John Mandeville: ‘I think you’re right about dips on the market per Friday’s column. I have had in the back of my mind, ‘when the market goes up, I’m selling and getting out of this rat race for a while.’ Well, as it turns out, everyone around the coffee break table is thinking the same thing. I can just see a continuation of this whip saw action for months and perhaps years to come. What are your ideas for getting the trust of the investor back into the market? Throw the bums in jail? What else?’
☞ Throwing the bums in jail may help restore some confidence, but the real base that’s needed is a compelling value proposition, where logic and greed overcome fear. Can you believe that great dividend yield? Or at least, Can you believe that low p/e ratio? Hey – I can’t sit it out any longer. If the world doesn’t end, buying shares at these prices has to work out over the long run. (And if the world does end, what difference will it make?)
Stocks may have to go a good deal lower for people to feel that way, or earnings next year (or some year) may have to be a lot higher. But the day may come.
Then again, it may not. There is a great deal of money sitting on the sidelines; and every week, more 401(k) money needs to be invested. So maybe stocks won’t have to get lower than they did a couple of weeks ago. I truly don’t know – obviously – which is why people like me shouldn’t try to time the market.
It’s only at the extremes – either nutty high or nutty low – that I feel confident of the intermediate direction of the market, even if it winds up getting even nuttier first, before it heads back toward sanity. (I say intermediate term because NO ONE can guess the short-term market moves with any degree of success, and the truly long-term direction is always easy to guess – up. Barring the end of the world, of course. But if the world does end, the Dow will be the least of our worries.)
If you’re in it for the long haul, I don’t want to encourage you to sell, even though I believe the market could have quite a bit further to fall. Prices have come back to earth sufficiently that they are no longer totally nutty. Here and there, and as tax-selling season kicks into gear, you may even find a bargain.
ALL WILL GO WRONG
I don’t know Derbyshire’s work well enough to know how deeply his tongue is stuck in cheek. If you read him literally, both here and in one or two other things I’ve read, it’s pretty appalling. One has the sense, though, he enjoys being grumpy and outrageous and politically incorrect. In any event, here’s what one conservative (i.e., Derbyshire) believes. We progressive Democrats recognize the same challenges he does but have a more hopeful vision of meeting them. Deep down, I think Derbyshire is rooting for us to succeed – and recognizes that we might. The sun will come up tomorrow, and it will not be totally obscured by pollution.
Quote of the Day
Very few American investors buy any stock for the sake of something which is going to happen more than six months hence, even though its probability is exceedingly high; and it is out of taking advantage of this psychological peculiarity of theirs that most money is made.~John Maynard Keynes
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