The dart board reference in today’s Tweet & Facebook post is just a joke, although there is one bit of truth behind it: You have as much chance throwing quivers and still being just as right as the ‘Pros’ are in predicting what the Stock Market will do in any given day, week, or month. No one knows for sure, or they would be richer than Bill Gates or Oprah, and they would certainly be smart enough not to tell you their secrets. Think about it the next time someone tries to sell you on a scheme that can’t lose. Would you advertise the location of the goose that lays golden eggs if you knew it? No, that would mean less eggs for you.
I’m actually extremely glad I’ve been dead wrong in my first three predictions since starting this series. I’m an Econ & Finance major who graduated at the top of his class, passed the series 7 stock broker exam on the first attempt back in 1987, and have been a portfolio manager for over 30 years. Why am I glad to look so foolish? Simply to ‘prove’ what I say in the first paragraph.
Even though I’ve been wrong, my portfolio is in fine shape because… I didn’t sell anything even though I thought the Stock Market was going to tank. Do you understand that? I take a long-term approach to investing and don’t trade often. My belief that the Market would dive simply kept me from making any new investments at this time. You really don’t lose money in the Market until you sell; you only lose paper-value or net worth when the Market drops. More on this concept in a later report.
Two things make the Stock Market move: Fear & Greed. There are a number of reasons I think a correction is due, but remember, I could be wrong, wrong, wrong again. I don’t think we are even close to being out of this recession. The Euro currency situation is still a mess. Earnings, while some up, are not all that good. Unemployment is still very high. The Market has had a nice increase of over 2,000 points (19%) since the huge drop in August 2011, and I think greed has taken over. People are buying to keep from missing the greed boat to paradise.
Maybe the DOW has to hit 13K for Fear to set in, and the selloff I see occurs. We still have that irrational fear of Friday the 13th…
If the DOW drops back into the 11K range like I think it will in the coming months, remember the adage my mentor, Jones Babier, made me promise to say to everyone I ever gave advice to: “Past performance is no guarantee of future results.” Also remember not to panic. You buy when everyone else is panicking.
Till next Monday, Steve
