(30 Jan) And month, for that matter.
We had the long-awaited fourth quarter GDP numbers released Friday morning and the result, while better than expected, was still nothing to write home about. The data showed a drop of 3.8% in the overall activity in the US. The intrepid economists had been calling for as much as a 5.5% drop. It was "better than expected" because inventories were higher than expected.
This was our worst GDP result since 1983 - the end of another bad recession. Interestingly, to me anyway, it's also the worst January for the markets since that same time.
Do you see any connection with the comparative timing of the two events? It may be coincidental that the markets had a great run after that low point. I think that the case can be made that this can be viewed as another indication that we're at or near our lows in the markets.
Earnings were, in Wall Street talk, spotty. For instance...
P&G sold more Folgers but less Tide - really. Stock went down. Exxon made more money for the year than any other company in the history of the country but, in the near-sighted ways of the denizens of the Street of Dreams, since the last quarter was down along with oil prices, the stock sold lower.
On the other hand, Amazon had its biggest holiday selling season ever and wound up posting the biggest gains of all the stocks in the S&P 500 for the day. PACCAR, the company that builds those big Kenilworth and Peterbilt trucks has results better that expected and their stock was up nicely as well.
Finally, the politicians could not seem to agree on how to price the "stuff" that would go into the bad bank(s) we talked about yesterday. Uncertainty rears its ugly head in bank stock land yet again, and down go their stock prices.
Some positive points for consideration
My whole premise for market optimism lies in the historic fact that these things are cyclical. The ups and downs are never the same in dimension or duration other than they show up - eventually.
So, Treasury rates are off their lows the lifeboat folks drove them to. Commodity prices, especially in metals and oil, are starting to tick up. The dollar has moved from life-support last summer over to providing that life support now. (Remember the talk last summer that the dollar was no longer the currency of choice for the world? Somebody spoke a little too soon, methinks.)
On top of all this, very little of the bailout money has begun to have any impact on the economy. (Given the pork factor in what the House let pass this week, it doesn't seem that that will be a source of any funds in the near-term due to the political arm wrestling.) When that begins to flow through and is turning over, that will help jump start us.
Back in 2002, the last time we had a market that was down like this, it took about 9 months to get from the market low (this one was around Thanksgiving) to the point when volume increased and the markets really started moving higher. So, we're close to three months in this cycle.
My point for the day
While the current numbers aren't totally great, neither have we slipped into a market environment that is outside statistical norms. Boring as that sounds, and as frustrating as it is to endure, it simply means that, based on the historical record, we're still in a position to transition higher from here.
Don't let the near-term noise overturn your long-term plans...
Friday, January 30, 2009
Some perspective on the headlines
(29 Jan) The markets got hit with a triple whammy on Thursday that erased the gains made just the day before. Let's look behind the curtain to see what we can see.
The mercs
A shorthand term for mercenaries, I'm referring here to the traders and portfolio managers sitting around the world and seeing the US market up four days in a row for the first time in quite a bit. Recalling that just a year ago right about now was the start of the falling trades that everyone wants to forget, these fine people said, more or less, I believe I'm going to extract some of the profits in these issues, I'd like to book a few profits in the early going this year. And so, they did. The markets dropped as there was a greater supply of orders for sale than there was of those to buy. This process, known as profit-taking, occurs with great regularity in the normal course of market events.
The earnings
Like the old Clint Eastwood movie, we could title these "the good, the bad and the ugly." Most of them are ugly, due to the bad last quarter in 2008. Ugly means not as bad as we thought -but not good. Also, please understand that the companies are not going to overstate any potential good in an environment like this - just like when it's all good, they tend not to play up any potentially bad stuff. Kind of hedging their bets.
The good - and there have been a few of those - are companies reporting numbers that were really above and beyond. Their prices really get a boost as they tend to stand out in a crowd right now.
Then there's the bad. It's not as if it wasn't a kind of forgone conclusion. It's just that human nature still doesn't accept it as real until it hits the print. Whether it's short or long term impactful has no bearing on anything - right now, it's just bad.
We'll be having more earnings releases for a couple weeks yet.
The economy
Oh, the media love these.
The unemployment hitting "record highs." Not exactly. It's the highest since 1983, when you adjust for the working population. 1983 just happened to be the tail end of a really tough recession that makes this one look like a cake walk with much higher interest, inflation and tax rates -as well as higher unemployment. From there, we went into 20 years of almost uninterrupted positive markets. Going to do that again? Not the foggiest - ask me in 20. I do submit that it reinforces the fact we're at or within micro-millimeters of the low, however.
Worst December since the dawn of time for the sale of new homes. Three things got left out of that blast. First, it was just a little nippy and flaky across the country pretty much the whole month. Next, and more to the point, most potential buyers were staying put - and still are -because of the new administration.
There have been rumors for some time that there will be very low - say 4% - mortgage rates and maybe even tax credits for new home buyers. Nobody's jumping until that rumor is substantiated, killed or massaged.
Finally, over the whole year, there was - in fact - a drop of 27% in the inventory of new homes for sale. The ones remaining are either already built or empty lots.
Summary
There is nothing in any of this news that gives me room for concern that we're not in a position to move broadly higher from here.
I'm not certain when. I am, however, certain that...
The mercs
A shorthand term for mercenaries, I'm referring here to the traders and portfolio managers sitting around the world and seeing the US market up four days in a row for the first time in quite a bit. Recalling that just a year ago right about now was the start of the falling trades that everyone wants to forget, these fine people said, more or less, I believe I'm going to extract some of the profits in these issues, I'd like to book a few profits in the early going this year. And so, they did. The markets dropped as there was a greater supply of orders for sale than there was of those to buy. This process, known as profit-taking, occurs with great regularity in the normal course of market events.
The earnings
Like the old Clint Eastwood movie, we could title these "the good, the bad and the ugly." Most of them are ugly, due to the bad last quarter in 2008. Ugly means not as bad as we thought -but not good. Also, please understand that the companies are not going to overstate any potential good in an environment like this - just like when it's all good, they tend not to play up any potentially bad stuff. Kind of hedging their bets.
The good - and there have been a few of those - are companies reporting numbers that were really above and beyond. Their prices really get a boost as they tend to stand out in a crowd right now.
Then there's the bad. It's not as if it wasn't a kind of forgone conclusion. It's just that human nature still doesn't accept it as real until it hits the print. Whether it's short or long term impactful has no bearing on anything - right now, it's just bad.
We'll be having more earnings releases for a couple weeks yet.
The economy
Oh, the media love these.
The unemployment hitting "record highs." Not exactly. It's the highest since 1983, when you adjust for the working population. 1983 just happened to be the tail end of a really tough recession that makes this one look like a cake walk with much higher interest, inflation and tax rates -as well as higher unemployment. From there, we went into 20 years of almost uninterrupted positive markets. Going to do that again? Not the foggiest - ask me in 20. I do submit that it reinforces the fact we're at or within micro-millimeters of the low, however.
Worst December since the dawn of time for the sale of new homes. Three things got left out of that blast. First, it was just a little nippy and flaky across the country pretty much the whole month. Next, and more to the point, most potential buyers were staying put - and still are -because of the new administration.
There have been rumors for some time that there will be very low - say 4% - mortgage rates and maybe even tax credits for new home buyers. Nobody's jumping until that rumor is substantiated, killed or massaged.
Finally, over the whole year, there was - in fact - a drop of 27% in the inventory of new homes for sale. The ones remaining are either already built or empty lots.
Summary
There is nothing in any of this news that gives me room for concern that we're not in a position to move broadly higher from here.
I'm not certain when. I am, however, certain that...
Thursday, January 29, 2009
Bad banks bring fine results
(28 Jan) After mincing along for three days, the markets finally got its legs under it on Wednesday and enjoyed a nice run up. Had a nice coincidence of events to provide the catalyst.
First, earnings continue to be underwhelming to a great extent. However, many are being reported not quite as horrible as expected and with some additional top line numbers coming in as the icing on those corporate cakes, that's been helping results.
Next, the Federal reserve Bank says they'll be keeping rates low for some time. They'll also be buying Treasuries and mortgage-backed securities as a way to help free up credit.
Finally, the news that swept all the major banks higher and, with them, most everything else, was the growing perception that a "bad bank" is going to be created.
What's so good about a "bad" bank?
Way back in the dimly remembered market past - which, technically, is anything before today - in the mid 1980s, we had another financial tussle that resulted in the crashing of many savings and loan associations. At the time, the bad assets that had been held by these entities were packaged up by a governmental agency called the Resolution Trust Corporation, RTC. The RTC allowed the banks which had taken over the failed S&Ls to then operate without any of the garbage that was formerly living within the dead S&L. The Feds, ultimately, made money on the deal, depositors were saved and we all lived happily ever after - or until Lehman cratered.
So, the latest bailout gang is rumored to be proposing a similar legal toxic waste dump. Hence, the term, "bad bank." Here, presuming we can get rid of the mark-to-market rules that have had a lot to do with the problem in the first place, the (presumably, good) banks can put these "underperforming assets." This will clean up their balance sheets and put them in a position to be lenders again. Hopefully, they remember how.
This would be a great way to get that 800 pound gorilla off the economy's neck so we can get some more traction in the markets and improve some attitudes.
Don't be surprised if we get some profit-taking in here. Four days of up is almost more than those traders can take without selling something. There are always down days within the ups - it wouldn't indicate we're sliding back to the bad ways.
Even if they do take some profits, the markets appear to be ready to continue their moves back to more appropriate levels...
First, earnings continue to be underwhelming to a great extent. However, many are being reported not quite as horrible as expected and with some additional top line numbers coming in as the icing on those corporate cakes, that's been helping results.
Next, the Federal reserve Bank says they'll be keeping rates low for some time. They'll also be buying Treasuries and mortgage-backed securities as a way to help free up credit.
Finally, the news that swept all the major banks higher and, with them, most everything else, was the growing perception that a "bad bank" is going to be created.
What's so good about a "bad" bank?
Way back in the dimly remembered market past - which, technically, is anything before today - in the mid 1980s, we had another financial tussle that resulted in the crashing of many savings and loan associations. At the time, the bad assets that had been held by these entities were packaged up by a governmental agency called the Resolution Trust Corporation, RTC. The RTC allowed the banks which had taken over the failed S&Ls to then operate without any of the garbage that was formerly living within the dead S&L. The Feds, ultimately, made money on the deal, depositors were saved and we all lived happily ever after - or until Lehman cratered.
So, the latest bailout gang is rumored to be proposing a similar legal toxic waste dump. Hence, the term, "bad bank." Here, presuming we can get rid of the mark-to-market rules that have had a lot to do with the problem in the first place, the (presumably, good) banks can put these "underperforming assets." This will clean up their balance sheets and put them in a position to be lenders again. Hopefully, they remember how.
This would be a great way to get that 800 pound gorilla off the economy's neck so we can get some more traction in the markets and improve some attitudes.
Don't be surprised if we get some profit-taking in here. Four days of up is almost more than those traders can take without selling something. There are always down days within the ups - it wouldn't indicate we're sliding back to the bad ways.
Even if they do take some profits, the markets appear to be ready to continue their moves back to more appropriate levels...
Wednesday, January 28, 2009
Jumper cables, please
(27 Jan) I just received an email from a mutual fund company which I hold in very high regard that was headlined, "global economy awaits benefits of massive surplus strategy." That's how I came up with today's title - plus the weather helped... I'll come back to this.
Let's see. Prior to the opening of Tuesday's market, we were told that consumer confidence had fallen to the worst levels since 1967, when they first started keeping these scores. We were then informed that, in the country's top 20 cities by population, the average home price was down 18.2% from the same time a year ago. Omigoodness. How much worse can it get? And then, on top of all that, we continued to see the results of the last quarter of 2008 in terms of corporate earnings being rolled out. But wait - not all of them were as bad as the tea leaf readers thought they might be. Others, to be sure, were "in line" - that's Wall Street for "I told you so."
So, what happened to the stock market - the national thermometer that helps us know how we're feeling every day. What's this? In spite of a rolling barrage of horrible news, it actually managed a gain? In my view, that's due to the fact that the markets are leading indicators - not rear view reviewers.
Seeing it makes it so
I know that, for the next so long, we're going to be rolling in less than good news that is due to all that has already happened. In spite of people being aware that this stuff is forthcoming, its actually hitting the light of day makes it seem more ominous to them somehow. I get that.
My contention is that a whole lot of folks in this country need to, as Zig Ziglar used to say, "get a check-up from the neck up." If you're mired in the woe is me point of view, if you actually believe what the news is saying - you're part of the problem.
I know that either of us just saying, "oh, it's all right" isn't going to get it done. But looking for the positive things that already exist and building on them is the key to getting our feet under us again. I just can't be a pessimist - I see no reason or justification for it.
What about the banks, the credit crunch, the worry du jour?
Well, what about them? Folks way above my pay grade are working their important parts just about off 24/7 getting some solutions that will work in today's world. I have complete faith that they aren't going to stop until they get it done. As they're working now, the fringes of the economy are starting to pick up. The, "yeah, I can do that" crowd starts edging out the group all tricked out in ashes and sackcloth. People with vision are saying, that is one fine company there - I think I can make a little money riding along with them.
They take the risk of ambiguity over the curse of certainty. They're the builders, the dreamers, the doers. We've always had them - seems like we've always had more than most anyone else. That's how we got to where we are.
That brings us to the jumper cables.
Foregone conclusion
In this case, I'm referring to the fact that folks such as I've mentioned have already have already begun the resurgence that is beginning to bring the markets higher. The conclusion is that we don't need near the amount of "help" the politicians are getting ready to throw at us. We're already on the way to recovery. We don't really need jumper cables.
However, there is enough of this pervasive gloom out there that many need some symbol to tell them "it's going to be all right." This symbol is the pouring in of money - some of which may actually get to the citizens - to "get the economy going again." When this occurs, the mindsets will begin to change and we'll see movement.
Here's the catch. Most of this money for the vaunted infrastructure and other needed programs - sarcasm intended - will take a couple years to actually work into the system. This is the government after all. By then, the inflation monster will be peeking around the corners. The same politicians who pumped all this money will now be looking for a way to control its effect... Stay tuned for that.
The markets - real estate and equities - are beginning their resurgence. I'm not given to know when it'll be official but, for those who can deal with that particular level of ambiguity, I think you ought to consider getting in now before you're chasing the market train out of the station...
Let's see. Prior to the opening of Tuesday's market, we were told that consumer confidence had fallen to the worst levels since 1967, when they first started keeping these scores. We were then informed that, in the country's top 20 cities by population, the average home price was down 18.2% from the same time a year ago. Omigoodness. How much worse can it get? And then, on top of all that, we continued to see the results of the last quarter of 2008 in terms of corporate earnings being rolled out. But wait - not all of them were as bad as the tea leaf readers thought they might be. Others, to be sure, were "in line" - that's Wall Street for "I told you so."
So, what happened to the stock market - the national thermometer that helps us know how we're feeling every day. What's this? In spite of a rolling barrage of horrible news, it actually managed a gain? In my view, that's due to the fact that the markets are leading indicators - not rear view reviewers.
Seeing it makes it so
I know that, for the next so long, we're going to be rolling in less than good news that is due to all that has already happened. In spite of people being aware that this stuff is forthcoming, its actually hitting the light of day makes it seem more ominous to them somehow. I get that.
My contention is that a whole lot of folks in this country need to, as Zig Ziglar used to say, "get a check-up from the neck up." If you're mired in the woe is me point of view, if you actually believe what the news is saying - you're part of the problem.
I know that either of us just saying, "oh, it's all right" isn't going to get it done. But looking for the positive things that already exist and building on them is the key to getting our feet under us again. I just can't be a pessimist - I see no reason or justification for it.
What about the banks, the credit crunch, the worry du jour?
Well, what about them? Folks way above my pay grade are working their important parts just about off 24/7 getting some solutions that will work in today's world. I have complete faith that they aren't going to stop until they get it done. As they're working now, the fringes of the economy are starting to pick up. The, "yeah, I can do that" crowd starts edging out the group all tricked out in ashes and sackcloth. People with vision are saying, that is one fine company there - I think I can make a little money riding along with them.
They take the risk of ambiguity over the curse of certainty. They're the builders, the dreamers, the doers. We've always had them - seems like we've always had more than most anyone else. That's how we got to where we are.
That brings us to the jumper cables.
Foregone conclusion
In this case, I'm referring to the fact that folks such as I've mentioned have already have already begun the resurgence that is beginning to bring the markets higher. The conclusion is that we don't need near the amount of "help" the politicians are getting ready to throw at us. We're already on the way to recovery. We don't really need jumper cables.
However, there is enough of this pervasive gloom out there that many need some symbol to tell them "it's going to be all right." This symbol is the pouring in of money - some of which may actually get to the citizens - to "get the economy going again." When this occurs, the mindsets will begin to change and we'll see movement.
Here's the catch. Most of this money for the vaunted infrastructure and other needed programs - sarcasm intended - will take a couple years to actually work into the system. This is the government after all. By then, the inflation monster will be peeking around the corners. The same politicians who pumped all this money will now be looking for a way to control its effect... Stay tuned for that.
The markets - real estate and equities - are beginning their resurgence. I'm not given to know when it'll be official but, for those who can deal with that particular level of ambiguity, I think you ought to consider getting in now before you're chasing the market train out of the station...
Monday, January 26, 2009
The Year of the Ox gets off to a bullish start
(26 Jan) Well, it wasn't that much of a bullish start, to be sure, but I'll take a bull where I can find one these days...
The markets, I believe, are at a most interesting juncture. On one hand, we have the already known, totally horrible, shouldn't be seen in public kinds of numbers coming out as a result of the fourth quarter's lack of economic activity. As we have seen, careers are ended - not made - on these types of results.
And yet - on the other hand, as the economist is wont to say - we have professional investors, traders and money managers who are saying, "well, sure, those are terrible - but what's down the road for this company, industry or sector?"
The result, it would appear, is exactly what the markets have been doing for a couple weeks - at least. They are churning around on these bad reports. That, to me, is the market responding much as my cohorts and I did once upon a time when we said, "what are you going to do - shave my head and send me to Vietnam?"
Put another way, what else can be worse than what has already happened? What other news is out there that can make this. Granted, there's always the "what if" crowd talking about things that could occur but those guys are always around. This type activity is what occurs at the beginnings of bull markets. Check the record...
Jeremy Grantham
This man is a professional investor - well-known in the concrete canyons, especially since, in 1998, the called the market bubble and exited stocks. He subsequently also called the credit bubble. I don't know what he drinks but I'd like to find out... Point is - he's been out of US equities since 1999, as in, hasn't owned any, right until just recently.
The reason I invoke his name is because he's come out and said "it's Showtime." Well, he really said this is the time to be buying US equities. I mention it because he doesn't use tea leaves, frog innards or whatever - it's just old-fashioned number crunching. The same fundamental approach that had him get out of stocks in '99 and lost him quite a few clients in the process. The market didn't cooperate with his findings - right away.
Now, he says, the markets are just about as cheap as the y were in 1974 and 1982 - both times at the end of long, tough recessions.
He also says that, using the 7 year cycle he favors, things look quite positive for the US markets in general.
Counter-intuitive
As I'm writing this, American Express is reporting their earning down 72% for that quarter. Earlier today, Caterpillar announced the layoff of 30,000 people - the ripple effect on the communities where that happens will be huge and not in a good way. And yet, I'm telling you that now is the time to be moving into the US equity market and that the future will be grand.
I am basing this representation not on current events or the effect of bailouts or any other "check in the mail" program on the horizon. I am basing it on the lengthy study of the historical record of the US equity markets AND the personal experience of recent (1974 and 1982) similar events.
The bottom isn't known until after you're well into the upward trajectory. It never comes when the conventional wisdom expects it. It usually comes when news of the hour is, shall we say, "less than good." There is no for sure time for it to start and no one knows how long it will last. People hesitant to get back in after having exited before still will hesitate to believe the data before them simply because they don't want to be wrong - again. Too painful - the amount of money has no bearing on that.
You do have to have two things if you wish to be a successful investor. This is based on personal observation of 35 years of working with investors.
You have to have an unwavering faith in the future...first and foremost. The other is that you must have a plan, based on your needs and goals - not some fill-in-the -blank thing - that you stick with, regardless of current events.
As Virgil said in the Aeneid, "forsan et haec olim meminisse iuvabit."
Perhaps even this will, one day, be pleasant to look back on...
The markets, I believe, are at a most interesting juncture. On one hand, we have the already known, totally horrible, shouldn't be seen in public kinds of numbers coming out as a result of the fourth quarter's lack of economic activity. As we have seen, careers are ended - not made - on these types of results.
And yet - on the other hand, as the economist is wont to say - we have professional investors, traders and money managers who are saying, "well, sure, those are terrible - but what's down the road for this company, industry or sector?"
The result, it would appear, is exactly what the markets have been doing for a couple weeks - at least. They are churning around on these bad reports. That, to me, is the market responding much as my cohorts and I did once upon a time when we said, "what are you going to do - shave my head and send me to Vietnam?"
Put another way, what else can be worse than what has already happened? What other news is out there that can make this. Granted, there's always the "what if" crowd talking about things that could occur but those guys are always around. This type activity is what occurs at the beginnings of bull markets. Check the record...
Jeremy Grantham
This man is a professional investor - well-known in the concrete canyons, especially since, in 1998, the called the market bubble and exited stocks. He subsequently also called the credit bubble. I don't know what he drinks but I'd like to find out... Point is - he's been out of US equities since 1999, as in, hasn't owned any, right until just recently.
The reason I invoke his name is because he's come out and said "it's Showtime." Well, he really said this is the time to be buying US equities. I mention it because he doesn't use tea leaves, frog innards or whatever - it's just old-fashioned number crunching. The same fundamental approach that had him get out of stocks in '99 and lost him quite a few clients in the process. The market didn't cooperate with his findings - right away.
Now, he says, the markets are just about as cheap as the y were in 1974 and 1982 - both times at the end of long, tough recessions.
He also says that, using the 7 year cycle he favors, things look quite positive for the US markets in general.
Counter-intuitive
As I'm writing this, American Express is reporting their earning down 72% for that quarter. Earlier today, Caterpillar announced the layoff of 30,000 people - the ripple effect on the communities where that happens will be huge and not in a good way. And yet, I'm telling you that now is the time to be moving into the US equity market and that the future will be grand.
I am basing this representation not on current events or the effect of bailouts or any other "check in the mail" program on the horizon. I am basing it on the lengthy study of the historical record of the US equity markets AND the personal experience of recent (1974 and 1982) similar events.
The bottom isn't known until after you're well into the upward trajectory. It never comes when the conventional wisdom expects it. It usually comes when news of the hour is, shall we say, "less than good." There is no for sure time for it to start and no one knows how long it will last. People hesitant to get back in after having exited before still will hesitate to believe the data before them simply because they don't want to be wrong - again. Too painful - the amount of money has no bearing on that.
You do have to have two things if you wish to be a successful investor. This is based on personal observation of 35 years of working with investors.
You have to have an unwavering faith in the future...first and foremost. The other is that you must have a plan, based on your needs and goals - not some fill-in-the -blank thing - that you stick with, regardless of current events.
As Virgil said in the Aeneid, "forsan et haec olim meminisse iuvabit."
Perhaps even this will, one day, be pleasant to look back on...
Sunday, January 25, 2009
A great time to be in the market
(22 Jan) The perception among many is that this bear market is a bad thing, a horror to be avoided and the indication of the end of times, etc. Bovine excrement, I say. Bear market is really code for big, dang, back up the truck sale.
Run your finger down the page with the stock prices in it. Pick out a few that you personally know make good things or provide good services in whatever they do. Then, do a bit a research and see what they were worth say in the fall of 2007. It's a fairly easy bet that more is the right answer. Okay, now try this analysis.
Other than price, are they still just as good a company - maybe even better - than they were then? So, if it's still thought of as good and is still in business, then, if someone was willing to own it, probably, a whole bunch higher, why wouldn't it be an even better value now? 99.999999% of the time, it is a better value. So why then don't you step up and get into it?
One of the great dichotomies of investing is how investors respond to market pricing. Here's a story to help explain what I mean.
What if the stock exchange were a Nordstrom's store and the whole inventory was marked down by 30% - the whole thing! Would it take long for the word to get out? Would there be a great rush to "hurry on down"? I don't think a prudent person would want to stand in the doors of the store, trying to stem the tide of onrushing bargain hunters...unless being a grease spot was a personal goal of theirs.
So, what happens when - in reality - you see the absolutely top companies on the planet having been marked down, in many cases, even more than 30%? Do people rush in to buy? Do they tell their friends? Shunning is a word that comes to mind. Definitely illogical as well - but this isn't about logic.
Journalistic "accountability"
The kind of advertising that comes with a bear market isn't what one could call upbeat. The biggest drawback to the stock sales is that, for some reason, they typically occur when there is some cyclically adverse economic news, trends, whatever, that come riding in with them.
Since all that dead air and white space need filling in our 24/7 world, lots of not accurate things take place. The "reporters" will focus on something they see as wrong and begin to extrapolate and what if these to make them appear infinitely worse than they really are. Their reason - "this time - it's different." Based on what? Their projections and extrapolations, primarily, has been my experience.
The actions that people then take - or don't take - based on these reports are almost universally the wrong thing to do at the time. Selling at lows. Putting all your money into taxable, no chance of ever maintaining purchasing power bonds. Focusing on short-term events that have no real bearing on your long-term needs. These are just some of the recent examples of their "advice".
These journalists, web sites and electronic media "experts" don't know you, your situation, your concerns or needs. They speak in vague generalities. How can they possibly begin to even come close to helping you?
The key
The real, no kidding factor that will determine how well you do over time with your investments is that good-looking face in your mirror. Way more important than how much of what goes where when. If you let yourself be swayed by the news of the day, your results will suffer significantly.
The proof is in a study by Lipper and Dalbar. Since 1987, they have compared the average 20 year annual compound rate of return on the average - not the best or even top quartile - large cap equity mutual fund in the US against the average return realized by, again, the average, mutual fund investor. It ain't pretty.
For example, for the specific 20 years between 1987 and 2007 - a very good market time - that plain vanilla mutual fund returned 10.81% annually. The plain vanilla investor? Only 4.48%. Not good - especially since that's per year and the effect is compounded.
Here's the worst part. Whatever the 20 year periods, the poor investor - listening to all that media garbage - only gets less than half of the return of just an average fund, year in and year out.
What can you do? It's not too hard, actually.
First, have an unflinchingly positive view of the future. Optimism is the only realism. It's the only view that is in line with the historical record. If you can't have that optimism, you will never be a successful investor. If your need for certainty constantly overrides your ability to tolerate ambiguity, then the equity markets probably aren't for you.
Next, accept and understand that the real determinant of how well you do is your own behavior.
Additionally, you have to accept that prices will change - volatility is what provides the growth you need.
Finally, carve this into the wall alongside your mirror. ALL successful long-term investing is goal-oriented and, therefore, planning driven. No goals + no plan = no investing success.
QED
Run your finger down the page with the stock prices in it. Pick out a few that you personally know make good things or provide good services in whatever they do. Then, do a bit a research and see what they were worth say in the fall of 2007. It's a fairly easy bet that more is the right answer. Okay, now try this analysis.
Other than price, are they still just as good a company - maybe even better - than they were then? So, if it's still thought of as good and is still in business, then, if someone was willing to own it, probably, a whole bunch higher, why wouldn't it be an even better value now? 99.999999% of the time, it is a better value. So why then don't you step up and get into it?
One of the great dichotomies of investing is how investors respond to market pricing. Here's a story to help explain what I mean.
What if the stock exchange were a Nordstrom's store and the whole inventory was marked down by 30% - the whole thing! Would it take long for the word to get out? Would there be a great rush to "hurry on down"? I don't think a prudent person would want to stand in the doors of the store, trying to stem the tide of onrushing bargain hunters...unless being a grease spot was a personal goal of theirs.
So, what happens when - in reality - you see the absolutely top companies on the planet having been marked down, in many cases, even more than 30%? Do people rush in to buy? Do they tell their friends? Shunning is a word that comes to mind. Definitely illogical as well - but this isn't about logic.
Journalistic "accountability"
The kind of advertising that comes with a bear market isn't what one could call upbeat. The biggest drawback to the stock sales is that, for some reason, they typically occur when there is some cyclically adverse economic news, trends, whatever, that come riding in with them.
Since all that dead air and white space need filling in our 24/7 world, lots of not accurate things take place. The "reporters" will focus on something they see as wrong and begin to extrapolate and what if these to make them appear infinitely worse than they really are. Their reason - "this time - it's different." Based on what? Their projections and extrapolations, primarily, has been my experience.
The actions that people then take - or don't take - based on these reports are almost universally the wrong thing to do at the time. Selling at lows. Putting all your money into taxable, no chance of ever maintaining purchasing power bonds. Focusing on short-term events that have no real bearing on your long-term needs. These are just some of the recent examples of their "advice".
These journalists, web sites and electronic media "experts" don't know you, your situation, your concerns or needs. They speak in vague generalities. How can they possibly begin to even come close to helping you?
The key
The real, no kidding factor that will determine how well you do over time with your investments is that good-looking face in your mirror. Way more important than how much of what goes where when. If you let yourself be swayed by the news of the day, your results will suffer significantly.
The proof is in a study by Lipper and Dalbar. Since 1987, they have compared the average 20 year annual compound rate of return on the average - not the best or even top quartile - large cap equity mutual fund in the US against the average return realized by, again, the average, mutual fund investor. It ain't pretty.
For example, for the specific 20 years between 1987 and 2007 - a very good market time - that plain vanilla mutual fund returned 10.81% annually. The plain vanilla investor? Only 4.48%. Not good - especially since that's per year and the effect is compounded.
Here's the worst part. Whatever the 20 year periods, the poor investor - listening to all that media garbage - only gets less than half of the return of just an average fund, year in and year out.
What can you do? It's not too hard, actually.
First, have an unflinchingly positive view of the future. Optimism is the only realism. It's the only view that is in line with the historical record. If you can't have that optimism, you will never be a successful investor. If your need for certainty constantly overrides your ability to tolerate ambiguity, then the equity markets probably aren't for you.
Next, accept and understand that the real determinant of how well you do is your own behavior.
Additionally, you have to accept that prices will change - volatility is what provides the growth you need.
Finally, carve this into the wall alongside your mirror. ALL successful long-term investing is goal-oriented and, therefore, planning driven. No goals + no plan = no investing success.
QED
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