CNBC Monday Wrapup

There were a couple of interesting segments on CNBC yesterday worth discussing.

The first one was a visit to Squawkbox by Jack Bogle. In listing some things he believes investors should do, one was pay as little attention to the market as you can with the idea being that this reduces the odds of panicking and doing the wrong thing or in other words just staying the course.

He is correct that too many investors give in to emotion and do the wrong thing at the wrong time (sell after a decline or buy after a big rally). I agree that panic does a lot of people in but I disagree with him about how to avoid panicking. What is paying as little attention as you can but sticking your head in the sand not making effort to become a more knowledgeable investor? Another strategy for avoiding panic and emotion is to learn more about how markets function and devising some sort of plan for preparedness such that panic is avoided through greater understanding.

Bear markets happen every few years yet somehow people forget and get caught off guard. Not everyone needs to reduce their equity exposure based on some sort of indicator (I prefer the 200 DMA and I do prefer reducing exposure) but if you are not going to try to avoid the full brunt of a large decline then you need to make sure you don't ride a large decline all the way down and then panic out and believe me this has happened before and will happen again.

Bogle says don't think you know more than the market, nobody does. To me that makes an argument for listening to the market. When the SPX goes below its 200 DMA (or some other similar breach) it is warning that there is a problem with demand for equities. The problem may be short lived and mean nothing in the big picture or it could be warning of something very serious but it is a warning.

He also said that when you buy a US portfolio you are buying a global portfolio because of the sources of revenue for so many companies, this as an argument for not needing emerging or foreign developed markets. He then offered opinions about why Japan, the UK, France and Italy aren't appealing investment destinations (in the context of their dominating broad based foreign funds). I find this paradoxical. He can recognize the various issues that some countries have but not so with some very similar problems in the US?

The other segment of note was a three-way conversation with Jon Najarian, Herb Greenberg and Robert Pozen about about whether people need a broker/advisor of some sort or are better off on their own. Najarian and Pozen were really having different conversations which watered down the segment somewhat. Pozen essentially was saying the some people have the time and interest to do it on their own using stocks and options strategies (options strategies as a nod to Najarian's comments) but that the vast majority of people don't have the time or the interest. Obviously there is nothing wrong with not being interested in studying the stock market but that person should not be selling calls against individual stocks.

Najarian's appearance was fresh off of a weekend of his giving presentations at seminars to audiences of do-it-yourselfers. His argument, as it pertained to do-it-yourselfers was sound, but not on target for the vast majority of people which, again was Pozen's point. Najarian's criticisms of broker/advisors was reasonable in terms of what many advisors don't do for their clients obviously some brokers/advisors are great at their jobs and some are far below the mediocre level that I tihnk Najarian was describing but of course different skill levels exist in every profession.

As I watched the debate I had a thought about do-it-yourself investing--there is no such thing as do-it-yourself, almost no such thing anyway. Taken to an illogical extreme wouldn't the real definition of do-it-yourself be to take no input from anyone? In it's purest form do-it-yourself would be reading the BLS reports for economic data and company reports for stock research.

Reading nothing but BLS data and company reports would be silly but makes the point that everyone needs help, even if you are the smartest person in the world on one particular thing there are people smarter than you in other particular things and while I believe there is a lot of growth potential in people mostly doing for themselves we all need help in trying to learn more. The discount brokerage business is built on this idea and maybe the wirehouses are headed in this direction too--I'm not sure.

A bigger takeaway is that we all have limits and we need to understand what our individual limits are (ego notwithstanding) and seek help in those areas. For many investors, one of the big blindspots is emotion which is where a good helper can come in be it a coach, broker, advisor or more experienced friend.