Just When You Thought It Was Safe To Go Back In The Water
Those of you of a certain age will remember the title of today’s blog as the tagline for the 1975 movie classic JAWS. The Peter Benchley thriller made its screen debut on June 25, 1975. One critic suggested it was secretly financed by the Swimming Pool Manufacturers of America.
Do you remember the first time you watched Jaws? I remember standing in a line outside of the Keswick Theater with a group of friends before we had the you-know-what scared out of us. I still enjoy watching Jaws and spotting the cinematic flaws and saying certain lines in unison with the salty characters that made this movie so fun. Let’s plunge into this a bit further.
From and IndieWire column in July, 2012: “Everyone credits Steven Spielberg’s masterful direction and his deft use of his barely functioning mechanical shark for “Jaws”’ success — and there’s no doubt that Jaws himself is one of the greatest movie monsters ever. But it’s Mayor Vaughn and his cronies who make “Jaws” truly terrifying. Their actions enable Jaws’ rampage, and turn the film into a cautionary tale about uncontrollable appetites of all shapes and sizes. A menacing shark is scary, but you can always stay away from the beach. But chillingly craven government stooges like Vaughn? They’re inescapable. And their appetites are just as voracious as sharks’.”
Reading this review, it got me to thinking about the current state of the stock market, the impact of governments’ and government agencies on markets, and the emotional cartwheels we are experiencing as investors. Are we in a trade war? How many times will the Fed raise rates? Is the stock market being driven by uncontrollable forces? Should I ever go swimming in the ocean again???
As much as Jaws scares us, even scarier are the times when markets suffer swift and deep declines. We are experiencing that right now. Consider: oil as measured by West Texas Intermediate index has dropped 40% since October 1. Small cap stocks are down 23.1% from August 31 (using the Russell 2000 index price). And you remember the fab four stocks of earlier this year known as FANG -- Facebook, Amazon, Netflix and Google? Well, these four are off an average of 30.67% from their respective peaks earlier this year, according to Thomson One. That is big, and it happened fast… and yes, it is scary.
Fear is the prevailing emotion in today’s market and that creates opportunity. It was a while before I comfortably swam in the water off of Sea Isle City or Avalon back in 1975. Did you suffer from the same emotion?? Yet a few years later, during a visit to Avalon, I was actually swimming comfortably offshore when a school of sharks came between the beach and me. The lifeguards looked at me in anger and awe when I walked ashore. In a case of “ignorance is bliss”, I never knew the sharks were there (and the lifeguard who had given me permission to swim offshore was not happy with her beach assignments for the next several weeks).
This is not to suggest you should blissfully ignore the market and everything will be peachy in a few months. Rather we need to recognize that the swift moves of the markets in the past few months, which have wreaked havoc on specific investments, are a sign we need to understand.
Is the market making a transition? Quite likely, we are going from a “growth period” in our economy to a “not growing quite as fast” mode. Markets are adjusting. Headlines announcing trade wars, rate hikes, and off the cuff remarks by current and former government officials about recessions (What are you thinking, Alan Greenspan?) fan the flames. Markets will find equilibrium.
Two memorable quotes to share:
“This too shall pass…like a kidney stone.” Unknown
“We’re gonna need a bigger boat”. Quint (my favorite character in Jaws)
Please feel free to call if you need some investing advice or swimming lessons.
Ralph McDevitt December 19th, 2018
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