30 Reasons Not To Worry
About A Market Crash

My favorite financial journalist is Brett Arends, a regular contributor to The Wall Street Journal and MarketWatch. He’s one of the very few who doesn’t have his head up his you-know-what.

Anyhow, Brett just published a tongue-in-cheek article about all the reasons the stock market is just going to keep going up and up. And I strongly encourage you to read it here.

Some of my favorites of Arend’s 30 reasons not to worry include…

  • Yes, stocks look expensive compared with annual sales, net asset values, gross domestic product, the replacement cost of company assets, and the average earnings of the past 10 years. But none of that matters because valuation measures are completely irrelevant.
  • You bears “just don’t get it.”30 Reasons not to worry about a Stock Market Crash
  • The S&P 500 is almost three times as high today as it was in 2009. Therefore it must be three times as good a deal!
  • People who aren’t bullish are losers and sissies.
  • Everybody on Wall Street says this is a great time to buy stocks, and if they don’t know, who does? [Read more…] “30 Reasons Not To Worry
    About A Market Crash”

Are you a predictably irrational investor?

Nothing defines humans better than their willingness to do irrational things in the pursuit of phenomenally unlikely payoffs. This is the principle behind lotteries and dating…”

– Scott Adams, creator of the comic strip Dilbert

UPDATED May 2016: With full confidence, I can say that you are irrational when it comes to investing.

I know this not from talking to your broker or your mother-in-law, and I haven’t hacked into your portfolio statements. I know this because you’re human.

What will happen in the stock market isn’t predictable. But one thing is absolutely for sure and for certain: Investors are predictably irrational. We’re not talking smart or stupid, sophisticated or naïve. We’re talking across-the-board irrational.

So maybe you’re thinking that you’re the exception. You think you can handle the volatility of the market by just gritting your teeth and praying everything turns out all right as you roll the dice in the Wall Street Casino. Or maybe you think that at the first sign of trouble, you’ll be able to bail out of stocks and into bonds or money market funds to lock in your gains.

Researchers say, “Nope, that’s not what’s happening…”

[Read more…] “Are you a predictably irrational investor?”

Should you be worried about the Dow’s plunge?

We're doing it again!

If, like most Americans, you have a substantial portion of your nest-egg in stocks and mutual funds, I urge you to take a few minutes to read this right now…

The U.S. stock market has lost considerable ground and volatility has returned with a vengeance.  The situation is precarious in both Japan and the Middle East.

But the recent stock market plunge was virtually assured before the earthquake and tsunami hit Japan.

Here’s why…

We’re doing it again: Buying stocks after big gains in the markets.

In 2008, 2009 and most of 2010, mutual fund investors in almost every month took more money out of stock mutual funds than they added. Then, in January, someone hit a switch.

Investors decided that it was time to get back into the stock market. Keep in mind this decision came after an almost 100 percent gain from the market bottom in 2008. So in December we pulled $10.6 billion out of equity mutual funds, and in January we poured an estimated $30 billion into the market.

Do you see the problem here?”1

The problem, as this article from The New York Times blog titled, “Are We Buying High All Over Again?” points out, is that investors are repeating past bad behavior.  Just as they have done throughout history, and just as they will continue to do for the rest of time.

[Read more…] “Should you be worried about the Dow’s plunge?”

Market Rally? Why you shouldn’t get carried away…

There is something occurring right now that concerns me… and ought to concern you, too.  So I urge you to pay close attention to this blog post…

Individual investors are moving into stocks and riskier investments

Since the financial crisis, and until very recently, individual investors (that’s you and me) largely avoided stocks.  But now, as the stock market continues on a sharp rise that is already one of the steepest in history, people begin to fear they will miss out.  According to a recent article in the Wall Street Journal1….

Stock-market fever is one of your biggest enemies as an investor… It’s pure instinct.  We’re hard-wired to run with a stampeding herd and to seek safety in numbers.”

The article advises that you shouldn’t trust the crowd, because, “they’re usually wrong.  Time and time again, studies show the public invests at the wrong time – they get bullish and buy after shares have risen, and then panic and sell after they have fallen.”Stock Trader Happy With His Success

Just as they did before the housing bubble burst and just like they did before the dot.com crash.  And just like they have done throughout history.

The article notes that, “too many TV market pundits talk like they’re on ESPN.  It gives the stock market a phony air of urgency and excitement.”  And it reminds us that, “if you’re buying, higher stock prices are bad, not good.”

Wall Street lost more than 40% of our money -TWICE – in the past decade

How can you be sure they’re not about to do it again?

[Read more…] “Market Rally? Why you shouldn’t get carried away…”