It is interesting to watch investor and advisors go through the market cycles and gyrations. Often we get derailed by feelings – mistaking them as “facts”. It is important to notice the difference between the two and how we are influenced by feelings versus facts. Let’s take a look:
The economy (GDP) is growing at a current rate of about 2.5%.
The long term average growth rate of our GDP is 2.7%
Corporate revenues (sales) are up 11% (Year over year – YOY)
Corporate profits are up 17% YOY
There is $10.8 Trillion in money market funds as of 09.30.2011
Unemployment is at 9.1%
Under-employment is at 20%
265 Companies have increased their dividends (vs. 191 increases last year), 5 have decreased dividends (vs. decreases 3 last year)
Companies are buying a record amount of their own stock back – indicating they have confidence in themselves about their future.
It sure feels like we are in a recession, close to one.
Our economy feels like it is at or close to “stall speed” using flying terms
The volatility on a daily basis is exhausting
Governments around the world are falling apart because they borrow too much money; spend more than they have in income.
It sure seems like there are a lot of people who cannot seem to find a job – no matter how hard they try.
Housing prices seem to be weak
I understand interest rates are low and would like to refinance my loan, but can’t
It feels like the stock market fluctuations are greater than ever, and the days the market falls are greater than the days of increases.
Investors have taken money out of stocks (- 53 Billion YTD) and invested those dollars in (+92 Billion YTD) long term bonds. Mind you stocks are down in price, lower than they were in 1998.
Bonds have gone up (in price) for the past 31 years and are at all time high levels (while interest rates are at all time lows).
It is difficult to look at your statement month after month and see the prices lower, the current market value lower.
Why do investors and advisors sell low and buy high? I believe a lot has to do with confusing facts and feelings, and being fatigued.
What is really happening?
I believe stocks are on undervalued. A couple of examples:
Some well known companies are paying over 4% in a current dividend, and who have increased their dividends every year, many at three or four times the rate of inflation.
Think about that: investors do not spend the balance on their statement; rather they spend the earnings off their assets. If your income is increasing at a rate greater than the inflation rate, isn’t that important? Growing income, larger checks, increasing at a rate greater than the inflation rate – that sure seems to me to be an important matter.
It is important for an athlete to be in constant training to last the whole game. Training is also important to win in the investment game.
Trust the facts. Guard the feelings. Train to beat fatigue.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly
It has been a year for humility as many of the traditional methods of managing risk inside portfolios have been taxed. It has been a year of consciously focusing on gratitude for all that we have and all that has gone well. It also has been a year where the value of our disciplined commitment to planning has never been more highlighted.