I have been wanting to write something inspired about the markets but I have very little to say as frankly I feel like my emotional tank is running on reserves. I want to write something personal before making a simple but fundamental comment about the way to successful investing.
Yesterday I saw this post on Facebook which couldn’t have been more appropriate as we were admitting my 15yr old daughter into hospital for chronic fatigue syndrome and fibromyalgia. For those not familiar how debilitating this condition can be; over the last 5 months my daughter has been sleeping 20hrs a day fighting pain 24/7. Her life has simply been put on hold. No school, no socializing, no fun, frankly no life. For a parent to watch helplessly on the sidelines is one of life’s real challenges.
The message I wish to draw from this difficult experience is simply that in life some of the most important principles are so basic that we tend to ignore their importance.
Watching my Sleeping Beauty sleep hour after hour I am realizing how precious every moment every experience is. When someone is denied something so basic as going to school, going out with friends, walking around without pain then we realize how blessed we are when we can do the basic things in life and how for granted we take these blessings.
It almost feels inappropriate to discuss the markets in the same context of this message but I feel we have lost our way when it comes to investing. If you think you are investing when you buy and sell shares on the market you are probably following some misguided belief. At the end of the day investing is about buying the market when its cheap and selling when its expensive. Do you get any simpler than that?
Norbert Keimling from StarCapital put some nice charts together using the CAPE (cyclically adjusted price-earning) ratio, otherwise known as the Shiller PE ratio to measure whether a market is cheap or expensive.
What you see is that the cheaper the market is in when you invest the better your future returns will be. The markets are breaking to new nominal highs, and the US is at its 2nd most expensive point in its history using CAPE, so you decide whether now is a good time to be investing in the markets.