Friends
How about a little pep talk at this point. After days of delivering bad news (and today isn’t any better with the Dow down 242 points), I want you to remember what our mindset was, just two years ago this month. Remember, we had experienced the second 50% drop in stocks in the decade, and things were never ever going to be the same again. Just over a week ago, we celebrated the two year anniversary of the bottom of that last bear market with the Dow Jones Industrial Average up more than 80% off the lows. Today we find ourselves down about 7% to 8% from the highs we hit in February. Considering the unbelievable amount of negative events and news over the last four weeks, starting with Egypt, it is amazing the market has held in as well as it has.
So where are we now and what do we do? Remember, we talk to you about protecting and growing your money. We determine what portion of your money should be in the protect bucket and what portion should be in the growth bucket. At these times, we check to see if the growth bucket is a bit full. If it is, mainly because of the recent advance in the markets, we may sell a few things to make sure we don’t overflow that bucket. If our growth bucket has been purposely less than full (under invested), we may take the opportunity to buy some things that are falling in price. These are the times when discipline and not emotion is important. If our buckets are filled correctly, then we let the emotional moments fade and then discover if there are any opportunities for us to seize.
It is always difficult when times like this occur. But remember, it will pass and we will move forward. We thought that stocks may never rise again when the Dow hit 6500 back in March of 2009. How do you handle in emotionally? Well, you remember that you have your protection bucket well-guarded, and your growth bucket may be volatile for a while, but that money is always subject these emotional swings. To get growth we need to endure the volatility.
Over time we will begin to quantify all the events in Japan and the Middle East. We will attempt to determine how these events will affect corporate earnings, which will directly affect stock prices and interest rates. Is it ok to worry about the nuclear issue in Japan? You bet it is. We are very worried about it. But we want to let the event resolve itself (and it will for better or for worse, soon), and then make rational decisions as to what changes we might want to make in our buckets. Has the long-term global growth story been compromised? Will Japan decrease global demand? Will the rebuilding of Japan actually act as a global stimulus? Has oil seen its highs for the year, especially with the possible slowing of global growth, or will the unrest in the Middle East keep prices high? Emotion, will not solve these issues. The picture will unfold over time.
Don’t hesitate to call if you have any thoughts or concerns.
Try to have a nice evening. We’ll check in with you tomorrow.
