Playing The Odds

Sam Ro is fond of saying “stocks usually go up.” The *chart below supports the statement that historically over time, stocks usually did go up. This is why it makes good sense for financial pundits to play on the bullish side. Usually they’re right, and when they’re wrong, so is everybody else, and misery loves company.

However, “stocks usually go up” also implies that sometimes stocks go down, and sometimes they go down a lot, which is supported by the *chart below. This is why it can also pay for financial pundits to play on the bearish side. Usually they’re wrong, but when they’re right, they get to say “I told you so.” They saw what few others did, and this can provide them with an open invite from the media for the rest of their career.

The fact that stocks usually go up makes permabulls look like idiots once in a while and permabears look like geniuses once in a while.

*S&P 500 Total Return, Data provided by Dimensional Funds Returns 2.0