Making predictions is hard, especially about the future. But...  “you can observe a lot just by watching.” - Yogi Berra

We are always investing in uncertain times, some far more uncertain than others, but there are clues everywhere if you pay close enough attention. Information is everywhere and it can be seen and found faster than ever but sometimes, it is with the benefit of experience that we see clues from just watching and listening. That doesn’t mean that we go ‘down a rabbit hole’ on every piece of data or page six headlines, it means seeing things not only for the relevant numbers but the information within the message. There is information in interest rates, house prices, shopping mall parking lots, in nature, even you are information. It is everywhere if we choose to hear and see it.

A farming client gave us a great example a few years ago when he noticed things around his property. It was early/mid-September and he called to take some money out of his account. “Gotta make sure I plan right for next year and I’m going to stock up a bit on fertilizer, stuff we’ll need, given what I’m seeing.” When asked what he was seeing it was all about nature. “The ducks and geese are leaving south already, the squirrels are already collecting and a certain stand of trees has a few yellow leaves. These things are telling me we could have a surprise blast of cold well before normal and it could mean a colder and longer than normal winter. That means getting the crop off even though it seems early and also means I may need to alter fertilizer for next spring.” He got his fertilizer fine tuned and ordered and got the crop off just before an early dump of snow made a mess of the fall harvest.

How am I information, you ask? The market is a voting machine, it is the collective ‘wisdom’ of all it’s participants of which you are part of. Some people (we call them the usual suspects) are very good at providing information about the market’s thoughts. How does this work? Here’s an example: does the date March 24, 2020 mean anything to you? Likely not, but why is this date significant? March 24, 2020 was the fourth largest percentage gain for the Dow Jones Index. On that day the Dow was up 2112 points, 11% in one day! People tend to remember Black Monday for it’s losses but no one remembers Green Tuesday. The information here? People hold onto and remember care more about losing than winning. No one calls on record up days but if the market were off by the same percentage, we hear about it.

Despite some pundits saying bonds don’t belong in a portfolio, we have and likely always will hold bonds and fixed income in various forms. In mid-June and early July, the ‘usual suspects’ were giving us clues about bond markets. “My bonds are down, we need to sell them”, “why are my bonds down?”. These are the same people who wanted to sell energy companies in the fall of 2020 or be buyers when oil was at $120. Comments and actions are information if we choose to look closely enough.

Bob Farrell was the Head of Research at Merrill Lynch and has ten rules for investment success. The clues discussed are great examples of his Rule 5: “The public buys the most at the top and the least at the bottom.” The ‘usual suspects’ are a great gauge about sentiment and we have a front row seat. We all have this ability but it takes practice to tune out the headline noise and listen intently.