health fitness management 2nd edition
How Do You Spell Correction?
During every correction, I encourage investors to avoid the destructive inertia that results from trying determine: "How far can we go?" and / or "How long will this last?" Investors who add to their portfolio during downturns invariably experience higher values during the next advance. Yes, Virginia, just as certainly it is Santa Claus, there is another breakthrough in our future market. And despite the DJIA still much too high, we are in the third month of a correction. (A fourth month if you own income securities.)
Corrections are part of the normal "market" shock menu, and can be caused by either bad news or good news. (Yes, that's what I meant.) Investors always over-analyze when prices become weak and lose their common sense when prices are high, thus perpetuating the "buy high, sell low" Wall Street line dance. Until the perfect moment to jump in a falling market strategy is as foolish as taking losses on investment grade companies and holding cash.
Repetition is good for the brain's CPU, so forgive me reinforce what I said in the face of every correction since 1979 … If you do no corrections, you really do not understand financial markets. Do not be insulted, it seems that very few financial professionals want you to see this way and, in fact, Institutional Wall Street loves it when individual investors panic response to uncertainty. Psstt, uncertainty is the regulation playing field for investors, and hindsight is not welcome in the stadium.
A closer look at the news that's fit to print (but is not printed often enough) should make you more confident about the future, whatever your politics. There is much good news, but neither media nor the presidential candidates much attention to it: (1) employment, employment and unemployment figures are good. (2) Manufacturing numbers are strong. (3) The inflation rate is historically low. (4) Interest rates are near historic lows that high hysterical. (5) Durable goods orders are fine. (6) reports business results were strong. (7) payments of dividends companies have not been cut. (8) Our economy is still the largest and strongest in the world, despite government efforts to prevent that this continues. (9) We are in our second consecutive season hurricanes mild so far.
The bad news is not all bad either, about the same ole commands: (1) There have always been a war of any kind, especially in the Middle East. (2) energy prices are high, but I still can not see the gas lines, or any new exploration or refining capacity in North America. More than half cars you see are SUV gas guzzlers. (3) trade deficits and jobs leaving the country are really not new: they are the result Tax misguided and tariff policies. (4) High consumer debt. New? Not. (5) The threat of terrorism was a serious major problem for the past how many years? We try to deal with it. (6) The federal regulatory agencies probably do more damage to the economy than any other handset. (7) Social Security, the IRC and health care are still major problems we face and ignore.
Clearly, there is no new economic problems to worry unduly. And for now, we simply have to face the opportunities at hand. Low, but increasing, interest rates force fixed income prices down and yields up … An opportunity! Encourages good economic news of higher rates to reduce inflationary pressures causing equity prices the downward trend … Opportunity Two! These forces of good are intersecting with the market cycle, something Wall Street tries to ignore and the media mistakes constantly. Orientation of the market in both directions, that is their thing, just like women change their minds … Opportunities One and Two, squared!
There is an Investment Mindset Solution for the problems that most people have dealing with corrections, and also brings together, for that matter. I never understood why "sale prices Yard" here are so scary. Prices for quality securities always seem to rebound thereafter. And we should not rush to make it happen …
In recent years, Wall Street and the media have transformed the process of investing in competition to Olympic proportions and stature. What was once a long-term (one year is not long term), the objective of the activity directed, has become a series of monthly and quarterly sprints. The direction of the market is not as important as the steps we take in anticipation of the next change of direction. Performance evaluation must be rethunk (sic) in terms of cycles!
The problems and solutions, are summarized in focus, understanding and recycling. You need to focus on the goals of these securities in the portfolio. You must understand and accept the normal behavior of your titles in front to different environmental conditions. You must overcome your obsession with calendar period analysis by market value, and adopt an easier approach manage the centers of asset allocation in your portfolio turnover. You need to elect new people who can connect the dots economic, and remember that "the business of America is business".
But this time, relax and enjoy this correction. This is your invitation to fun and games for the next rally, when you see that correction is spelled opportunity.
Note: The 2nd Edition of "Brainwashing" is coming this fall.
About the Author
Steve Selengut
800-245-0494
http://www.sancoservices.com
Professional Portfolio Management since 1979
Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”
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