Another "Investing 102" term..... UNCERTAINTY.
If you've ever listened to a business news channel - you've heard this term. "The markets hate uncertainty". To me - uncertainty equals undecided or unsure. What's that do to the market? A market takes BUYERS and sellers... if you're uncertain - you may NOT decide to buy.... and when that happens you get a down market.
I had warned in an earlier post that I thought as we approached the election that we might see a choppy market... people are unsure what their tax situation is going forward. They're unsure what the economy is going to do. There is no clear picture of what's ahead.
What you are seeing is exactly what I had expected. It's not rocket science... "WE" are normal human beings... and if we are uncertain - then so is everyone else. It's the same thing I've been preaching about when you're buying - use your own gut sense about a business... long lines at the check out? Great! An empty store - empty parking lot.... not so great. You're friends finding work and buying houses? Or are they selling everything they own and collecting unemployment... Obviously this "depends" - it depends on where you live - what industry you're in - your own economic surroundings etc. But in broad general terms - you get a sense for what's going on around you. You either feel optimistic or negative - OR - UNSURE. Uncertainty/unsure is the deer in the headlight... which means no commitment.
Now -- add to this -- we're in "EARNINGS SEASON" which means companies are just starting to report on their earnings -- and so far these seem to be coming DOWN... The market may have been a little optimistic about the "turn around". I think the USA is turning around - but we have those across the pond doing worse - which is more important? I think we're seeing that in companies reports such as UPS and FED EX etc reporting slowing "international" business. I would certainly expect that given the news for the last many months.
I've said in earlier posts that this year has been AMAZING -- it's been an investors dream! Everything has seemingly gone straight up. That's an easy market to feel good about. It's easy to buy. It's easy to hold. I personally have some outsized paper gains. Long term investors - people that have been in the market for the last 3+ years have seen their investments go up 100% in many cases... so now - what to do? Sell? Hold? Unsure? When it's unsure - they're not buying! Right? Maybe they just sell a little bit to lock in some capital gains at this years 15% rate... No biggie there -- unless you're in an uncertain position and then the buyers just aren't there to LIFT the price.
On big down days -- the one thing I have to remind myself of.... even if a stock is down $5 - that means SOMEONE paid that price for it... so there are buyers out there... they're just bargain hunting. They may only be nibbling. They may be averaging down.. but someone is buying or you wouldn't have ANY market at all!
NOW ---- If you're in dividend stocks for the long haul.... then you're dividend is buying at these lower prices - which means you buy more shares per dividend period which means you're compounding your returns FASTER... and buddy... That's a GOOD THING!! Remember that as the price comes down... the percentage of dividend rises... you get more shares that pay you a higher PERCENTAGE return and next quarter you pick up even more shares and so on.
In actual fact YOU WISH you'd have invested in 2007 - and the market went down another 30% and you'd bought a ton of shares CHEAP! 'Cause right now you'd be jumping for joy and wishing you'd have put even more money "to work"!
Brian Hobaugh SCCA National Tour June 2014
First Hemi 'Cuda Convertible Ever Built
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