My call for questions yielded an enormous response. I’m working through them for a video to be published Friday. Please look forward to that.
Meantime, I have other material to boost your spirits.
I asked some of The Kelly Letter’s longtime subscribers for their thoughts on managing stress, both of the stock-market variety and the war variety. So much good material came back that it will take a few notes to get to it all.
Let’s start this first installment with stocks.
Managing Stock-Market Stress
Tamar Frankiel in Los Angeles subscribed to the letter in 2013.
She’s a believer in understanding what it means to put volatility to work. She describes it as accepting that “things will change, sometimes fast,” but once you’ve committed to a stock investing system, you should stay committed:
“Our brains are wired to overreact to negative news and underreact to positive. So don’t expose your brain to too much stock market news. You’ve made responsible (not perfect but good enough) decisions, stick with them.”
Ah, yes, the fear/greed cycle.
It shows up in subscriber emails as clearly as in sentiment indicators. After upstreaks, newcomers wonder why we weren’t all-in to leveraged ETFs. After downstreaks, they wonder why our plans didn’t switch into inverse ETFs at the most recent peak.
Because we can only identify them in retrospect, of course.
And by not having switched at the ten falsely identified previous “peaks,” we improved profit enough to create buying power to take advantage of cheaper times, like this one. It’s easy to forget all the previous times you felt iffy, read warnings, and thought of going to the sidelines—and were later glad you didn’t.
If you’re kicking yourself for having missed selling at this year’s early January peak, because it now seems obvious when you look back, Greg Kennedy has some thoughts for you. He lives in Louisiana, and subscribed to the letter in 2010.
Like Tamar, he believes in tuning out and staying the course:
“Stick to the plan. Emotions cloud the picture, so let’s execute our financial plans dispassionately. We know we are in a z-val environment so let’s not suddenly believe that we can predict the future. If you are a frequent account-checker, it might be wise to check them less often to buffer your emotions. Otherwise, focus on the great bargain we will hopefully be getting when things are down, and the benefits we will receive when things recover. If we didn’t believe things would recover then we wouldn’t be in the market anyway.”
Chad Fischer in Portland, Oregon, subscribed to the letter in 2016. The Covid crash of March 2020 was hard on him, but he stuck with the plans and emerged wealthier and steadier for it. He sent the following:
———-
First, I think it’s important to have a solid belief that whatever turbulence the market is currently going through today, will pass.
At some point in the not-too-distant future the market will once again be setting new highs, just the way it always has. …
When the market goes down day after day and there only seems to be worse and worse news on the horizon, I understand that it can make people feel powerless. I’ve been there. Something Jason mentioned that I found to be very profound is the idea around the moment when the market turns the corner and starts heading back up. It’s not when all the problems are addressed and there is no more fear on the horizon, it’s the moment just after the worst news has been given. The market goes up on the days when there is less bad news than the days prior.
The item above gets to why you continue to hold. Your entire being may ask, Why am I doing this? I’m fairly certain the market is going to go even lower, but Jason says don’t sell.
Selling requires you to be right twice to come out ahead.
You need to be right first about guessing that the market will continue to go lower, then you need to be right about the moment to buy at the bottom (lower point). As discussed above, we know that the market starts going up when there is still a lot of fear.
[Do you think] that the same you who sold because you didn’t feel good about the prevailing fear is later going to buy at a moment when there is actually more fear (as evidenced by lower prices)? You will need to buy into more fear in the future, to come out ahead.
Guess what, you will not come out ahead by attempting this.
Related to the above, we will be rewarded greatly with increased returns by riding out this period of discomfort and later buying in at the quarterly rebalance. It will be an action that many in the market won’t have the guts to do in real time, but will later say that they would have been all about it in hindsight. The Sig plan will be your guide through this critical transition.
We all know this is the right move even though it can be frightening. Make the investing decisions today that your future you will be very proud of when that you looks back on the scary time when Russia invaded Ukraine. …
In the short term, don’t rest your emotions on your account balance. If you believe in the ideas above, it’s not necessary to keep score every day / week / month. This is never good practice anyway, but certainly not in a plan that trades today’s downside for tomorrow’s greater returns.
I loved Roger’s wisdom [my friend and research partner, whose investing experience I shared in an email sent 3/18/20] that today’s market fears will be a distant memory in a shorter time than you realize today. Put another way, it may not feel like it today but whatever the market just did today won’t be any concern to you two years from now (most likely much sooner than that). Covid was two years ago and what the market did back then is no one’s concern today—well, no one who held through or bought into that market at that time.
Oh, and I STRONGLY recommend periodically revisiting the onboarding guide.
I think everyone should have a homework assignment to do this once a year minimum. In that guide is the reasoning behind why we feel so strongly about these plans. It’s likely what led you to buy in and sold you on the concept.
I think it’s only natural to forget this “why” after some time. Especially in the moments of rough financial seas we are facing. Two years back I started doing this. The concepts are even more meaningful after you experience the emotions of the plan.
I love the section that starts at the end of page 59 with the passage below:
I’m pleased with the research methodology behind 9Sig for a couple of reasons. First, and most important, because it was rigorous. I’m confident that the 9Sig plan will navigate real-life price fluctuations ahead because it demonstrated its ability to navigate 100 random price environments to an impressive outcome, as well as the historical Nasdaq 100 modified to a 3x daily path.
The guide is linked on the help page of the subscriber site.
———-
Jonathan Kelley, also in Portland, Oregon, who subscribed in 2012, wrote that the Sig system is one of the few things that provide peace in this nutty world:
“In that world, I find the Sig programs an enormous comfort. Markets took a dump? I’ll care at the end of the quarter. If they are still low, I’ll get to shop at employee discount prices. If they’re recovered or even high, I’ll book some gains. I have enough to worry about with the domestic and global situation. I no longer have to worry much about my investments. Everything is perspective, and from my perspective, markets go up and down. We profit from that because we buy cheap and sell dear.
“Yesterday I was thinking of how many networks, producers, and corporations just can not resist the urge to ‘change it up.’ Famous last words, all by people who basically want to ruin good things so as to ‘make their mark.’ What is not broken ought not to be fixed.
“This mentality extends into investing, where even if one presents people with a mechanistic, disciplined system that will let them forget about the whole thing for three months at a time, they just can’t resist that itchy urge to ‘change it up.’ Yeah, it’s different this time. Right. Fact is, if we could do better, we would be doing that. We can’t. We know it. If that isn’t true, one is not in the Sig systems. If I knew I could make 25% per year reliably, I wouldn’t be doing this. Fact is, I can not, and I know that I can not. So I’ll settle for a good return that is less than that.
“I’m just glad there is one aspect of my life that is easy. I have more energy to spare for stressy stuff.”
Speaking of stressy stuff…
Managing War Stress
Many people report feeling deep despair over Russia’s invasion of Ukraine.
Some are not sleeping well at night, minds fixated on news images of the violence, seething with frustration at the senseless cruelty of Vladimir Putin, wanting to help but not knowing how.
Brian Donnelly in Los Angeles, who subscribed in 2006 while serving in Afghanistan, sees reasons to feel good about how the war is unfolding.
“First,” he wrote, “this was going to happen eventually, no matter what. Russia didn’t really have a choice, given how they view the world.” And given their collapsing country.
He linked to a February article by Peter Zeihan, which concludes:
“The Baltic beaches and the plains of Poland are where the future of Russia and the West, of the European Union and NATO, will ultimately be decided. It is there that Russia will succeed or die.”
Second, Brian wrote, “Russia botched it pretty badly and now Ukraine has a chance. [Russia] underestimated the resolve and response of the West. So in all the ways this could have happened, actually so far it has happened in a way that is tremendously damaging to Russia and has given Ukraine a chance. Twenty-thousand foreigners have signed up to fight there while Russia fumbles around.”
That’s right. From Monday’s Daily Mail:
“Around 20,000 people from 52 countries have already volunteered to fight in Ukraine, where they will serve in a newly created international legion, the Ukrainian Foreign Minister said. In a television address on Sunday Dmytro Kuleba said: ‘The whole world today is on Ukraine’s side, not only in words but in deeds.’”
This can help us feel better about Ukraine’s chances, about the good guys winning this one, but it does little to comfort people worried about nuclear war and feeling awful about the atrocities taking place.
Even Brian concluded: “Needless to say, Russia will very likely pull out the Syria playbook next and start reducing cities to rubble, unfortunately.”
Insiders agree. Fox reported Monday:
“Maria Baronova resigned as editor-in-chief of Russia Today, a state-run media operation also known as RT, last week after condemning Russian President Vladimir Putin’s invasion of Ukraine. …
“‘The problem is, I know these people very well,’ [she said.] ‘They never send threats, they just kill, so there is kind of [a] weird silence around me, but I really think we’re on the brink of a nuclear war right now. I’m not exaggerating.’”
So the awful feelings are here to stay for a while. How to manage them?
JP Harris, who subscribed in 2016, lets it all out:
“Sometimes, I just allow myself to stop and scream. Then, I move on. Scream and move, scream and move.”
Several people recommend accepting that you’re not going to alter the course of Ukraine by obsessing over the news.
Russ Hullet in Boulder, Colorado, a new subscriber but longtime friend, put it thusly:
“I’m convinced if I follow the Ukraine crisis closely I can influence the outcome. What do you think of my strategy?”
Tamar agrees:
“On the war stress: Not too much television either. I am an information hound myself so it is really hard to stay away from the news, but I’m disciplining myself to check it just twice a day; if I see the same video a second time I turn it off. (Well, sometimes I switch to BBC.)
“I remind myself that even my favorite, much beloved news commentators are being paid to sell emotional stories, and they may sincerely like that part of their job. On my side, I’m glad to hear stories that touch my heart. I don’t want cold reporting. But if the stories rerun in my brain at night, it’s too much exposure.
“Also there’s a danger that I might go around feeling depressed because ‘there’s nothing I can do.’
“It’s not true though: I can do something in the world every day by being kind, affable, generous with time and smiles as well as money; offering help in little ways to people in my own life. You can do that too, and it will help you as well as others. This will rebuild the world.
“As for dread of horrible things, the answer is: Cultivate trust. Instead of thinking about people who screwed up, look around and see all the competent, responsible people who keep our incredibly complex society running every day. These same folks and thousands more at every level have done and will do their best in whatever the circumstances. The worst thing you can think of probably will not happen, but if it does we will be in it together.
“We are together already. Humanity is one being.
“What is happening in Ukraine is like a dangerous injury to a person’s body. Thankfully, compassion is flowing to it like blood bringing healing nutrients to a wound. Every system in the body is going into emergency mode—that’s where we are. It’s okay: Each of us is a cell in one of the body’s organs that has to do its part.
“Whether it’s protect and defend, or conserve resources, or just keep the regular things going in the best way possible, we are going to do our jobs and we will bring humanity back to a healthier way of being.
“And if I don’t really feel that brave or confident: When all else fails, I steel myself with the thought that one thing the world does NOT need is another madwoman (in either sense of the word mad). So, Tamar, do the world a favor: shut off the hysteria, clamp down on the constant chatter, and do what’s in front of you today.”
Thank you to all of these Kelly Letter veterans.
Let’s get through this day, and all days, together.
I’ll have more for you soon, and you can always email me.
With you all the way,
5 Comments
I agree whole heartedly when it comes to the Sig plans.
In fact, a statement from The 3% Signal has stuck with me ever since I read it 7 years ago. Paraphrasing: If the market crashes so bad that you lose everything in the Sig system, the Sig system will be the least of your worries.
Relating it to the current situation, if a nuclear war spirals out of control to the point of a dystopian novel, it won’t matter what you did or didn’t do with your stock market assets. I don’t think a dystopian future is the most likely future, but this fact allows me to continue trusting the system even when the what if’s come to my mind. So, I agree, just turn off the financial news if it is too much and let go of this stress so you can focus on more important things.
On the question of what to do about stress over what is happening in Ukraine, I feel very differently.
We have to cope in a way that allows us to continue living, but I do not think it is good for everyone to turn it off and forget about it until it is over. I know I could do this. I have done it in the past when difficult times in my life got to be too much. If you are at the point of breakdown, you have to do this.
But, for the rest of us, we have to keep this on our minds. We have to keep raising our voices about the absolute necessity of stopping the atrocities, while somehow avoiding an all-out nuclear war. It does make a difference. Politicians, for better or for worse, have to pay attention to what is popular. Therefore, we must rally one another to make it clear that it is our will that our country support Ukraine, end this nightmare and hold Putin responsible.
If we sit back, relax and ignore the news about Ukraine, I think we might bear responsibility for not raising our voices and not pushing our leaders to do more. If we turn our back and go on with life as usual, if we demand lower gas prices and that our lives and wallets not be impacted by the war in Ukraine, then we will be guilty of complacency of the worst kind, ignoring a human cost that is astronomical in comparison to whatever tiny little financial consequence and minor inconvenience we experience.
Thank you for this heartfelt and valid response, Neil.
I believe the point that our veterans were making was the one you acknowledged, that if a person is not directly involved, and feeling deep despair from coverage, an acceptable coping mechanism is to take a break from coverage. I doubt anybody would advocate complacency.
You’re right that worrying about small inconveniences when an atrocity is going on is not the way to a better world. I wrote about it in last Sunday’s end note.
John Stuart Mill said in his 1867 inaugural address at the University of St. Andrews:
“Let not any one pacify his conscience by the delusion that he can do no harm if he takes no part, and forms no opinion. Bad men need nothing more to compass their ends, than that good men should look on and do nothing. He is not a good man who, without a protest, allows wrong to be committed in his name, and with the means which he helps to supply, because he will not trouble himself to use his mind on the subject.”
Keeping ourselves of sound mind need not mean ignoring world affairs.
Thank you, again, Neil.
Thank you, Jason. I didn’t intend my comment as a criticism or to disagree, but to add. I probably did not make that point well enough.
I think you did, Neil, and like what you wrote.
The US has been at war 225 out of 243 years since 1776. Didn’t we just get out of Afghanistan recently? Where were the cries and stress about humanity in the last few years? There is no winner in wars, so don’t even start one. I truly believe this war is preventable by the US. There’s something that I can do, as I have the vote in my hand to use starting this coming November.