Bulls, Bears and Babes
By Martin Brown
These are the times that test if not the soul of investors, not to mention their sense of equilibrium. You can put any spin on it you wish, but put simply, this economy has everyone on edge.
Economic problems are, metaphorically speaking, like a rock thrown into a pond: one ripple causes another and another. Eventually those ripples extend just as far as your eye can see.
Not invested in the financial markets so none of this matters to you? Think again. The only people not affected by this economy are living in the wilderness enjoying God’s natural bounty. For those of us not cooking a pot of moose stew over a campfire right now, the continue decline of the markets is a concern.
Say for example, you’re a government employee with a solid pension plan, and your only savings are stuck away in an account that is FDIC insured. Well you are certainly more sheltered than a self-employed person whose savings are sitting in funds invested heavily in the real estate and retail sectors. But that government employee pension plan of yours is most likely heavily invested in the financial markets and as those markets continue to take a beating the strength of your once mighty pension fund continues to erode.
Don’t feel bad. You’ve got plenty of company: in fact, most Americans—not to mention countless millions of people around the globe who are seeing their local markets tumble as well.
So where is it all heading? And in the terms of today, is there a floor for stocks?
As in all things in the study of economies, the answer to that depends on who you choose to believe. We have always had our bulls and bears in the business of financial markets. So what’s a gal to do?
1. Look at the smartest players in the game for one thing.
If you’re ready to run for the exits, open your eyes. You’ll notice that Warren Buffett and other big leaguers are actually buying stocks right now. Consider the fact that if you had pulled all your money out of the market during the 1988 bear market you would have missed the 12-year bull market that followed. If you had jumped out of the market in 2000 when the tech bubble burst, you would have missed out on several solid years of growth that followed peaking with the markets high of over 14,000 points in 2007.
If you think that this is 1932 all over again, you’re watching and reading too many scary news commentators. In 1932 unemployment was hitting 30%. Today we’re a little over six percent.
This is not to suggest for a moment that these are not the types of times that lead us all to having a second class of wine with dinner. But remember this: You invest in stocks because you want to share in growth. Bonds, and low yield savings certificates never accomplish that for the investor. With growth, comes contraction. But history has always sided with a return to growth and I have little doubt when the storm clouds pass, growth will reassert itself as it has over and over again since the earliest days of America.
2. Are we at the bottom of the market fall? Perhaps not, but I suspect that we are close.
Remember that markets fall prior to bad news taking hold, and they rise before good news about the economy spreads. Don’t jump now. Better days may still be awhile in coming, but they are ahead.
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