to think about and plan for what’s to come.
It will be far harder to do than you can imagine. But if you prepare yourself now, in advance, you can get through it, keeping as big a portion of your gains as possible.
When the hard times come, your instinct will be to make the wrong decisions. (It's not just you – everyone does this.) But if you can keep your cool... keep your perspective... and know what you'll do ahead of time, then you have a much better shot at succeeding under pressure.
Tomorrow, I’ll share another tip you can use to keep yourself together in the coming months.
Good investing,
Steve
Further Reading
The warning signs that the Melt Down is coming have been piling up. But the best way to handle the coming crash isn't to buy recklessly or sit on the sidelines... Get the full story here: You Don't Ever Have to Be 'All in' or 'All Out' in Investing.
"It makes sense to be a little worried about the market today," Dr. David "Doc" Eifrig writes. While it feels like the market is only going to go up, that won't be the case forever... Learn more here: The Bull Market Is Still Healthy... But Expect Volatility.
If you're going to survive – and even thrive – during the Melt Down, you need to consider one major factor today...
AMERICA'S LARGEST BANK IS EYEING A RECOVERY
Today's company is showing the growing strength in the financial sector...
Regular readers know we like to check on the big banks for a real-time look at our economy. These companies make up America's "financial backbone"... When they're thriving, it means folks are earning, spending, and investing money. And today's company is giving us another reason for optimism...
JPMorgan Chase (JPM) is America's largest bank by assets. It has a wide reach in the financial sector, covering everything from credit cards and loans to investment banking and asset management. And for the second straight quarter, it has decreased its provisions for loan losses... which tells us something important. Remember, JPMorgan and other big banks set aside billions of dollars in case customers couldn't pay back their loans due to COVID-19. So JPMorgan believes the economy is recovering – it doesn't think it needs to hold such high reserves in the near future.
As you can see in today's chart, JPM shares have soared in recent months. The stock is up roughly 80% from its COVID-19 low, recently hitting an all-time high. That's a great sign for the broader economy...
