The Only Three Questions That Count: Investing by Knowing What Others Don't

Chapter 8. THE GREAT HUMILIATOR AND YOUR STONE-AGE BRAIN

That Predictable Market

Presume at every turn the market is actually out to get you. I'm not being paranoid—it's true. I don't call the market The Great Humiliator (TGH) for nothing. Think of it as a dangerous predatory living instinctual beast doing anything and everything to abjectly humiliate you out of every last penny possible. Just knowing and accepting that is the first step to getting the whip hand of TGH. Your goal is to engage TGH without ending up too humiliated. In the next chapter we talk about how to create a strategy to beat the market, but first, let's talk about exactly how to use the Questions to see clearly how the market operates so you can cease being humiliated.

TGH headfakes you by moving in disorderly patterns. We know the market historically has averaged about 10 percent yearly over long time periods.^[150] Many investors say all they want is a 10 percent absolute return each and every year, but that's tough to do with TGH. Since 1926, there have been relatively few years the stock market has actually returned about 10 percent to 12 percent—only five times—in 1926, 1959, 1968, 1993, and 2004.^[151] Other than that, normal market years are anything but average. This is an easy Question One truth you can see demonstrated in Table 8.1.

Not only are returns wildly variable, but it's a global truth. Think globally and check elsewhere. This is how markets behave. In the United Kingdom, TGH goes by Ye Olde Humiliatour ...