The Best Month

There’s one immutable fact about our calendar: October is the best month. There is no argument here, don’t even try to email me about this take, it is the best month by far. The front half of it is usually warm, the back half is crisp, leaves are turning into spectacular colors, and it ends with the best holiday of the year (yea I said it.  Halloween). Apparently the stock market didn’t get the message though because holy cow what a mess. The first two days have seen the S&P500 fall roughly 3% which is the worst start to the month in over a decade. Does this mean we’re going to experience a repeat of last years disastrous drop into the Christmas Eve massacre? I doubt it, primarily because the Fed is easing not tightening. Last year was a toxic brew of a growth scare + Fed hikes and right now we only have half of that in our cauldron. On Monday I said that the stock market was holding its ground primarily because consumer data remains firm. Today we saw ISM Services whiff and you don’t have to be a CMT to notice the downtrend. This bears watching, it really does, if other consumer data like spending, jobs, and residential investment falters then it’s entirely possible that uncertainty around this Trade War has bled from businesses into consumers. Speaking of consumers, lemme give you my take on what “free commissions” might mean to our world.

The biggest news this week was that discount brokerages like E-Trade, Schwab, and TD Ameritrade were cutting their equity trading commission to 0. Free, no cost, you can wing yourself into and outta stocks online for absolutely nothing (startup Robinhood has allowed their customers to do this for a while now). Now there’s a case to be made that this is a golden age for retail investors, the frictional costs of investing for mom and pop are approaching 0. But here’s what the data shows about them:  most do-it-yourself investors struggle to match the overall performance of the stock market. Now there’s lots of reasons why but they mostly revolve around overreacting to noise, trying to time the market, and letting emotions sway decisions. They see something they think is important, fear and greed kicks in, they make a rash decision, and all of a sudden they are chasing the market around. Behavioral stuff. Now if there’s no transaction costs they might be MORE inclined to do this. In fact, I wonder how much “free commission” will end up costing retail investors?

Honestly, I think this will only increase the value of advice/having an advisor. A great many investors will STILL fail at reaching their goals even with zero frictional costs. They are only human, they have biases and emotions literally working 24/7 against their investing success. Yes, advisors charge fees, but part of their value lies in helping clients overcome those investing traps and tackling those behavioral biases which might get WORSE now. Remember, the value of advice is different than the value to transact, don’t conflate the two. Good advice, and frankly a good partner who understands you and your values, will always be needed even in a world of $0 transactions.  

Ok, apologies, I went a bit long today so I’m just going to skip to my big finish:

Tell me if you saw these guys performing this act on the street you wouldn’t give them at LEAST $20? Absolutely amazing

Have a good night