Time to Buy

As mentioned in previous posts, I’m no economist or prognosticator. And many who are way smarter than I am make a living advising people about how to invest to make the most over time. But there is one thing I have observed in nearly 50 years of existing on this planet. The stock market goes up. Then it goes down. Repeat. Over and over. And, as I have said before, long term investing in equities always outperforms almost any other method of investing.

I can’t provide data, charts and true objective analysis like Wharton’s Prof. Jeremy Siegel, whom I had the challenge of following as speaker at Wharton’s MBA Convocation a few years back. Jim Cramer did scare a few by advising folks to take their money out of the market if they need the money in the next five years. But in truth that’s been the advice of the advisors forever – if you might need the money pretty soon, it really shouldn’t be at risk.

But for those of us who have a bit more of a time horizon (for the moment anyway!), I can only look at current market prices and see tons and tons of incredible bargains. The sell-off is probably not over, it may indeed have a bit more to go. But my smart brother-in-law, who’s been in the market for over 40 years, says very simply, “You can’t buy at the bottom or sell at the top, so don’t try.”

But when you look at what are considered “normal” ratios of stock price to earnings, you see lots of opportunities. So I think it’s time to buy. The other reason it’s time: the stock market, our economy and our financial institutions are not entering a depression or collapse. A number of sectors of the economy are getting stronger (look at the dramatic fall in energy prices for example). We are not seeing massive unemployment, runs on banks, people trying to jump out of their air conditioned windows on Wall Street. Yes times are tough, but thanks to the steps that have been taken and more that are coming, I expect that we will move to a more traditional bear market and recessionary economy for awhile.

This we know how to deal with. We tighten our belts, if necessary draw a little on that rainy day fund, and wait for the next upturn. Oh, and something else Prof. Siegel talks about. Expectations. If everyone gets a little sunnier outlook like I am projecting here, it will become infectious, and that alone with fuel the positive energy in the market and in our economy. So at a time when most of us are not high in expectations about the Presidential election, let’s up our expectations a bit on capitalism and our very way of life here in America.

Oh and take a close look at the smallcap market as you invest. When things come back chances are the smaller stocks will outperform largecaps. And of course that helps those of us who make our livings not prognosticating, but helping smaller companies find ways to fuel their growth and build wealth for their stockholders.

[I'm not a financial advisor, this is not legal or financial advice, blah blah, so don't sue me!]

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