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00:00Barry the clients of wealth management root holds walk in the room and you need to display a self confidence. How do you form a self confidence now that gets you your clients or viewers or listeners to 2023. Well we cheat. We we don't start discussing long term investing in volatility and drawdowns. Now when we're in the midst of a pretty substantial correction we start talking about it from day one. We let investors know and we let clients know. This is a feature not a bug of volatility. We really repeated over and over again in twenty twenty one. Hey no more than a 5 percent drawdown in this falling volatility is the aberration. It's unusual. High volatility is the norm. Regular 14 15 percent corrections is averaged thirteen point six percent going back to 1950 is average and so enjoy 20 21 but expect more volatility in the future. And you know I'm fond of saying the time to read that card in the seat back now is not when the engine falls off the wing at 30000 feet. But when you're sitting on the tarmac waiting for your chance to leave JFK right now we're flying on one engine. One of my great mentors John Templeton who was very kind to me at a young age had a wonderful phrase in that Tennessee accent. Tom shares are on sale. Why do we have trouble buying when Templeton sees shares on sale. Well it's not like we're going to the supermarket and buying milk and eggs. And when we consume them they're gone. And we're not happy when prices are higher. The next trip to the supermarket when we own stocks and buy more stocks they're on sale. But keep in mind it means that anything you've bought over the past eight months is probably below what you paid for it. And so people have a very hard time. This is a temporal challenge. This is a time issue. People have an incredibly difficult time picturing the world 10 20 years from now which is what 90 percent of our clients are individual investors 10 percent are institutions. And even those institutions are things like foundations and endowments. So they have a really long time perspective. It's very challenging to think about 20 30 to what 2042 when Thursday was such a disaster. And that's the that's the challenge for investors to pull themselves out of the moment and project forward. Barry I'm glad that you talked about the time horizon. It's one thing if you've got 20 years it's another thing if you've got three years or five years or six years. And I wonder you know you say that that's sort of the same thing that we've always seen that it's sort of that volatility is a feature not a bug. Is this time however unique for the Fed withdrawing stimulus actually tightening policy at the same time that central banks around the world are doing the same and moving away from unprecedented policies at a time of such economic uncertainty. Yes. So I wouldn't say unique but I would say rare. The last time we saw a year where both the S & P 500 and the bond index were down double digits was eighty eighty one you know 40 years ago. So most of the traders were out there who don't really know what a rate hiking environment is like and are totally unfamiliar with inflation. This is before most of them were born forget before they've been on trading desks. And so it looks like gee this is unique and never happened before. You go to the history books you go to the charts and the data and it tells you hey this has happened before. And it's not a coincidence that looking back to 1982 81 that wasn't the worst time to be in equities or bonds. What's different today is all the fiscal stimulus we see coursing through the system and the fact that we're starting from zero and reopening from a pandemic closure. So some things are similar. Some things are wildly wildly disparate. Barry Reynolds thank you so much. Greatly appreciate it this morning. Chris Masters in business will give you the self-confidence you need to move forward in this market.

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Why Investors Have a Hard Time Buying Stocks on 'Sale'

Barry Ritholtz, Host of the "Masters in Business" podcast and Chairman & CIO of Ritholtz Wealth Management, discusses the difficulty investors have looking past temporary challenges. (Source: Bloomberg)

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