April 7, 2025
Deja vu all over again
A few short years ago my blog comment section and social media were blowing up. Panic was in the air. The comments were varied, but uniformly convinced this time was different. As a theme, they ran along these lines:
“JL, I love your work and have been following The Simple Path with great success. But now the market is crashing and this time is surely different. This time it is a pandemic. This time economies around the world have shut down. This time people are dying! The Simple Path is no longer going to work. This time is truly different.”
Well, as I said at the time, yes and no.
Yes in that the trigger was a pandemic and we hadn’t had one of those in a hundred years.
No in that, while the trigger is always different and always feels uniquely scary (that’s why the market crashes after all), it doesn’t change The Simple Path.
The Simple Path tells us:
- Market corrections (-10%), bear markets (-20%) and crashes like the ~33% covid decline are a perfectly normal part of the process and to be expected.
- Trying to time these, trying to dance in and out of the market, is a fool’s errand.
- Such times are opportunities to pick up shares on sale.
- You must tie yourself to the mast and stay the course.
- Whether the market makes you rich or leaves you bleeding at the side of the road depends on what you do during these drops.
- As Jack Bogle famously said: “Don’t just do something, stand there.”
Understanding these principles is essential to following The Simple Path. It is designed to be implemented over the decades and it assumes we’ll be enduring turmoil like Covid and these current tariffs and political season. And it requires you to stay the course.
Now, of course, you are perfectly free to disagree with me on some or all of these. If that’s the case, you clearly do not want to be investing with The Simple Path. Indeed, you might well not want to be investing in stocks at all.
The market is an amazing wealth building tool, but to benefit you must be willing to endure its volatility. If you’re not, if you are going to panic and sell during times like these, it will leave you bleeding at the side of the road.
Let’s take a look at the last extended ugly time in the market: 2000-2010.
That decade started with the Tech Crash in 2000-2002 with the S&P 500 falling 49% and ended with the financial crisis of 2008-2009 with the S&P 500 falling 56.8%.
Over the course of those ten years, the S&P 500 posted an average annual return of 2%, -.26% adjusted for inflation. Given those bookend crashes, not bad.
Now if you were following the media reports around this, despair was in the air. If you were following The Simple Path you stayed the course and were steadily accumulating shares at bargain prices and doing so has enriched you greatly.
Which brings us to today, Monday April 7, 2025. So far the market has had wild swings and, at mid-day as I write this, it is down 32.87 points/.65%. Essentially flat for the day but still flirting with bear market territory given the debacle last Thursday and Friday.
But, of course, that’s history. What you really want to know is:
“Where is it going from here?”
You and everybody else, and I’m sorry to tell you I don’t know. Nobody does. Not even (especially!) all those gurus on the news telling you they do.
For what it is worth, I think these tariffs are a terrible and dangerous idea. I won’t bore you with the reasons, there are pundits on 24/7 happy to lay it out.
I can see this change in world trade driving the market much lower and maybe even into an extended multi-year bear.
So, if that is the case, why am I not selling and advising you to do the same? Two reasons.
1. If 50 years as an investor has taught me anything, it is humility.
Countless times over the decades the future seemed so clear as to be obvious. Sometimes I was even right. But lots of times I wasn’t. The future just has too many moving parts.
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- Could be, Trump and his advisors will turn out to be right about tariffs and things will turn up roses.
- Could be, these tariffs are a negotiating ploy and will fade away.
- Could be, something else as yet unseen changes the game.
2. Could be, we are in for that extended multi-year bear and on The Simple Path we will be accumulating shares at bargain prices like 2002-2010.
But wait, JL, you might be thinking, this time truly is Armageddon.
Could be, you’re right. Regardless, nothing I can say will dissuade you. Nor would I want to. It is your life and your money.
But for others, those scared but wondering, I would observe Armaggeddon is exactly what folks were saying about the Covid pandemic.
20 years from now the market will almost certainly be higher. 10 years from now the odds are it will be higher. Even 5 years out, it very likely will be higher. What happens in these next few days, weeks, months, years is anybody’s guess.
Addendum 1: A word about the media.
Understand the mission of the media today is only secondarily, if at all, to inform. It is primarily to seize the attention and eyeballs that drive revenue. Countless studies have shown this is most effectively done by instilling anger and fear.
This is true regardless of your preferred media outlet.
It pays to listen with a skeptical and critical ear, especially when you are hearing things you are inclined to want to hear.
Addendum 2:
From the Mad Fientist newsletter:
I recorded this podcast episode with JL Collins right as the world was locking down at the start of the pandemic. Markets were going crazy and fear was rampant.
All the advice in the episode applies to this current correction.
Of course, this time is different. But as JL says during the episode:
“Every time there’s a bear market, it has the feeling that it’s something major and it’s something different and it’s terrifying. And if you think about it, that’s by definition. Because if it were not those things, there would not be a bear market. If people didn’t feel that way, if people weren’t scared, they wouldn’t be panicking. And if they weren’t panicking, they wouldn’t be selling off their stocks.”
Addendum 3:
Investing in a Raging Bull (or Bear) Market
Why you should not be in the Stock Market
Time Machine and the Future Returns of Stocks
Donald Trump and the Future Returns of Stocks
Guided Mediation for when the Stock Market is Dropping