It was a brutal week in June…
The Nasdaq was already in a bear market, down more than 20%.
The Federal Reserve hiked rates earlier in the week, and the market fell further.
By the end of the week, the major indexes fell another 5%.
Investors were no longer talking about the returns on their money.
Instead, the talk was focused on the return of their money.
That’s a big difference.
And it reminded me of the mood during the 2008 financial crisis.
The fear was so great, that the Treasury bill had a negative yield.
Buyers of T-bills received lost money at maturity.
The textbooks and ivory tower professors say that should never happen.
Yet when fear runs amok, people act irrationally.
But this time it felt a bit different…
Gut Punch
Inflation soared to over 7% for the first time since 1982.
The Fed couldn’t be more blunt: Interest rates were going higher.
Investors were scared to look at their brokerage accounts.
One friend told me: “It hurts too much to see two years’ worth of gains … go poof.”
It was a few minutes after the market closed last Friday that I got a text.
I thought it was my son who lives in New York City.
Each week, he texts around this time — wanting to know the time for Sabbath dinner.
But it wasn’t him.
It was a colleague who has read Alpha Investor since we started in 2019.
He didn’t follow any of the recommendations.
Instead, he speculated in options, cryptocurrencies and growth stocks.
And when I read his text, it took me by surprise…
You seemed boring and stodgy in the speculative bubble. Now you seem like the only sane guy in the room.
He wasn’t far off by saying I seemed boring and stodgy.
In fact, he was spot-on.
Over the past few years, growth stocks of every size, shape and color were all the rage.
It seemed every company was an “innovative disruptor.”
Things like AI, robotics and precision medicine were going to change the world.
It didn’t matter if the companies weren’t profitable.
They saw their stock prices rise 100%, 300% and even 500%!
But then came the COVID-19 bear market in March 2020…
Lightning Strike
Stocks fell more than 30% in a bit more than one month.
It happened so quickly that if you blinked, you missed it.
Because of the pandemic, the Fed kept interest rates at close to zero.
Politicians gave stimulus money to every American, and speculation went into a frenzy.
More stocks than you can shake a stick at soared 1,000% or more.
And things got even crazier:
- An imaginary coin was worth over $60,000.
- One car company was worth more than all the car companies in the world combined.
- A company sold cars out of vending machines and called itself a tech company.
While special-purpose acquisition companies, initial public offerings, tech stocks and cryptos were soaring … I didn’t participate at all.
Instead, I was recommending quality businesses that were profitable.
We did have several stocks go up more than 100%.
But it wasn’t much considering how much other investors were making.
Still, that didn’t bother me one bit.
And the reason was simple: I’ve seen this movie before…
Pop!
Real Talk: I’ve been doing this since 1983.
I’ve managed money and traded through eight bear markets.
That includes the 1987 October crash, the 2000 dot-com bust and the 2008 financial crisis.
So, I know what it looks like when bubbles form.
And more importantly, I know how they end…
Which, for many investors, is terribly.
Stocks aren’t lottery tickets. They’re pieces of a business.
Investing should be boring — like watching water boil.
The first American economist to win the Nobel Prize was Paul Samuelson.
And I 100% agree with his view on investing…
Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.
If you want action, I’m not your guy.
But if you want to make money, you’ve come to the right place.
Because right now, the “boring” stocks in the Alpha Investor portfolio are knocking the lights out.
And if you want to invest in stocks to build your wealth, click here to join our Alpha Investor family.
Regards,
Founder, Alpha Investor