Nobody Knows the Bottoms Bohl's Seen

At first glance, this Charles Schwab banner ad strikes a chord. Who hasn't kicked themselves for not buying into a market bottom out of fear, only to watch it steadily rise for months afterwards? Who has not, at some point, bought confidently into a surging market, only to have the ground pulled out from under them, Wile E. Coyote-like?

Everyone, but that doesn't make Mr. Bohl's seemingly sage advice any less tautological: markets hit tops precisely when people become "too optimistic" or, say, irrationally exuberant. Similarly, people think a diving market will sink even further precisely because they think it hasn't bottomed yet and — here's the important part — because there's no way of knowing when a market has bottomed until it starts to recover, from which vantage point the market at bottom was "too pessimistic" by definition. Obviously, if investors could know by some kind of divine revelation that the market had just hit bottom, they wouldn't be pessimistic at all, would they? In fact, they'd be glowing from within (as would trade stations swamped with buy orders), because markets rise from bottoms — again, by definition. But nobody glows because nobody knows. You see, boys and girls, market tops and bottoms are only visible in the rear-view mirror. And that's a good thing. If God (or worse, Ben Bernanke) were ever to announce, "The market has hit top today — that's all, folks!", so many sell orders would come in that Wall Street would implode into a tiny black (or red) hole.

So now go back and read Bohl's gratuitous advice. The more you read it, the funnier it gets, and the sillier that grin looks.