I HAVE TO ADMIT IT, I’m one of those guys who likes to hide money. I have cash hidden in a couple of places in my house and even in the garage. And I’m not talking about a few dollars. I probably have more than $3,000 in denominations large and small tucked in envelopes. I also have a jar of coins.
You might ask, “Why in the world would someone have so much cash lying around the house?” I keep it on hand in case of an emergency.

IT MIGHT SEEM LIKE an obscure academic question: Do stocks truly follow a random walk or can we count on them reverting to the mean? Depending on which side we favor in this debate, it can make a huge difference to how we invest—and to our confidence as investors.
Like me, many HumbleDollar readers have most or all their investment dollars in index funds. A key reason we invest this way: It’s impossible to predict which stocks will shine because they follow a random walk.

IMAGINE A MARKET genie offered you the choice between knowing the stock market’s return next year or the stock market’s average return over the next 10 to 15 years. Which would you choose?
I’m guessing that most people would prefer to know how the stock market will do next year. After all, that seems like more actionable information, plus who has the patience to wait a decade or longer? But for those with an investing time horizon of more than 10 years—the vast majority of us—knowing the stock market’s return over the next decade or longer is far more valuable information.

AN MIT PROFESSOR named Edward Lorenz published a paper in 1972 titled Predictability: Does the Flap of a Butterfly’s Wings in Brazil Set off a Tornado in Texas?

It was a catchy title. Though Lorenz didn’t mean it literally, the basic idea was that events in the physical world are highly interconnected—more so than they might appear.

The world of investments is similarly interconnected in ways that aren’t always visible. Just like the weather,

THE ECONOMY IS recovering and the stock market has recovered. The pandemic isn’t over, but it seems we’re past the worst, at least in the U.S. Feeling better? Take a deep breath, take a step back—and think about the past two decades.
Since early 2000, we’ve had three major stock market declines, or roughly one every decade:

In 2000-02, the S&P 500 tumbled 49%, excluding dividends. The first leg down was triggered by the bursting of the dot-com bubble.

IN RECENT MONTHS, there’s been a lot of handwringing about the stock market. Thankfully, we seem to be on the back end of the pandemic, but things remain far from perfect in the economy. Millions are still unemployed. And the government has had to spend trillions to get us through, adding to a federal debt that was already enormous.

Today, the economy is far more fragile than it was pre-COVID. And yet the stock market just keeps cruising to new all-time highs.

IS THIS A TIME TO be fearful? In Berkshire Hathaway’s 1986 annual report, Warren Buffett wrote, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
Make no mistake: There’s plenty of greed on display right now, whether it’s bitcoin, nonfungible tokens, Robinhood traders, GameStop or special purpose acquisition companies. All of this has some observers talking of a market bubble. Indeed, I suspect much of this nonsense “will end in tears,” a phrase my mother often used when trying to control her four rambunctious children.