The weekend party conversation was filled with talk of Armageddon. More than one person told me very clearly that the world over. My response to friends, clients and family includes three facts. One, we've been here. Two large U.S. companies still sell things to people. Three, can not keep cash cash for long. Let me explain.
First, we have seen it all before and the world is still there. Calm down. In fact, in my experience as aInvestment Adviser, two important dates to remind me to stay cool. In October 1987 I was sitting in my office asking if the world went off a cliff. The market rose by 22% in one day. This would be the modern equivalent of one day drop of 2300 points! But, exactly one year later, on 19 October 1988 the market was up 23%!
More recently, in October, but this time in 2002 for the market to hit a bottom of 7286 on the Dow. A year later, in October 2003? The market had recovered and rose by 33% to9680 on the Dow! We have been here. The market goes up. The market goes down. That's why they call it a business cycle. Too, shall pass.
Second, large American companies to sell stuff. This is the great under-appreciated economic fact that the rules of the world. People buy stuff. Lots of stuff. In fact, the guiding principle is inexorable desire of all people. In addition, they buy it all over the world. It is true that a number of areas, such as the current financial sector, maysuffer from unique and breathtaking losses, but that does not mean that every company in America comes to a complete standstill. Think of all the Head & Shoulders, Charmin, Duracell batteries and Pringles, Procter & Gamble markets around the world on any given day. The numbers are overwhelming at $ 83 billion per year. Not to mention the continuous growth of mobile phones from Verizon Wireless, or the Band-Aids, Motrin, Listerine, and the things we can not even pronounce name of Johnson & Johnson, to name a few.
So, do notOnly we have before, not only large American companies rising in the morning, turn off the lights and sell many things to many people, but ultimately can not be cash, as cash for long.
Trillion now sitting on the sidelines in cash, fear of the market. The simple problem? Cash does not exist. Real income is the income after taxes and inflation pay account. Unless, of course, make your investments that they have at least account for taxes and inflation,You lose money! The current Treasury yields of 2-3%, depending on the length of maturity, not this simple test. The 2-3% Treasury return is taxed, then removed, the current inflation rate, which is you think, eat real. Is a 3% inflation assumption fair in this environment? Cash after taxes and inflation is a negative number! Ouch. So, can not keep cash cash for a long time and if, on this market, and it is the market willRebound dramatically.
Be of good cheer. It is not lost. Instead, this market presents a unique opportunity in a generation. If stocks have you bought in the Great Depression? If you have, you are fabulously wealthy. Why? They knew that we were before. She knew that continued large American companies sell things that many people who want to buy things. She knew that money can not stay for long bar, as they lost for the foreseeable future to taxes and inflation.
The Worldwas not finished. Keep your chin up.
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