What Investors Can Learn from Groundhog Day
Contributed by Doug Walters, Max Berkovich, David Lemire
Wednesday was Groundhog Day, and Punxsutawney Phil saw his shadow, so according to legend, winter will extend another six weeks. This winter has not been great for investors, so let us hope his powers of prediction do not extend to the stock market! This superstition may be silly, but there are lessons to learn from Groundhog Day.
Investors are not immune from superstition. Every year we have to endure media references to sell in May and go away, the Santa rally, SuperBowl winners, as goes January so goes the year, and the hemline effect. These superstitions range from the unfounded to the ridiculous. There is not much to learn from them other than how to data-mine spurious relationships, but we can learn something from Groundhog Day… the movie that is.
If you are unfortunate (or fortunate?) enough not to have seen the 1993 Bill Murray classic, Groundhog Day, it is about an intolerable newscaster, Phil, who is condemned to repeating the same day again and again. At first, he becomes increasingly miserable but then uses the opportunity to better himself. It did not occur to me the first time I saw it, but he was apparently in this time loop for decades. The movie does not make this clear but based on the skills he picked up, like French, ice sculpting, and piano, estimates are that he was iterating on this day for decades if not centuries.
As investors, we do not have the luxury of reliving a day to better our returns. But like Phil, we do have the ability to learn from the past. Such is the way of the evidence-based investor. History does not repeat itself, but it often rhymes, and therefore, we can learn from the mistakes and successes of those before us. Avoiding market timing, taking advantage of market volatility, and steering clear of speculation are prime examples of these lessons from history.
The Winter Soldier
On Wednesday, the original winter soldier, Punxsutawney Phil, ran scared from his shadow signaling another six weeks of winter.
- Phil may be onto something, as a large swath of the country was buried in ice and snow over the past few days.
- In Utica, we have a good 18″ of fresh powder. Time to hit the slopes!
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