Don’t misunderstand me, I feel great that the stock market is rising and has recovered most of its losses. But, I also don’t understand why it is going up so much. However, there also many other things I don’t understand, so I’ll just put this on my “Things I don’t understand…but will not obsess over” list.

Regarding the stock market, I have been a consistent bad short term guesser, but a great long term prognosticator. If you measure the growth since I started investing in the market, I am nothing less than a genius. Phenomenal! I still follow my long term growth policy and look forward to even greater growth. I just don’t exactly know when it will occur, but I know it will, as it has consistently done in the past. I’m in this for the long haul and “know” I am right about this.

Where I’ve been a lousy clairvoyant is in the short term. With one exception that I can recall [on Oct 22, 1987, when the market was tanking I bought on the way down] I have NEVER been right. So much so that I stopped betting, i.e. acting, in the short term. I stand pat. I do nothing. Nada. I also don’t worry anymore. I get concerned and I watch it and try to figure it out, and feel lousy sometimes, but I don’t do anything. I would be much better off today had I followed this plan all of the other times I thought I was right and wasn’t.

There are three reasons why stocks should go up, as far as I am concerned. 1) Earnings growth. 2) Dividends growth. 3) Optimism that earnings and dividends will be sustained and grow. That optimism is reflected in the Price to Earnings ratio or P/E. The greater the optimism, the higher the P/E. Of course, there are some exceptions, such as with Tesla and Amazon.com with sky-high P/Es and Berkshire Hathaway with no dividend payments. But, on balance, my rules hold for stable well-diversified portfolios.

Right now we do not have earnings or dividends growth, and any optimism about the near term future is either misplaced or exaggerated because it is being compared to the nadir of the pandemic we have just experienced. I’ll take the market recovery and I won’t do anything more about it. I am sitting pat. I know dividends won’t drop completely or even that much and I know large company earnings as a whole will not shoot up suddenly but also will not vanish significantly, and I certainly cannot account for herd optimism, so I will take the good, accept the bad, and know that in the long term, everything will be OK.

These are my opinions and you should formulate your own opinions and act accordingly; but keep in mind that none of us have crystal balls and each of us has different experiences, expectations, spending needs, goals and risk tolerances and you need to do what makes you be and feel secure.

If you have any business or financial issues you want to discuss please do not hesitate to contact me at [email protected] or fill out the form below.


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