Bob Farrell’s 10-Investing Rules For A “QE” Driven Market
A recent post on CNBC discussed Bob Farrell’s 10-Investing Rules. These rules have withstood the test of time as it relates to long-term investing.
Here’s a list of Farrell’s 10-rules:
- Markets tend to return to the mean over time
- Excesses in one direction will lead to an opposite excess in the other direction
- There are no new eras — excesses are never permanent
- Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
- The public buys the most at the top and the least at the bottom
- Fear and greed are stronger than long-term resolve
- Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names
- Bear markets have three stages — sharp down, reflexive rebound and a drawn-out fundamental downtrend
- When all the experts and forecasts agree — something else is going to happen
- Bull markets are more fun than bear markets
However, given more than a decade of QE-driven bull market advance, I wondered what they might be like if Bob Farrell was alive today. Would he have changed his mind?
With this in mind, I present Bob Farrell’s 10-Investing Rules For A “QE” Driven Market. (Tongue firmly implanted into the cheek, of course.)
1) Markets Remain Deviated From The Long-Term Means Over Time
Bob believed that stock prices get anchored to their moving averages. As such, with regularity, prices must and will revert to and beyond those means over time.
However, as any young retail investor will tell you, such “boomer” ideas must be “put out to pasture,” as they say in Texas. All you need is a fresh round of “stimmies,” some “rocket emojis,” and you have all the ingredients necessary for a bull market.
Sure, prices certainly get overextended, but any dip is a buying opportunity because the “Fed put” ensures any downside is limited.