Agnostically Contrarian

July, 2022

Happy second half of 2022. This year is flying by. Seems the older I get, the faster the years get. You’re probably wondering where the title comes from and I’m going to tell you, but please keep an open mind. Years ago, I wrote a blog entitled “Everyone’s Agnostic” which was inspired by two distinctly different individuals.

First, in early 2008 I was in Boston at an advisor’s conference where a panel of mutual fund managers were doing Q & A for a group of about 100 of us. The question was asked to one manager about what direction he saw the market going and he said, “Basically I’m agnostic…meaning I don’t know.” Later that year I was watching a show on CMT called “Crossroads,” which I loved. It matched a country artist with a rock artist and the synergies from each episode were amazing. One in particular matched Vince Gill with Sting. They were in conversation about both growing up in the church. Vince, being quite open about his faith, professed his Christianity, and Sting, being quite open and honest, said he was agnostic, meaning he truly didn’t know enough to firmly believe.

Needless to say, I started Googling and found that in 1869, the English biologist Thomas H Huxley coined the actual phrase and said, “It simply means that a man shall not say he knows or believes that which he has no scientific grounds for professing to know or believe.”

So, if I take that definition, and apply it to all of the economists, pundits, bloggers, podcasters, financial entertainers, and the like, I can say that absolutely none of them have a clue what is going to happen in the financial markets tomorrow, next week, next month, and the next year. They are all using the SWAG method, meaning Scientific Wild A$$ Guess.

Hopefully, you are still with me. So, let’s talk about the word “contrarian”. Simply put, it means doing the opposite of what is said to be the conventional wisdom or common thought. If I had a dollar for every blog, email, or advisor marketing piece telling me about their “secret sauce formula” or “bear market magic bullet” I could take the rest of the year off.

Yes, I am as the title says: agnostically contrarian. As an advisor and an individual investor, I do not know what the markets are going to do in the near future. Sorry, no crystal ball here. However, I can share some thoughts that I have.

• If you have stayed the course so far this year, you are down double digits in your portfolio year to date, but are up overall since inception, meaning you still have positive gains. Keep that in mind.
• It’s easy to get out of the market and go to cash, and you probably feel better…for a little while…but if you remember 2008, those who did missed the gains that followed the crash and the incredible growth that followed when the market finally bottomed out. History has a habit of repeating itself.
• Fortunes will be made in this volatile market, but you’ve got to stay the course and turn off the noise. Remember, regardless of who they are, and what they do, they do not know! Also, in your 401(k) account, your balance may be down, but with each contribution, you are buying more and more shares with each mutual fund purchase. If your budget allows it, consider increasing your contributions.
• If I look at Amazon stock and consider that it recently split 20 for 1 recently, as of this writing (7/13/22) it was trading at $110.97. That’s 41% less than it’s high of $188.65 on 7/13/21. Common thought says to stay away from it because it’s down 41%! (Source: E-Trade) Full disclosure: I own Amazon stock in my personal portfolio. But let’s frame it in another way…
• Think of a luxury item that you would really like to own. Say a 2022 Mercedes Benz AMG GT. Beautiful car with a MSRP of around $100,000. If you got a call from the dealership and they offered this car to you for $59,000 or 41% less than the MSRP, would you go for it, or run from it? Think about it. What’s the difference? You run from the stock purchase, but race toward the car purchase! This is where behavioral finance takes over and you can see where emotions play into your investment decisions.
  
• Being a contrarian, I’m going to be the guy that runs to the dealership and also the guy that recognizes that the entire stock market is basically on sale, and I see the value in each scenario. However, where my car purchase gives me immediate gratification, the investment purchase is a deferred gratification as I have to play the long game. Reasoning is that I do not know when we will get out this sea of choppy waters and into smooth blue seas. I just know eventually we will, and I will be handsomely rewarded.

So, to wrap up. With regards to your investments, be a contrarian and think the opposite of what everyone else is doing. Look for value in investing just as you look for value in the way you purchase consumer goods. Remember regardless of who they are, they are agnostic…they do not know!!! If they did, they wouldn’t be on TV or the radio. They would be on their own private island somewhere sitting on their billions of wealth.

If you want to learn more about Behavioral Finance, there’s lots of places to look. One place I can recommend is my book “Castles and Moats” www.castlesandmoatsbook.com Chapters 24 and 25 speak directly to this subject as it’s something I’m passionate about. As always, I’m here to be that “psychologist that deals with numbers”. Its now more than ever that my clients need me and I’m here for them, just as I will be here for you.

Many thanks,

Brian

**Examples are intended for illustrative purposes only and may be not indicative of your situation. Individual results may vary.