After today's rally, one that has taken us within striking distance of a whole bunch of records, it's time that we talk about how we must stop worshiping at the altar of golden calves.
Yes, it's time to reassess the whole notion of listening to even the smartest of minds and taking action on what they say. Nothing wrong with taking it in, but without showing some critical thinking, the so-called gurus who come on television are false idols that must not cause you to take action alone, on their words, on their fears.
Three times since the pandemic started to wreak havoc on the stock market we heard from brilliant men who presented dire pictures of the world, with pictures so grim that you would have to strap yourself to the mast in order to not hear their sirens. But strap yourself you must, you had to, or you would have done the wrong thing.
Who were these false idols? Before I mention their names I want to say that not one of them seeks your worship. They actually aren't looking for adulation. They are not rainmakers. All they are, all they will ever be, are people with opinions, and it is on us to assess their opinions, and, yes, to blame ourselves if we listened because we didn't have conviction, knowledge or belief in ourselves and our own judgments.
Okay, enough caveats. We had a brutal decline, worst and quickest ever, from 29,000 on the Dow Jones Average on February 21, of this year, down to 19,882 on March 18th, when Ray Dalio came in Squawk Box and in a calm and unimpassioned way traced out prediction of Great Depression II, the sequel. He mentioned the 1930s as an analogy four times. He talked about how the country might need to spend a trillion and a half, maybe as much as two trillion dollars, and offer all sorts of guarantees and subsidies, or we could be facing the unimaginable.
Dalio is brilliant. His book is sage-like. He's smarter than I will ever be. He's so smart that the Treasury Secretary Steve Mnuchin and Federal Chairman Jay Powell listened to him. They heeded Ray Dalio.
So, what happened here? Dalio came on and traced out a likely scenario, that we would have a Great Depression, and an unlikely scenario, the government would deliver. The long shot paid off. The favorited and you fell with it if you listened.
Second siren? On March 18th Bill Ackman came on air and urged that the economy be shut down for one month to save it and he told us that "hell is coming." I don't know what to say about this doomsaying. It was pretty emotional and outrageous and many feel it actually caused the bottom, given that it was uttered when the Dow fell below 19,000. I can't defend this one, other than to say that everyone gets it wrong and Ackman got it wrong. It happened.
Finally we have Stan Druckenmiller with his May 12th statement that the risk reward for equity was maybe as bad as he's ever seen it. It's very important to point out that Druckenmiller was not on CNBC, and I believe the whole context of a speech he gave that was reported by us seems more like a standard warning jeremiad rather than a jump out the window call. Plus it was only about 800 Dow points ago, totally in striking distance of being right.
Here's my bottom line: all three gents deserve your respect not your opprobrium. All spelled out how they felt at the moment. Who knows if they changed their minds? Did Ray Dalio stay negative when the government did much more than he said they would need to? I don't know. I see Ackman on the tape buying a lot of stock. I have no idea what Druckenmiller's doing. But what's most important is for you to know what you are doing. Worship no one. Trust yourself. Or take your IRA your 401k and go home.