Do you remember waking up early every Saturday morning in sheer excitement for the coming of your favorite TV cartoon characters to hit the screen — Looney Tunes? Now, I do admit I was somewhat of a fanatic when it came to just about any of those shows that played in a span of some two hours or so. As I look back on those days, and have watched them again through more mature eyes, there is a completely different message (and adult humor), in which as a child I never picked up on. This, in my opinion, is the pure genius of creators like Chuck Jones and Mel Blanc. One in particular was Wile E. Coyote vs. The Road Runner.
As a reminder, Wile E. had just one purpose in life … to catch the Road Runner. How he went about it was to utilize some of the cleverest ideas (in his mind) and the newest gadgets manufactured from that famous cartoon company — ACME. In theory, why couldn’t he outsmart a bird that just was able to run faster than he could? His plans always seemed logical — well, to him, at least. And with the newest tools available, he believed they would be able to catch the Road Runner. However, time after time the results were that Wile E. would fall off cliffs, get crushed by boulders, and manage to blow himself up more times than we can count. I thought to myself, why doesn’t he figure this out? After all the knowledge he gained from past mishaps, botched tools, and faulty plans it should have taught him otherwise, right? We, as humans, would have learned from our past mistakes, correct? Well, let’s take a look.
In Brett Arends article in Smartmoney.com titled, “Main Street’s $100 billion Stock-Market Blunder,” he looks at what happened over the span of years since the Lehman Brothers collapse in October 2008, now that the Dow Jones Industrial Average had hit over 13,000. What he goes on to find in rough figures (you can read all the details if you go online) is that by calculating the information on mutual fund net sales or purchases for each month with data from MSCI on each month’s average market return — Main Street investors have missed out on $106 billion in investment profits over the past five years. How did this happen? Well, by selling stocks at the wrong time. Arends states, “… in October 2008, after Lehman, investors panicked and withdrew about $45 billion from U.S. Stocks. That trade alone cost $25 billion in profit. … In February and March 2009, as the market bottomed, mutual fund investors sold another $29 billion worth of U.S. stock funds … that cost them another $26 billion in profit.”
By adding up the past mishaps, botched ideas, and faulty plans over the five year period, the lost profits come to around $100 billion. It seems as though the average investors, utilizing what they believed were some of the cleverest ideas and newest market gadgets, have consistently done the wrong things at the wrong time — can you hear the sound of the boulder crushing the average investor? In the words of The Road Runner: “Beep Beep!” Unfortunately as investors, we may not be so different from those Looney Tunes.
Past performance is no guarantee of future results.
This article was written by Lou Melone, Managing Partner, with Budd, Melone & Company in Auburn Hills, MI. Lou Melone can be reached at 248.499.8704.
Posted date on DBusiness.com- Article XVI, Issue II
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