Going Long, When the World’s Attention Seems Short

Global strife, selling rife. It’s almost a market maxim.

The crazier the world looks, the less attractive stocks look. Investors seize on trouble abroad and unload almost any equity investment they can.

But why? You don’t have to be a market player to know that lately, bad global news hasn’t been playing out well. First it was the Ukraine mess, then the sanctions on Vladimir Putin because of that mess, then the Malaysia Airlines shoot-down because Putin loyalists didn’t much care he was creating a mess. With each new mess over there, massive market gyrations everywhere.

Then along came to the Israel-Hamas conflict, then the growing Iraqi insurgent conflict, then U.S. airstrikes because of that insurgent conflict. So many new disturbing developments abroad that we just couldn’t – and can’t – figure if any of them will work out soon. And into such a vacuum, go a lot of investors with sell orders.

What’s remarkable is that on the very first sign of dust settling, markets start stabilizing. You’d think we’d get the routine down by now. But we don’t. Most never do. But you can’t tell me a few brave stock souls don’t defy the crowds and capitalize on their collective panic.

And they capitalize on something else – history. Because invariably markets that seize on bad news, equally seize on any glimmer of good news. That’s why last week in the middle of President Obama initiating air strikes against Iraqi insurgents, the markets actually reversed course and started moving up on news out of Ukraine that Russian troops were backing off the border. In neither case was the news entirely positive; just that in the Ukraine case, it was the first news in weeks that was positive.

Word to the wise that it might be wise to focus less on global events that could change, and more on repeating market trends that invariably do not. That old Peter Lynch advice to hang tough when other investors aren’t hanging around, comes back to me every time I see such market reactions. Maybe because they’re so common and almost so ritualistic, you’d think we sense by now that they’re long-term hold tends to be brief.

There is, of course, the bearish argument that such global developments can serve as a convenient excuse to sell, and take profits. After all, prior to last month’s Ukraine and Malaysia Air developments, markets had been on a torrid, darn near uninterrupted advance. It was an advance that market pros didn’t buy on the fundamentals, since earnings and stocks had been darn near priced to perfection. And if the real weight of an out-of-whack Dow Jones Industrials Average wasn’t going to bring investors to their senses, maybe some good, old fashioned global anxiety fears would.

It’s very hard to say, but this much is not: Do not assume market gyrations supposedly built on global worries really amount to much more than a global hill of beans. For one thing, even in the worst of such friction, investors seek out the haven of something, and that something generally is us…as in United States Treasury securities or simply, the dollar itself.

The world’s near Pavlovian financial response is uncanny. With every Ukraine development, then Putin development, then Israel-Gaza development, then Iraqi airstrike development…same deal…same flight to quality.

And we’re the quality. We’re the flight destination. Let that be a reminder to all the naysayers out there who insist this country’s best days are behind it. With each and every crisis that hits us – at damn near the frequency of Delta shuttles – investors shuttle to dollar-denominated assets. I’m not talking some of the time, or most of the time…this year, I’m talking ALL of the time.

Far be it from me to offer anyone investment advice, so maybe I should just leave this column with nothing more than one historical note – so few ever make note of history.

That’s not to say that market hits are real, but they don’t really endure unless the world truly is going to hell. When investors give up on all investments, and do so for a very long time, the cynics just might have a point. But all I know is those who challenge their freak-outs typically make a nice profit…when they do.