“The stock market does not trade off of politics, it trades off of profits.” A wise statement overheard.
May 2021 Newsletter
1. The Stock Market – my answer for growing wealth for all people who can spend a little less than they earn.
“The stock market does not trade off of politics, it trades off of profits.” A wise statement overheard.
Remember the late 1990’s when high tech was reaching unbelievable levels and the resulting CRASH in March of 2000? The government came to the rescue with easy money and relaxed rules which ultimately led to another CRASH in 2007 where a Bear Market began in the fall and lasted through March 2009. Along the way we learned about real estate deals that had been approved for people who could not afford to become real estate owners. Was that plan helpful and good for anyone? After months of watching the market lose 50%, it turned positive on March 9, 2009. Money was made by investors who stayed the course, added money, and reinvested dividends. (see percentage later.)
Many people will say that the government rescinding a Mark to Market Ruling made the difference for the market in 2009. The ruling had ruthlessly downgraded good loans that were paying regularly and The S&P bottomed at 677.
Move forward by twelve years and CNN recently reported on April 9, 2021 that more money moved into equities in the past 5 months than in the past 12 years. Their interpretation: this likely means a stock market correction before year end. However, what had really happened was that bond funds/ETFs took in Three Trillion Dollars over twelve years while equities took in $164 Billion, and the S&P moved from 677 to 4100! The five months CNN reported as important was merely short-term history. Some investors had earned a good to excellent return in the stock market during that 12 years while other investors thought they were being “safe” waiting for “signs” to enter the stock market at various times.
Putting it another way, money you put into the market on March 9, 2009, has earned about 16.2 % per year for 12 years. That’s equity reality for 12 years. And notice the incongruity; equities increased by 660%, fixed income increased by 60%. However, 18 times more money was added to fixed income, not equities. It is equities that have been increasing over the last 200 years of our economy according to Jeremy Siegel, author of Stocks for the Long Run.
As Nick Murray* says, “The Economy cannot be forecast. The market is only correlated to the economy over the longest term and cannot be timed. To continue to capture its long-term success you must endure the declines.” We have always taken the long-term approach as the surest way to your long-term goals.
*We are thankful to insights and opinions gleaned from Nick Murray’s website and articles.
2. The Terrible Temptation to Hold Cash – article written by Nick Murray
See attached to read the article…
3. And, now, Inflation
Themes come and go. Right now, the media is working on “an inflation scare.” It comes from a storehouse of “worries about your portfolio” that they draw upon when they need “new”, actually old, material. Of course, inflation exists and as long-term investors, we understand and incorporate them. Some of our rules: (1) Never jump to conclusions and make portfolio decisions based on a current event. (2) Understand the value of that investment due to inflation will show up in your ownership of the stock as “growth” in time. (3) If it is said to cause a Bear Market, be prepared to make decisions about dividends and additional investments. It may be time to buy. (4) The stock market is a vehicle for “beating inflation.”
4. Final Words
Recently I listened to an honor acceptance speech by Robert Woodson, Sr. He founded the Woodson Center in 1981 to help residents in low-income neighborhoods. I was stimulated by his speech and listened to his speech where he reiterated circumstances of how they helped the communities learn success and demonstrate success, not failure. He completed his speech with the following statement: “I’d rather hear a black person say, ‘I is rich’ than ‘I am poor.’” Food for thought, I thought.
Sincerely yours,
Louise Googins
Rick Martin
Michael Googins
Kim Rankin
Carson Bieber
Brady Peat