Originally traced back to the Napoleonic wars, one piece of investment advice was to “sell when you hear rumors of war and buy when you hear cannons.”  The thinking was that the market will lose value as uncertainty rises, and market prices are usually lowest when the war actually begins.  Of course, this presumes you have a good idea of who will win the war.  For example, once Russia formally invades Ukraine, is there any doubt who will win?

This adage seemed to work well in the days of conventional forces or standing armies.  In my Special Forces training, we were taught the ultimate weapon is not conventional forces, nor even an atomic bomb, but trained, motivated guerrillas, and I do believe that.  Unfortunately, this evolutionary change makes it unclear when wars actually start or end.

One side-effect is that it makes the old Napoleonic adage less useful.   Exactly, when did rumors of war in the Ukraine start?  Isn’t uncertainty still rising?  There has been a few firefights and some people have been killed, but does that mean a war has started?  At one time, conventional Russia armies would have simply marched over the border and seized the country.  Today, they send small bands of Special Forces, disguised as guerrillas, to create trouble and provide an plausible excuse for the regular Army actions later.

Today, the old adage has been turned upside-down into “buy on the rumor and sell on the news.”  An example of this would be an announcement that a company will make a major product announcement on a certain date.  As excitement over the announcement builds, you should own the stock.  Then, when the announcement turns out to be just major product news and not life-changing, the excitement ends and you should sell the stock.

I’m sure Warren Buffett would point out all this just proves the foolishness of trying to “time the market.”  He has always argued you should buy companies you understand and hold them “forever.”  Still, timing the market does not mean being 100% in the market or 100% out of the market.  It means increasing the percentage of cash in your portfolio as your anxiety increases.  That may or may not maximize investment performance, but it will maximize your anxiety-related performance.