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FEAR AND THE POWER OF SUGGESTION

Can the suggestion we look ill make us feel sick?

Life in the automobile biz:

During the 1970s I was the business manager for a Volkswagen dealership in New England. My office staff maintained the bookkeeping, tracked the vehicle inventory and produced the monthly financial reports. Fortunately, the business office was located on the second floor, apart from the flow of daily business below: new and used car sales, and parts and service. That’s where the action was.

One morning, Chris, one of the younger car salesmen, came up to the main office and told the billing clerk, “You wait and see. Ray will be going home soon.”

“Why,” the billing clerk asked.

“Because he’ll say he’s sick.”

“Is he sick?” she asked. “What’s wrong?”

“Right now, nothing,” Chris said. “But we’re telling him he looks awful.”

“Does he?” she asked. Billing clerks worked closely with the sales team. If Ray, the sales manager, was sick, it would directly impact her work. Before typing up the paperwork, every car deal had to be approved and signed by the sales manager. Also, automobile salesmen were infamous for oversights and omissions. In those days, every deal was hand-written. The sales manager was the billing clerk’s first line of resolution. Cryptic agreements were riddled with math errors, missing payoff details, and incomplete serial numbers. Chris was one of the worst offenders.

“Not yet,” the salesman said, smiling and turning away. “But he will. We’ve been telling him he looks green all morning.” He grabbed the manila folder holding the papers for his waiting customer and smirked as he exited the office.

Just a day at the office – back in the 70s

The proximity of our office suite to the center of action dictated that most of our information came second hand, third hand for me because the door to my private office was often closed. I had more to do than listen to their silly comments as they dropped off customer deposit checks or picked up the documents for their next delivery. The owner’s son, a feckless lay about, always turned the office lights off when he left.

This kind of behavior wasn’t unique as some car salesmen have a talent for being clever and obnoxious. I personally loved some of them and wanted to throw others over the balcony to the showroom floor below.

Unbeknownst to me, the psychological game continued through the noon hour and by two in the afternoon, Ray stopped by my office to tell me he was going home sick. He held the back of his left hand to his forehead and whined, “I think I have a fever.”

“Are you going to the doctor,” I asked. “You look a bit flushed.”

“I’ll go home and lay down for a while and see how I feel.”

Later that afternoon, with Ray being absent, I took the paychecks downstairs and passed them out to the salesmen, a job that normally belonged to Ray.

“Have you heard how Ray is?” I asked a small cluster of guys, hanging around the up desk.

“No, but thank you,” Rich said. He snickered and slipped the blade of his pocketknife through the top of his pay envelope.

Does telling someone they look sick seem funny to you?

The rest of the men doubled over laughing.

“What’s going on?” I asked. “Did I miss a joke?”

They knew I didn’t want an answer. I couldn’t think of one salesman’s joke, told in a car showroom, that I would choose to hear.

“No,” Matt said. “But you helped.”

“What do you mean, I helped?”

“Well,” Rich began, “we pretty much had Ray convinced he was not well. But when you told him he looked flushed, you made our day. He came downstairs and said, ‘Jeanine says I look ill,’ and bolted.”

Just then the used car manager strolled in from the lot. “Hey, Mike!” Rich yelled across the showroom. “Pay up. He’s gone.”

This is more than a lost bet, this was an eye-opener for me.

That was the first time I’d personally witnessed the power of suggestion. Ray walked in to work the next day feeling fine. But I didn’t. I’d never known how simple and how cruel the power of suggestion could be. That was forty-seven years ago.

This is March 23, 2020

Today, as I read the lead article in the Wall Street Journal, “Investors Fear Worst Is Yet to Come”, I felt that stomach-churning reaction that I’d felt so many years ago when I’d watched a group of silly, bored car salesman cause their manager to leave work, believing he was ill.

I do not know the authors of the article nor am I qualified to assess the accuracy of their opinions, but, when I read the prognostications by so-called experts who state things like, “…one of the most prominent market casualties from this episode could be long-term investors’ ingrained inclination to step in to buy the dip,” my heart sank. It went on to say, “Now, many believe it could be some time before that behavior (rushing in to buy the dip BTD) returns.”

The article continues noting that we need clarity, we really don’t know, etc. Good. Those sentiments are certainly true. But is it necessary to blatantly state that the buyers most crucial to the resuscitation of the market, won’t show up? Don’t you think they are spooked enough to hesitate a painfully long time without this kind of fearful reinforcement?

I do not know where the market will find its bottom: I never have. But if I had some spare cash I would start buying in now. I wouldn’t put all of my available money in at once. I would pick my symbols and buy in a portion at a time, spreading out my acquisitions with the hopes my average cost per share would look like a bargain in hindsight.

A bit of history and how I keep the faith:

My husband retired in August 2002, his official date being the first of September. When his lump sum settlement was transferred into our account, the market had tanked. Personal friends were pulling out of the market, some waiting until it couldn’t look darker, selling at painful losses. I didn’t know the precise moment that capitulation would occur, but I believed the bottom was somewhere in the near future.

I had what I believed to be a well-crafted investment plan and began buying. The market near the end of 2002 had appeared to hit bottom and began to rise. I kept buying. In early 2003, it dropped again, testing every conviction I’d formed about long-term investing. But I hewed to my plan and kept buying. I bought across that double bottom, creating a portfolio that represented a small balanced fund of its own.

Over the years I have experienced a respectable return on a portfolio that was constructed and managed based on a set of rules I had created after ten months of intense study. I made a lot of mistakes, and I had a few triumphs. But, the core principle to the success of that initial portfolio was that I bought into a descending market, and when it continued its downward path, I kept buying.

Either you believe the long-term bias of the market is upward, or you don’t.

Cluck! Cluck!

Photo by Joshua J. Cotten on Unsplash

See WILL THE MARKET BEHAVE DIFFERENTLY THIS TIME?

 

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