If you've believed America's economy improved over the past year as Herr Geithner has- I have some prime scenic property to sell you (on the Moon).
Mega-inflation looms as those trillions of Federal 'bailout' dollars float around- and locally- DST Systems is getting rid of 700 workers.
Keep buying those stocks- you can always use them to paper your cardboard shack a few years down the road.
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1 comment:
To be honest, job growth is one of the most lagging of all lagging indicators. If you look at leading indicators, they all have improved significantly. Leading indicators include consumer confidence, the ISM manufacturing report, business inventory growth and the stock market.
Markets in particular are a very easy to appreciate as a leading indicator. If you look at how the market topped in 2007 and began a subtle decline in 2008, finally crapping out bigtime in late 2008 and then bottoming in March of 2009, you can see the decline and improvement.
Since the March lows, the S&P has climbed some 65% since then to today's close of around 1100 (up from 667 at its low).
Job cuts were the last thing business did, and as such they will be the last thing to recover.
If you have held off on buying stocks, you missed one of the greatest buying opportunities in the last 25 years. Purchasing very plain funds, like the Vanguard Total World Market fund,would have grown some 40% in 2009.
Returns like that aren't just rare. They are almost unheard of. Since many people are still very leery of the market, as illustrated by the amount of money pouring into high grade corporate and government bond funds, those people will miss out on a lot of gains that will manifest as the market improves.
If you investing horizon is 10 or more years, you are passing up a tremendous opportunity to generate great growth.
Since risk = reward, you make the most money at times of greatest fear (such as March 2009) when everyone was predicting the end of the financial world.
Unless you have a crystal ball, there's no utility in trying to forecast the market. Nobody can do it consistently, and that includes hedge funds, actively managed mutual funds, or people like Jim Cramer and the blatherheads on CNBC.
My advice is to pick an asset allocation you feel comfortable with and continue to contribute in times of good and bad. When your allocation drifts from what you want, reblance (at least once per year). In doing so, you will force yourself to buy low and sell high.
A properly targeted asset allocation, even one that is 60/40 stocks and bonds, can generate at least 8% return annualized. It has done so even going back 80 years.
So don't fret and choose low costs index funds that don't try to outguess the market. It is a zero sum game.
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