Investor Sentiment Survey: Marc’s Response

This is a guest post by Marc Saunders, who was kind enough to share his responses to our recent investor sentiment survey, in which I asked Have You Lost Faith in the Markets? These are his responses to the 10 questions I asked:

These are some good and thought provoking questions that everyone should answer for themselves before they ever get near a market. I could write book based on these, but I’ll try to be short and pithy:

1. Do you feel differently about investing than you did 5-10 years ago?

No. I feel like I always have. If you study the market (US market) going back to the 1800s, you’ll see it’s no different than it ever was… it goes up, down, and sideways. The only difference is that now we’re in a secular bear market, so we can expect a lot more volatility, and a lot more of the down.

2. If you are new to investing, are you reluctant to get started?

Been doing it awhile. Wouldn’t get in now if you paid me. A secular bear is not a smart time to gamble, and there are better ways to make more with less risk.

3. Have the market crashes of the past 10 years changed your view of investing?

No, this is typical secular bear behaviour. The secret is to use the market in a way that’s appropriate for the times you live in. If you invest now as though it was 20 years ago, you’ll get killed. History shows us that very clearly.

4. Do you trust our government and corporate leaders to act with integrity?

No. Never have and never will. The government is in it for power, and business is in it for profit. Neither are there for you or me. It’s a tough lesson, but one worth learning. However, I’m American, and your experience may be different.

5. Are you confident that the financial system is repaired and the economy will recover?

This problem has been building for a long time. What we are seeing now is the fallout and cleanup. The economy will recover, but it will not be the same as it was 20 years ago. We can look to Japan for an example of that. Times change… we can’t hold onto the past.

6. Do you believe today’s markets are structurally different than they were 20 years ago?

Not really. The market’s not different, the times are different. The market isn’t about numbers, it’s about people and the times they live in. It’s the times that have changed. Demographics and psychology plays a huge role in market behaviour.

7. Do you think it’s realistic to expect average annual returns of 7% or better from the stock market, or do you embrace the New Normal paradigm of roughly 2% returns?

No one knows, but if history is any indication, between 2% and 4% sounds about right. And who am I to argue with Bill Gross… he’s an investing genius.

8. Do you think bonds are any safer than stocks given the age of the current bond bull market?

Bonds are inherently safer than stocks. There’s just no comparison. That doesn’t mean they’ll give a better return, just that they’re safer.

9. Have you changed your retirement plans based on your answers to the above questions? Will you do so now?

No, my retirement plans don’t involve traditional market strategies, or necessarily traditional markets at all.

10. If you are indeed feeling less confident in the markets, what would it take to restore your trust?

I have complete trust that the markets are just what they have always been, and I have total confidence that the markets will act just like they always have. This is the way markets always behave in a secular bear market. Trust shouldn’t be the issue… education is the issue.

We’re starting to see more articles pop up lately about investor distrust in the markets, and I can certainly see how many investors may have lost faith in some of the people who regulate the markets. But perhaps Marc makes a good point. Maybe markets are just behaving the way they’re supposed to in a secular bear market and some of us just haven’t acknowledged the shift from a secular bull to a secular bear yet.

Thanks to Marc for sharing his ideas here. If you would like to do the same, leave a comment on this post or the original.