The Song of Stock Pickers – Wiped Out and Exhausted

2,814 stocks & ETFs are down 50% or more this year.

The collective value of this is in the trillions.

Generally, there are two kinds of investors. There are those who invest long-term, dollar cost averaging into indexes or other fiduciary-led portfolios, and then there are those who are self-directed, attempting to build their own portfolios and outperform the indexes.

This post is about the self-directed, the daring few, the stock pickers who take on the bold quest of outperformance. Sadly, for the majority venturing along these paths, the last two years have presented unimaginable obstacles, overconfident investors have disappeared into the abyss, without explanation. The well-known woodshed in the back has been open, chopping many trees.

The S&P 500, meanwhile, is down a measly 15% or so.

To demonstrate how brutal this drawdown has been for stock pickers, let me first explain it has been going on longer than anyone really understands. It started well before this post, and is beyond 20+ months. Two years of the average individual stock getting plundered.

I tweet a lot. Sometimes I tweet bad takes. Other times they are okay and I even surprise myself. To be completely transparent, it is just a stream of thought. But perhaps I should listen to that stream more often.

Looking back at my stock picker crash tweets, the data I was gathering, I am reminded how long it has been, the following tweet, for example, is from December 2021:

However, there’s a saying in financial markets that goes like this: it can always go lower. And lower this story has gone, to depths that are even worse than the DotCom Bubble.

The spread between the average tech stock and the major indices has blown out. This spread remains blown out to this day, getting even worse with each market open. In the tweets below, you will see some data about this spread breaking, in addition, the extent it has lasted, starting as early as February 2021!

The point is, I can only imagine how many stock pickers are down 50%, 60%, 70% or more over the last 20 months. Wait a second, not just stock pickers, also hedge funds. Some of the largest, perceived most sophisticated stock picking funds on earth are down 60%. Hey, at least that means some of us are outperforming the so-called smartest on the street!

Sure, perhaps this drop makes sense, as some money has fled to Treasuries at 2% and 3%. Or perhaps cash is king once again as worries of geopolitical fears breakout, wars, and oil – I guess some things truly never change.

I have no idea when or if this stock picker crash will end. But, l leave you with a chart that shows total Money Market Funds in the US. These funds are as close to cash as anything, generally only investing in cash itself or very short-term treasuries.

There’s a little over $5 trillion in US money market funds currently sitting idle, enjoying life, right near its recent highs.

While yes, the average stock is down some 50%+ over the last year, while Ray Dalio says another 25% crash is coming and Michael Burry says the world is ending, sell everything, I am actually reminded that at any moment, the dance could begin again, surprising even the brightest, as markets often do.

It will start slowly, and then suddenly, it will be.

P.S.

I need to write more again! So I am writing this down to put it out into the universe to start blogging more often. Get back to it, Stef!