- Wall Street investors are giving contradictory advice at every stage of this stock market downturn.
- As expert traders they can act fast and beat the market.
- But retail investors will get burnt trying to follow every analyst call right now.
The last few weeks have been brutal for the average stock market investor. But it’s probably been even worse if you listened to any of the talking heads on CNBC.
Wall Street experts have spent the last month going on TV making grand claims and predictions. As an average retail investor trying to follow their often contradictory advice, you’re probably getting screwed.
Case in point, legendary investor Mark Mobius.
2 weeks ago: ‘we may have hit the stock market bottom’
On March 31st, Mobius claimed the worst of the selling may be over. He even recommended buying again:
When people ask me if this is the time to buy, my thinking is: if you see bargains, then you should be buying.
He said the Fed’s aggressive stimulus action will likely support the markets from here.
The stock market went on to climb 10% over the next two weeks. Mobius was buying luxury and pharmaceutical stocks at the time and likely made a decent profit.
Now: “I don’t think we’re at the absolute bottom yet”
In a quick flip-flop, Mobius now thinks we’re heading for new lows. Speaking to CNBC on Tuesday, he said he said it’s better to hold cash than buy stocks at this level.
Although there are some opportunities to buy, I would say it’s probably a good idea to keep some powder dry for another downturn.
Of course, Mobius could have simply changed his mind in the last two weeks, especially with everything going on. But some investors may have seen his first analysis and bought heavily. Proof, as CCN.com reported yesterday, that every Dow Jones forecast is BS in these uncertain times.
Are retail investors about to get burnt?
Reports out of Vanguard suggest that the average investor bought the dip in the March downturn. Many of them may have been compelled to do so by the revolving panel of experts on financial TV saying the ‘bottom is in.’
They may now be forced to watch their new investments sink even lower.
Google Trends also appears to suggest that retail investors were desperately searching for “how to buy stocks” in March. Unfortunately, this is usually a contrarian indictor, with the ‘smart money’ waiting for the average Joe to get burnt before sweeping in at even lower prices.
The Bill Ackman saga
Mobius isn’t the only Wall Street veteran to appear contradictory on financial television. Three weeks ago, billionaire hedge fund manager Bill Ackman went on CNBC in a hysterical 30-minute rant. He declared that “hell is coming” unless the president imposed strict social distancing measures, stoking some panic among the investment community. The stock market went on to carve out its interim low days later.
Ackman reportedly profited $2.7 billion via a series of credit default swaps used to hedge the fund’s portfolio during this period. Two weeks later, Ackman’s tone changed, saying he was growing optimistic.
I’m beginning to get optimistic. Cases appear to be peaking in NY. Almost the entire country is in shutdown… There is increasing evidence that the asymptomatic infection rate could be as much as 50x higher than expected.
The average stock market investor can’t keep up
I’m not suggesting any of these Wall Street experts are doing anything wrong. They are doing their job – quickly reacting to stock market moves and global events.
But most people can’t keep up. Wall Street experts will always have the edge (and a direct line to the president of the United States). Unfortunately, the average person is probably getting screwed if they buy stocks based on a news headline or sound bite.
The best strategy? Don’t try to time the market. Dollar-cost-average your way into stocks with money you don’t need for at least ten years. And turn off the TV.
Editor’s Note 04/20/2020: The article has been updated for accuracy.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.
Last modified: September 23, 2020 1:50 PM