When Financial Pundits (Wrongly) Predicted Financial Armageddon: 2010–2019

On the 11/15/2019 edition of Stock Talk, CIO Chris Perras provides an update on recent market action, and takes a look at how several predictions of “Financial Armageddon” have actually played out over the last several years.

Chris Perras: Good morning. My name is Chris Perras. I’m the chief investment officer here at Oak Harvest Financial Group in Houston, Texas. Welcome to the November 15th edition of our weekly Stock Talk podcast: Keeping You Connected to Your Money. S&P is sitting near 3,100. This podcast is entitled, Financial News or Opinion Calls for Financial Armageddon, 2010 Through Today.

As of this morning, the S&P 500 sits almost exactly at 3,100. We have rallied almost exactly 225 points from October 2nd through October 4th pivot at 2,885, and we’ve done this in the span of about five weeks. The normalcy of this rally continues as the team at Oak Harvest laid out back in late June in our second-half outlook. We’re at the end of the third-quarter earnings.

This week, applied materials reported a great quarter and an upbeat outlook for the first half of 2020, while Cisco Systems reported a downbeat quarter due to slow corporate spending on new hardware. Cisco has a huge corporate business in China, currently being affected by the trade war, and while they will be a big beneficiary of the fifth-generation wireless technology rolled out, their business momentum per orders in that area will be a second-half 2020 story, as more of the base network from AT&T and Verizon and other wireless carriers need to built out first before corporate customers demand new Cisco technology.

As for the market, the S&P is sitting at 3,100. The team at Oak Harvest expects two to four weeks of up and down trading in the overall market in a very narrow range. Let’s call it there’s 1% upside and 2% downside through the end of the month of November. The remaining chance for a pullback of any size, it’ll be at small, would appear to be the last week of November as liquidity will be very low, and the final, big trading-oriented accounts out there take care of their tax loss and tax gain positioning. Once again, the big money guys need to do this before December 1st as to not run afoul of tax loss wash sale rules in December.

Onto the topic for the week, and I want to stay on last week’s topic for one more week. That topic was financial news? As I previously mentioned, this week’s title is Financial News or Opinion Calls for Financial Armageddon, The Consequences of Listening to the Armageddonists from 2010 Through Current. Having managed portfolios institutionally for over 20 years, I have the great fortune of having some great contacts for market research from both friends and business associates.

One of the best charts I’ve seen in the past 10 years is circulating around the internet this week. It shows the opportunity costs and return differential of moving every dollar from the S&P 500 to bonds the last 10 years, as the group labeled, the Armageddonists came out publicly with their end of the world and end of the bull market run predictions. I won’t go through every piece of data on the draft and chart, but I do want to highlight a few from the past 10 years.

Most of our listeners who watch CBC and other financial channels will know these names. Most of these people are probably hoping we forget their market calls. The first of the Armageddon crowd is Dr. Nouriel Roubini. Yes, the brilliant and often quoted Dr. Doom. Mr. Roubini got the blow up the housing bubble right in 2007 through 2009. He first warned about that bubble in September of 2006. [claps] Great call, Dr. Roubini.

However, come 2010, he was still calling for more bubble blowups, and in 2011, more of the same. 2012, yes, it’s too early to buy. 2013, bubbles are everywhere and had you took his advice with your money, you would still be sitting on a big pile of cash earning 2% while the S&P 500 has rallied 200% since January 1st, 2011. Forget the fact that Dr. Roubini has never managed other people’s money as a fiduciary. Forget that Mr. Roubini’s main source of income is, anyone, anyone? Well, his main source of income is selling books, public speaking engagements, and selling macro data research on a subscription basis. Had you listened to Dr. Doom, he would still be waiting to invest.

Another favorite of mine, who didn’t make the Armageddon list is Dr. Nassim Taleb. Yes, you know him as the man behind the Black Swan event theory. Mr. Taleb is one of the most educated and brilliant math minds in the world. He literally coined a term in a financial risk belief system that was talked about almost weekly from 2007 through 2013. His book, The Black Swan: The Impact of Highly Improbable, was visionary. It is a must-read for anyone in finance. It is brilliant but does it help anyone manage their finances or manage money

The main idea behind The Black Swan theory is this, “The disproportionate role of hard to predict and rare events that are beyond the normal expectations in history, science, finance, and technology. These are so-called tail risks.” Let me ask this if the chance of such a rare event is random, why do I care? Isn’t it priced into the tail of the auction market? While it is a scary and dramatic theory and was talked about nonstop for almost five years, what does it mean to you as an investor? The basic takeaway from the theory for 99% of all investors is probably this. Always have risk-free money sitting around in case the proverbial hurricane or perfect storm hits. Well, this is just plain and simple common sense, whether one is accumulating wealth or retirement income.

The Armageddon lists list from 2010 through today includes the likes of the following almost quarterly TD financial guests. Those are Marc Faber of the Boom, Gloom, and Doom report. David Stockton, who is a former political appointee under President Reagan, and then a private equity investor. Peter Schiff, an economist and radio show host. Paul Krugman, an economist, academic professor, and author. Carl Icahn, a historically great private equity investor.

I’ll throw in another one, not on the list, but Tony Robbins, the amazing motivational speaker, and self-help guru. I’ve even attended a Tony Robbins seminar, and it was amazing. He is truly a larger-than-life personality and is brilliant at motivational speaking and life coaching. However, somehow, Mr. Robbins is now pitching financial advice, and he’s been doing so since 2010.

Unfortunately, to those who took his advice, a quick Google search shows that in August of 2010, with the S&P 500 sitting around 1,100, Mr. Robbins had advised his listeners to get out of stocks because one of the biggest bubbles in history was about to blow up. Well, after a 200% gain in the S&P 500 over the past nine years, one has to ask what exactly is Mr. Robbin’s core competency? Is it motivational speaking, book writing, and business development, or is it financial and investment management? Listeners, please tune out this noise.

What do all these individuals have in common besides being brilliant in their own right, and having very loud, broad public opinions? Almost none of them directly managed publicly traded assets that are comparable to 99% of investors’ portfolios. None of them probably knows your financial situation, and most likely none of them manages a dime of your money. Why do you care about their opinions? The team at Oak Harvest knows how hard it is to do, how hard it is to turn out all the loud opinions you are bombarded with every day, how hard it is to tune out the daily noise and the opinions that are now almost labeled as news.

These opinions and views, while interesting and possibly good for TV ratings, should have zero relevance in making your personal financial decisions. Please give us a call. We can direct you to the Armageddon chart, and you can see for yourself just how much opportunity costs you would have lost by listening to any or all of these loud dire warnings since this bull market began in 2010.

If your advisor stopped buying stocks for you this summer because he was concerned about the economic signals only to recently say the clouds are clearing and he is starting to buy the markets after they’ve rallied 10% in three months, give us a call at 281-822-1350. Selling fear and buying greed is not a systematic investment plan. The team at Oak Harvest wants to help you navigate your retirement. We want to help you manage your emotions around your savings, and we want to make sure that you only retire once in your life with a customized retirement planning. My name is Chris Perras, I’m chief investment officer at Oak Harvest, and have a great weekend.

Operator: The proceeding content expresses the views of the speaker and is for informational purposes only. It is based on information believed to be reliable when created, but any cited data, statistics, and sources are not guaranteed. Content, ideas, and strategies discussed may not be right for your personal situation and should not be considered as personalized investment, tax, or legal advice, or an offer, or solicitation to buy or sell securities. Investing involves the risk of loss, and past performance does not guarantee future results.