Mr. Market and You
Who is Mr. Market?
Drama masks. Source: Musei Capitolini
Investing is a partnership between the investor and Mr. Market. Mr. Market is a moody fellow. Some days he’s gloomy and unhappy. He wants you to buy something—anything—from him at the cheapest prices. The world looks uncertain, the economy looks lousy, profits are miserable, and nothing seems to be getting better. So the prices he asks for his goods are cheap.
Other days he’s happier than a lamb skipping across the fields. The sun is shining, business is booming, and all seems right with the world. Life’s a peach. So he doesn’t want to sell you anything. In fact, he’s buying everything he can lay his hands on with abandon. It seems that no price is too dear for him. He’s upbeat and glad, and wants share some of his cheer with anyone around him.
Photo: Dave Meier. Source: Picography
They key is to understand the nature of your partnership. You don’t have to do business with Mr. Market. You don’t have to do anything at all. He’s happy to do his thing, and let you do yours. But you can’t change your partner, you have to wait for him to change. And he will. He always does.
These days, Mr. Market is double-minded. He’s quite depressed about some businesses—banking, farming, mining. These old-line activities seem pointless. There’s nothing new, nothing to get excited about. On the other hand, anything having to do with consumers is great. Consumers keep spending on cigarettes, snack foods, and cleaning supplies, so any company that makes these things is golden, in his thinking. And online consumer activity has that “wow” factor. Those companies don’t need profits. He’s willing to let them make up their own pro-forma financials—like a newspaper reporting on fantasy sports league scores instead of the real games.
In the past, your partner was willing to do a lot of heavy lifting as far as helping you achieve your financial goals. In the ‘80s and ‘90s, double-digit returns were common. But now, you need to step up and provide a bit more capital for your partner to work with. Mr. Market can seem to work wonders, but he doesn’t do magic tricks. He can’t pull a silver dollar out from behind your ear, or spin straw into gold. He’s all business, all the time.
Investing has always been a partnership between the markets and the investor. In order to invest successfully, we need to accept the markets as they are, not as we’d like them to be. If you want to have more savings, you’ll need to save more money.
Douglas R. Tengdin, CFA
Chief Investment Officer