With all the craziness going on world wide why did the stock market rise 5.9% in the first quarter? 

 It’s a “bad” question. People are still somewhat amazed and surprised that the geopolitical turbulence of early 2011 lead to a nearly 6% rise in US stocks. Conventional wisdom even gets caught off guard when it sees sensational global instability lead the S&P 500 to a 3 month gain equal to approximately 29 years worth of current 11 month CD rates2. The bad question is: ‘How can this be when the dollar is heading to zero and our nations tailspins through this atrocious economy?’

The real question is: What makes the stocks go up? Bluntly stated, there is no cause and effect relationship between global headlines and the S&P 500 quarterly results.

Corporate profit, on the other hand, does fuel stock price increases and, at $21.92 per share, the average S&P 500 company has been growing profits for 2straight years.3

Oil started spiking in late February and is the one obvious cause for concern about potentially derailing the impressive expansion in corporate profits. Yet as of this moment, nearly all the decline in US stocks since the oil spiked in February has been reversed. This means that even with all of the hyper-information about price of oil attached to global unrest, the US market looks to predict continued profit growth.

Here’s another good question: What does supply and demand have to do with all of this?

Contact me to discuss this strategy.
 
D. Scott Bloom, CFP
 
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor before investing. All performance referenced is historical and is no guarantee of future results.
Securities offered through LPL Financial, Member FINRA/ SIPC

Let’s clear the plate and start fresh with a simplistic view of what we’re talking about when we’re talking about investment strategy and global finance. We are talking, quite simply, about the price of things. Namely, changes in the price of things like milk, gasoline, real estate, copper, diapers, interest rates, common stocks, etc. Many times, if not most, the “value” of something does not equate to its price and that’s the incentive to make investments.

When we can agree to break it down to the simple premise that financial decision making is reliant on predicting future price movements and the directions thereof, we can then do some real focused analysis and look at what really matters to “the price of things”: supply and demand (in fact, it’s a law).

Understanding the law of supply and demand helps us to make more knowledgeable decisions based on a guided and fundamental process.

Contact me to integrate this process into your own custom strategy. Have a great week.

D. Scott Bloom, CFP

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor before investing. All performance referenced is historical and is no guarantee of future results.

 
 LPL Financial, Member FINRA / SIPC

Market commentators have some silly catch phrases that pop up every now and then get recycled by others and then, finally, you hear these phrases “parroted” by neighborly pundants at your local Starbucks. That’s when you know the catchphrase has run its course: when cable news junkies repeat the silly things they’ve heard others say on TV.

 

One of them is that “This market is trying to climb a wall of worry” and is the gist of this week’s iScott blog. Our goal is to have investors learn how to “Climb OVER this wall of worry” and use certain knowledge to do so to their advantage.

People worry about so many things they shouldn’t. Conversely, they don’t worry about the things they should. The point is to “get over” the wall of worry. Just get over it.


Examples:

People may worry about the US deficit yet they do little to control their own budget deficit at home. (they don’t cut expenses when they can and should)

People may worry about the rising costs of higher education yet they do little to make increases to college funding for their own family.

People may worry about nuclear proliferation in N. Korea and Iran, yet they have failed to assemble any disaster preparedness kit (ample water, fuel, propane, first aid and generator)

People worry about “the market”, “the president”, “the deficit” “mass joblessness”, “rising prices” and “this horrible economy”. Believe it or not, people we know actually spend time, energy and emotions worrying about these items when they have no control or influence over the outcomes of any of them.

Meanwhile, people we see everyday are neglecting to control and influence so many things they do have power over: Diversification, home budgeting and finding bright spots in the economy.

The greatest teacher and mentor I have ever known gave me a piece of advice that I was able to glean and use from the day it was given. His name is Phil James, a retired business man known for his ultra strict business standards and unwavering punctuality, almost to a fault. James taught me, “Don’t ever spend time or energy worrying about anything you cannot influence or control.” He advised, instead, to do the opposite.

The other day while having a great conversation with a couple of business owners, one of the partners countered my optimism for our future with open ended questions about the so-called failing economy and she cited gas, prices, under-employment and the deficit. She admitted innocently that was she is indeed “worried” about these things and it made sense to her when I asked what, if any, control, she may have over any of it. When then opened a new conversation about business continuation and estate planning techniques which directly have an impact on her family and, here’s the clincher, that she had an immediate and direct influence on the outcomes. Now she’s spending time and energy worrying about something she can fix and, as she fixes it, the “worry’ will subside.

To quote the noted scholar Van Wilder, ‘Worrying is like a rocking chair. It gives you something to do, but it doesn't get you anywhere”. In other words when we worry, we go back and forth, but never move forward.

People do spend time worrying about the items of the day such as Avian Bird Flu, SARS, West Nile Virus, H1N1 and Anthrax. If you want to climb a wall of worry every week, make sure its something you can control and/or influence. If not, you’ll never “get over it”. The “wall of worry” that is.

D. Scott Bloom, CFP®

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor before investing. All performance referenced is historical and is no guarantee of future results.

 



     LPL Financial, Member FINRA / SIPC