Here I am on Thursday morning. Stock markets have continued to plummet over the last couple of days in the face of developments in the Middle East. A friend of mine called, telling me that his wife was in a panic as a result of the steep market decline on Wednesday. I felt the pain as well. I reminded him that the stock market is an elevator, with its ups and downs. I find myself feeling nervous facing the volatility as well. I never learn. A couple of months back, I was going to shift my portfolio from individual stocks to ETFs. I did about half the job and sold mostly the wrong stocks.

Fortunately, I maintained an over-the-top cash reserve, which is a buffer to the market decline. It could have been much worse. When I look at some of the bond ETFs, which are marketed as a tool for stabilizing portfolios, these too have declined, but by a smaller margin.

I am very concerned about the long-term impact of all this on oil prices. It’s funny how, in some twisted way, the environmentalists were right. Pushing towards non-fossil fuels for national security reasons, however, rather than for the environment. It’s funny how things work out.

What’s Next?

I have no idea what will happen. But I do know this. As I get older and my time horizon for investing gets shorter and shorter, I have failed to reduce the volatility embedded in my portfolio. This is another way of saying I should prioritize capital preservation over growth.

The last twenty years of market growth have lulled investors into a false sense of security, leading them to believe that, over time, markets always go up and recover quickly from setbacks. This was not always the case, and it’s not logical to conclude that this will always be the case.

The wet-behind-the-ears crowd wants us to believe that things have changed. That AI and all the other “tools” will boost everything into the stratosphere. But people haven’t changed one bit. Greed and fear are still the primary motivations.

Look at the stock of Elbit Systems. An Israeli military technology company making stuff for war. It trades at a P/E ratio of almost 100. That’s a lot of war. Have investors lost their minds?

Enough said.