How to Keep Your Investing Enthusiasm High in a Cocaine Bear Market!

I think we are in a “cocaine bear market,” and you might need to buckle up. While I love the new economic terms that we are floating around, this one is a banger. Rolling Recessions + Inequitable Recovery equal a nice recipe for a massive loss of wealth between the wealthy and the desperate.

An Addiction to Spending and Bad Investment Habits

I don’t have a friend or a family who suffers from addiction but I know a lot of people ready to get a fix of spending all their paycheck. With each deposit, I imagine that people get a jolt and rush to their supplier of choice. Sometimes it’s Beyoncé. Other times, it’s trendy or goofy fashion gone viral. No matter how we flip the chart, it’s always another opportunity to spend.

Here lies the problem.

The American spending habit is insatiable. We are also searching for the next fix for an unending problem. At best, we recover quickly and at worse, we start stealing from someone we love. That person being ourselves.

To Stay Cozy in a Bear Market

To stay comfortably struggling middle class, instead of saving and relying on the disciple to create a budget; Americans started to withdraw from their savings. How much? Since we didn’t have much, to begin with, how about $600-$1,000?

According to New York Life’s Wealth Watch Survey, high prices and inflation prompted consumers to withdraw an average of $616.73 from their savings accounts. Fidelity corroborated this with some new data citing that “the average balance in a 401(k) plan tumbled 20.5% in 2022, reducing employee nest eggs to $103,900 at the end of 2022.”

Others are going against the old adage of Buying Low and Selling High. Instead, retail traders are running from high positions, selling low and buying other high positions.

To keep it simple, that’s like flushing your money or wealth down the drain over and over again.

Cocaine is illegal but a Bear Market does Way More Damage to Your Bottom Line

The S&P 500 lost more than 18% in 2022, prompting many panic sales. TikTok influencers found out the hard way that stocks don’t always go up, as the likes suggest.

Just to throw this tip in here, if someone said “trade and travel,” “trade and hustle,” or “running the play”; run very far away. Most of these cavalier phrases were born from the longest bull market in history. Follow by a K-shaped recovery fueled by the heaviest printing of money that we have ever seen. We were irrationally exuberant.

Those are big words to say we were high.

Going long on investments

The Bear Market is different. Opportunities dry up. People will get laid off in hopes to curb spending and start fresh. The duration of a cocaine high (i.e. the Bull Market of 2020) depends on a few factors, such as the method of ingestion ($ARKK or ChatGBT) and how much you use (bitcoin and 10x lines), but it typically lasts approximately 15 to 30 minutes. From April 2020 to December 2021, or about 20 months in real-time.

Some people (long-term investors) experienced lingering effects for hours after taking it (from 2020 to 2021), and the comedown effects can also last a few days (all of 2022).

Cocaine (or in this instance, the Federal Reserves and company earnings statements) produces a temporary euphoric effect that may make a person (retail traders and crypto fanatics) feel excited, energetic, more confident, and sociable. For example, Biden flew to Ukraine and turned the plane around to Poland.

Anecdotally, some people that cocaine also increases their capacity for creativity. But you can recreate that with coffee and sugar technically. Or rage quitting social media.

Nothing more powerful than Black Twitter but to quote Dave Chappelle, “it’s not a real place.”

Rewards of an Erratic Bear Market

These effects occur because cocaine influences dopamine pathways in the brain’s reward center. When you use cocaine (trades, options, or stock tips), the brain receives a temporary jolt of stimulation from increased dopamine production. You will find that it’s better to lose early if not you will get overconfident. Thus overleveraging with another line of equities. You can only do so many lines.

The average amateur investor’s portfolio is down 30%. Some are down as much as 60% or more.

It’s a blood bath out here.

However, some people may also experience increased anxiety, panic, or paranoia from using cocaine, according to a research report from the National Institute of Drug Abuse.

Basically every other week or every day, you are looking at stock prices, charts, and opportunities that aren’t even there.

In this example, the stock market has bursts of unexpected and unexplained surges followed by panic-induced falls. One week or even a month of market highs followed by random daily lows. Avoid jumping on the bandwagon late every time, you end up caught in a vicious game.

The takeaway?

This is not a bull market, we are in a cocaine bear market. As such, the best thing for you to do is to dollar-cost-average and invest for the long term. If you have too much credit card debt, paying them off can free up catch flow.

No better high than being debt free.

Ask the Dave Ramsey super fans. In contrast, most day traders don’t make any money. They often end up in sales i.e. Real Estate. You can win sometimes against the house but it always comes back on top due to the odds.

But if must trade and risk it all to make money in the stock market, consider these tips from Fidelity:

1. Temper your enthusiasm during good times. Adjust and build on your savings, rebalance positions, and create a long-term investing plan that includes exit points.
2. Become more optimistic when things look bad. Buying stocks low is easier said than done since most people are running away from great companies. Do the opposite. I like to wait for a drop or sale at 15% off or more.
3. Don’t fret about the average return. The average isn’t bad. On average the return should be the historical average of 8%-10%. The average for a retail anxious trader is less than 20%. You do the math.
4. Finally, just hold. The average bear market since 1929 lasts just 9.6 months or 289 days, according to Ned Davis Research. Turns out, the average length of a relationship is 2 years and 9 months before coming to an end. That’s 1,000 days or three bear markets.

Here’s hoping that helps. Before I conclude this written TedTalk, remember to never get high on your own supply.

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