I Get Knocked Down, but I Get Up AgainSubmitted by RetireWiseCFP on November 10th, 2015
They say it ain’t over until the fat lady sings. I think I hear the U.S. stock market singing the following, “I get knocked down, but I get up again. You’re never going to keep me down. I sing the songs that remind me of the good times and I sing the songs that remind me of the better times.”
Where are we now?
The convulsion that began in the middle of August over China and the debate over when the Federal Reserve Bank should start raising interest rates basically wiped out all the gains of 2015. The more relevant reversal for us is the abrupt and sudden losses for biotech and pharmaceutical companies. For years, I have generally overweighed in healthcare (biotech and pharmaceutical) companies because the fortunes of many of these companies are not tied to general economic conditions. Investing in the healthcare sector is conducive to the fundamental analysis, independent judgment, and disciplined management that I am superior at: it is not about the herd mentality. In line with my values of full disclosure and transparency with you, we had been winning for years with pharmaceuticals, but we got our butt kicked in pharmaceuticals in August and September. All of a sudden ─ a fever to sell pharmaceuticals broke out on Wall Street: the good, the great, and the sacred cows were all slaughtered in the madness.
Where do we go from here?
It is really simple (notice I did not say easy) right now ─ will the economy continue to slog forward (it need not be brilliantly), and will the Federal Reserve Bank raise rates before the end of 2015?
On fixed income and alternatives:
As Yogi Berra said, “When you come to a fork in the road, take it.” I think we have now come to a time when the Federal Reserve Bank under the leadership of Janet Yellen needs to make a decision. The markets and, more important, many business leaders are looking for clarity and direction on interest rates so they can make 2- to 5-year strategic business cycle decisions.
What should we look out for?
Look to see continuous and senseless selling of the kind we experienced this past quarter, often without regard to fundamentals. Some are based on computer algorithms. My friends’ computers are coded to sell when things are going down and buy when things are going up without regard to any fundamentals. Folks, that is diametrically the opposite of common sense and the profitable adage “buy low, sell high.” These run-amok computer-based trading systems simply add violence and volatility to daily fluctuations ─ which in turn create more fear for the average investor.
Yes, pharmaceuticals were knocked down heavily this past quarter, but I am reasonably confident they will get up again. Over the next 3, 5, and 10 years investors in healthcare companies will sing songs of good times and better times. We will keep singing, when we are resilient, we will keep winning because nobody is going to keep us down.
10/5/2015 Femi Shote,CFP