Dean Parisian
Active Member
- Messages
- 441
?I never met anyone, or heard of anyone, or read of anyone who was successful who was a pessimist. You have to be positive, or you'll never get anywhere?
William J. O?Neil
"The most successful men in the end are those whose success is the result of steady accretion. It is the man, who carefully advances step by step, with his mind becoming wider and wider -- and progressively better able to grasp any theme or situation -- persevering in what he knows to be practical, and concentrating his thought upon it, who is bound to succeed in the greatest degree."
Alexander Graham Bell
?Attitude, to me, is more important than facts. It is more important than the past, the education, the money, than circumstances, than failure, than successes, than what other people think or say or do. It is more important than appearance, giftedness or skill. ... The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change our past. We cannot change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude. I am convinced that life is 10% what happens to me and 90% how I react to it. And it is with you. We are in charge of our attitudes."
Charles Swindoll
The stock market is a facility for the exchange of shares. Just like markets for cell phones, oil or fur, it is driven by supply and demand. Never forget that stock prices are set ?at-the-margin?, that is, by the selling pressure or buying interest at an electronic or physical location. Share prices are not set by any kind of fundamental valuation formula or by the talking heads on CNBC. Friends of our firm who work on the floor of the New York Stock Exchange understand fear and greed better than most investors but they can't tell the difference between preferred stock and livestock. Their only concern is commission flow.
As an economist by training, I understand that contrary to what I was taught, supply and demand in the stock market is seldom in equilibrium. Price and value are separate and the market is not always efficient but it is very effective.
Securities markets are fundamental to the capital formation process in a free economy. They enable businesses to raise capital by offering shares to investors. Companies then use that capital to invest in technology, new equipment and employees that will produce goods and services to create more jobs in our communities.
Today, capitalism is the organizing principle for most of the human activity on the globe, for no one can stop capitalism. I feel the 21st century started in 1989 when the Berlin Wall came down. The opportunities for success are greater now than ever before and for the first time in the history of the world all the people who are poor, know that they are poor.
The stock market doesn't care who you are, what color your skin is, where you went to school and it doesn't care where you came from. Here are some reasons why the stock market will continue to go up much like it has during your lifetime.
1. The United States has the greatest number of entrepreneurial managed companies.
2. We have the leading military in the world.
3. We have the leading technology in the world both in hardware and software.
4. We have the leading medical technology in the world.
5. We have the leading political system in the world.
6. We have 25 times more Nobel Prize winners than any other country.
7. We create more jobs than Japan and Europe together.
8. We have 11,000 companies in the U.S. that trade under good accounting rules.
9. You as an American have the freedom to accumulate wealth and extract out of life what it is you want.
The stock market is a funny place. It is the only business in the world where when things are on sale, people don't want to buy. The greatest single enemy of long term investment success is not ignorance, it is fear. Fear leads to panic and panic breeds the inability to distinguish between temporary declines and permanent losses. When investors panic they don't discriminate. Investors are more predicable when they're scared and it makes it easier for those of us who take advantage of that indiscriminate selling.
All stock market declines have been temporary in my lifetime, and all advances have been permanent. The key to investment success is not found in intellectual babble such as standard deviations, quantitative analysis or chaos theory. Successful investing in the stock market is about time in the market. The single greatest thing you can have going for you is time because no on can successfully forecast interest rates over the long term and no one can forecast market gyrations. Long term the market always goes up.
Why do so many people lose in the stock market? I don't mean to be critical, a tenant I try to live with is don't criticize until you have walked a mile in someone?s moccasins. Investors lose because they don't make good trading decisions, they fail because they don't understand the market, they don't control their risk, they don't understand themselves, they don't use the right tools, they get advice from brokers whose motivation is to generate commissions and they fail because they sell-out at the bottom of temporary market declines. Is it any wonder that the average American spends more time planning their vacation than they do planning for their retirement?
Another reason that investors are losing the investing game is because they have bought into what I call the Sesame Street School of selecting mutual funds. Journalists and many in the brokerage community tout the mantra of counting the number of stars in ranking mutual funds, thinking, you will enjoy superior investment results with owning so many stars next to the name of your mutual fund.
You see, unaided, most people invest through a rear-view mirror. They buy mutual funds after they've gone up substantially. Brokers sell investors the hottest fund, in the hottest sector, the one that has the most stars next to its listing in Money magazine. Then what happens? You know the drill. They turn cold. In fairly short order, a perfectly normal market correction comes along and the cycle comes to an end. Investing like that is like enlisting in the Taliban on September 11, 2001. On that day you are joining the proudest fighting force in the world. Yes, your outfit just pulled off one of the greatest disasters of all time. But you know what? You are toast. Your obituary is written. When you invest like that, the chances of selling out at the very bottom of the cycle, being influenced by negative journalism is very high.
I want to make one point very clear. Pay attention. At the end of an investor?s life, less than 5% of total lifetime return will come from what the investments did versus other investments. The other 95% will come from how the investor behaved. I have a firm belief that there is no relationship between investment performance and investor performance.
Stock market success is a function of two things: first, recognition that the markets will go down and sometimes go down a lot and two: preparation to regard those declines as either non-events or buying opportunities, and never as an occasion to sell in a panic.
With all certainty, the most boring and mediocre stock fund in your portfolio, the one that you hold onto during a vicious and severe bear market is infinitely better than that world-class stock fund that you sell out of at the bottom of a temporary decline.
Now, if your serious retirement portfolio is making you feel uneasy and you feel it needs professional, unbiased attention, let's talk for a moment on what you might do.
The first thing you should do would be to shut off CNBC. I hope someday CNBC will be required by law to flash on the TV screen a graphic that says ?Nothing that happens in the market in the next 30 days will matter in 10 or 15 years?.
You also might want to stop reading the financial press. Yes, I read three papers every morning before the average guy gets out of bed, but journalism always gets it wrong. It has a relentless bias to the negative. I call it financial pornography. Reporters never report my reasons the stock market is headed up in our lifetime and it isn't the job of journalists to make people great investors. It's their job to make people come back for more journalism.
The simple lesson to remember is that markets are not logical or reasonable; they are emotional and unstable. Markets are crowds of people. As we know from attending sporting events or concerts, the normal rules of behavior do not apply when we are in large groups. If we try to predict what a crowd will do based on logical behavior of a single person in isolation we will most likely be mislead.
And so it goes with the stock market. Today the black boxes at a handful of firms scan the exchange order books every millisecond and automatically execute algorithmic trades, ripping any conceivable advantage away from the public. They are the casino, with structurally embedded multi-billion annual profits ? leaving everyone else on the other side of the zero-sum game. We think that sitting and doing cold and hard calculations on valuation levels and the reasonableness of gains is as futile as predicting what a teenager might do at a rock concert. The market is not an exercise in calculus. It is primarily an experiment in crowd psychology.
Stocks are on sale, we are in a recession and stocks are starting to come down to more attractive buying levels. Stay the course, stay smart and keep contributing to your 401-k
Dean Parisian
Chippewa Partners
http://chippewapartners.blogspot.com
William J. O?Neil
"The most successful men in the end are those whose success is the result of steady accretion. It is the man, who carefully advances step by step, with his mind becoming wider and wider -- and progressively better able to grasp any theme or situation -- persevering in what he knows to be practical, and concentrating his thought upon it, who is bound to succeed in the greatest degree."
Alexander Graham Bell
?Attitude, to me, is more important than facts. It is more important than the past, the education, the money, than circumstances, than failure, than successes, than what other people think or say or do. It is more important than appearance, giftedness or skill. ... The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change our past. We cannot change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude. I am convinced that life is 10% what happens to me and 90% how I react to it. And it is with you. We are in charge of our attitudes."
Charles Swindoll
The stock market is a facility for the exchange of shares. Just like markets for cell phones, oil or fur, it is driven by supply and demand. Never forget that stock prices are set ?at-the-margin?, that is, by the selling pressure or buying interest at an electronic or physical location. Share prices are not set by any kind of fundamental valuation formula or by the talking heads on CNBC. Friends of our firm who work on the floor of the New York Stock Exchange understand fear and greed better than most investors but they can't tell the difference between preferred stock and livestock. Their only concern is commission flow.
As an economist by training, I understand that contrary to what I was taught, supply and demand in the stock market is seldom in equilibrium. Price and value are separate and the market is not always efficient but it is very effective.
Securities markets are fundamental to the capital formation process in a free economy. They enable businesses to raise capital by offering shares to investors. Companies then use that capital to invest in technology, new equipment and employees that will produce goods and services to create more jobs in our communities.
Today, capitalism is the organizing principle for most of the human activity on the globe, for no one can stop capitalism. I feel the 21st century started in 1989 when the Berlin Wall came down. The opportunities for success are greater now than ever before and for the first time in the history of the world all the people who are poor, know that they are poor.
The stock market doesn't care who you are, what color your skin is, where you went to school and it doesn't care where you came from. Here are some reasons why the stock market will continue to go up much like it has during your lifetime.
1. The United States has the greatest number of entrepreneurial managed companies.
2. We have the leading military in the world.
3. We have the leading technology in the world both in hardware and software.
4. We have the leading medical technology in the world.
5. We have the leading political system in the world.
6. We have 25 times more Nobel Prize winners than any other country.
7. We create more jobs than Japan and Europe together.
8. We have 11,000 companies in the U.S. that trade under good accounting rules.
9. You as an American have the freedom to accumulate wealth and extract out of life what it is you want.
The stock market is a funny place. It is the only business in the world where when things are on sale, people don't want to buy. The greatest single enemy of long term investment success is not ignorance, it is fear. Fear leads to panic and panic breeds the inability to distinguish between temporary declines and permanent losses. When investors panic they don't discriminate. Investors are more predicable when they're scared and it makes it easier for those of us who take advantage of that indiscriminate selling.
All stock market declines have been temporary in my lifetime, and all advances have been permanent. The key to investment success is not found in intellectual babble such as standard deviations, quantitative analysis or chaos theory. Successful investing in the stock market is about time in the market. The single greatest thing you can have going for you is time because no on can successfully forecast interest rates over the long term and no one can forecast market gyrations. Long term the market always goes up.
Why do so many people lose in the stock market? I don't mean to be critical, a tenant I try to live with is don't criticize until you have walked a mile in someone?s moccasins. Investors lose because they don't make good trading decisions, they fail because they don't understand the market, they don't control their risk, they don't understand themselves, they don't use the right tools, they get advice from brokers whose motivation is to generate commissions and they fail because they sell-out at the bottom of temporary market declines. Is it any wonder that the average American spends more time planning their vacation than they do planning for their retirement?
Another reason that investors are losing the investing game is because they have bought into what I call the Sesame Street School of selecting mutual funds. Journalists and many in the brokerage community tout the mantra of counting the number of stars in ranking mutual funds, thinking, you will enjoy superior investment results with owning so many stars next to the name of your mutual fund.
You see, unaided, most people invest through a rear-view mirror. They buy mutual funds after they've gone up substantially. Brokers sell investors the hottest fund, in the hottest sector, the one that has the most stars next to its listing in Money magazine. Then what happens? You know the drill. They turn cold. In fairly short order, a perfectly normal market correction comes along and the cycle comes to an end. Investing like that is like enlisting in the Taliban on September 11, 2001. On that day you are joining the proudest fighting force in the world. Yes, your outfit just pulled off one of the greatest disasters of all time. But you know what? You are toast. Your obituary is written. When you invest like that, the chances of selling out at the very bottom of the cycle, being influenced by negative journalism is very high.
I want to make one point very clear. Pay attention. At the end of an investor?s life, less than 5% of total lifetime return will come from what the investments did versus other investments. The other 95% will come from how the investor behaved. I have a firm belief that there is no relationship between investment performance and investor performance.
Stock market success is a function of two things: first, recognition that the markets will go down and sometimes go down a lot and two: preparation to regard those declines as either non-events or buying opportunities, and never as an occasion to sell in a panic.
With all certainty, the most boring and mediocre stock fund in your portfolio, the one that you hold onto during a vicious and severe bear market is infinitely better than that world-class stock fund that you sell out of at the bottom of a temporary decline.
Now, if your serious retirement portfolio is making you feel uneasy and you feel it needs professional, unbiased attention, let's talk for a moment on what you might do.
The first thing you should do would be to shut off CNBC. I hope someday CNBC will be required by law to flash on the TV screen a graphic that says ?Nothing that happens in the market in the next 30 days will matter in 10 or 15 years?.
You also might want to stop reading the financial press. Yes, I read three papers every morning before the average guy gets out of bed, but journalism always gets it wrong. It has a relentless bias to the negative. I call it financial pornography. Reporters never report my reasons the stock market is headed up in our lifetime and it isn't the job of journalists to make people great investors. It's their job to make people come back for more journalism.
The simple lesson to remember is that markets are not logical or reasonable; they are emotional and unstable. Markets are crowds of people. As we know from attending sporting events or concerts, the normal rules of behavior do not apply when we are in large groups. If we try to predict what a crowd will do based on logical behavior of a single person in isolation we will most likely be mislead.
And so it goes with the stock market. Today the black boxes at a handful of firms scan the exchange order books every millisecond and automatically execute algorithmic trades, ripping any conceivable advantage away from the public. They are the casino, with structurally embedded multi-billion annual profits ? leaving everyone else on the other side of the zero-sum game. We think that sitting and doing cold and hard calculations on valuation levels and the reasonableness of gains is as futile as predicting what a teenager might do at a rock concert. The market is not an exercise in calculus. It is primarily an experiment in crowd psychology.
Stocks are on sale, we are in a recession and stocks are starting to come down to more attractive buying levels. Stay the course, stay smart and keep contributing to your 401-k
Dean Parisian
Chippewa Partners
http://chippewapartners.blogspot.com
