Some Thoughts About the Week on Wall Street

There is a lot of uncertainty out there, and at this point, one cannot help but question the economic condition of the country. People are beginning to crack. I was mentally prepared for a "typical" bear market, but the stock market blew through that is a few weeks. So that brought me to the threshold of pain faster than I expected. However, I am hanging in there and have re-reviewed my financial plan, and my portfolio. I do have a list of stocks that are currently of great interest to me and I just purchased some NOV. As they say, the price was right.

For some calm, non-emotional advice on what to do now, go to this link: Rick Ferri on "What to do in this current market environment"

You can search for "Rick Ferri" using your favorite search engine, if you want to know more about who he is.

As for the negativity out there, those messages flashing across the screen on CNBC: "IS YOUR MONEY SAFE??" certainly don't help, but then, they are simply intended to keep us glued to the screen. I aso suspect that as the program is being beamed from NYC, that there is a built in "negativity bias". Too bad for the talking heads on the financial shows. Anyone who is sane has to question those people. Only recently Jim Cramer was playing the pied piper of the stock market, then turned on his adoring fans and told everyone to bail: Link to video Oct. 6, 2008: Cramer Says Now is the Time to Bail!

For more on Cramer, see: Link to "Forever the Cynic"

We all feel the pain; even with all the balancing and asset allocation I have done to my retirement portfolio, I am experiencing a paper "loss", or decrease in the value of that portfolio, just as everyone who has any exposure to the stock market has experienced. Index funds tanked. Bond funds were dumped. Etc., etc. This was not unexpected; financial people were flashing "bear market ahead" warnings for months. As a consequence I re-allocated by entire portfolio, that is; the portion that is not in cash. I had gone long on cash, as they say, with the remainder set up for a minimum 5 year and possibly a 10 year horizon. Ultimately, the horizon of my retirement accounts is 30 years.

As you can see, I do have a long term perspective, so even though I am not happy to be with our market and the economy in it's present state, I can take some solace that my time perspective is a long one.

To Quote Warren Buffett (Smart Money, May 1997): "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes." I don't take this advice to literally mean I should buy all stocks and hold them for 10 years, but rather to buy with the expectation that I be prepared to hold them for 10 years.

I also am well aware that sometimes one can do everything right and still not achieve the desired result. So it is still possible to lose money in stocks and bonds. As the saying goes, there are no guarantees in life, no matter what the pandering politicians tell us.

I do have sympathy for those who expected quick returns from the stock market and invested that way, just as I have sympathy for those who purchased a home recently, expecting to flip it in a year or two. Housing is similar to the stock market. Breakeven on a home purchase is typically 5 years as compared to renting, according to most of the financial analysis I have read, and supported by my own, independent analysis.

As I see it, if we think housing or stocks always go up, we will be disappointed. If we think reversals, when they occur, will always be minor and corrected in a year or so, we will also be disappointed. If we think we can gamble and always win, we will lose, and lose big time. That's the way it is.

"The market, he had learned, was like the sea, to be respected and feared. You sail on its smooth surface on a placid mid-summer day; you were borne along by a favoring breeze; took a pleasant swim in its waters, and basked in the rays of the sun. Or you lolled in the quiet currents and dozed. A cold gust of wind brought you to, sharply — clouds gathered, the sun had gone — there were flashes of lightning and peals of thunder; the ocean was whipped into seething waves; your fragile craft was tossed about by heavy seas that broke over its sides. Half the crew was swept overboard... you were washed upon the shore... naked and exhausted you sank upon the beach, thankful for life itself..." Liars Poker, Rising through the Wreckage on Wall Street, by Michael Lewis Link to Liars Poker at Amazon