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Friday, August 17, 2012

Is This a Good Time to Invest?

Is this a good time to invest?  Market timers and stock pickers, both pros and individuals, debate this question all the time.  The evidence is that they tend to miss it.  Many times we focus on longer term evidence, but the longer term is made up of the shorter run.

Last year was a great case in point.  In October, it looked like the world was coming to an end.  The U.S. Congress was at an impasse and seemed incapable of increasing the debt limit ceiling.  Europe was falling apart, and it appeared obvious that Greece was on the verge of leaving the European Union with Spain close behind and possibly even Italy down the road.  Abandonment of the euro and its attendant uncertainty was the buzz of the day.  Topping off all of this was economic data suggesting the U.S. may be going back into recession.

With this backdrop, any brilliant, analytical portfolio manager would sell; and, from performance results, it appears they did.  Unfortunately (for them!) the market rose sharply through year end.  As a result, huge state pension funds produced anemic returns and hedge funds got clobbered.  Once again, the brilliant, analytical types were not smarter than the market.

Take A Longer View

There is a different approach.  Rather than trying to outguess the market on a short-term basis, take a longer view.  This approach recognizes that the world 10 -15 years from now will be wildly different from today.  How do we know this?  Just compare today with 15 years ago.  Look at smart phones and tablets.  Tablets of today are the Pong games of yesterday.  Look at automobiles and advances in medicine.

Does anyone doubt that the automobiles we drive 15 years from now will be completely different from today's.  The laptops and other electronic devices will all be replaced with products beyond our imagination.  I know this is hard to grasp for many.  Maybe it requires a certain age.  Fifteen years from now, people will be saying "Merkel who?" as they project the TV program they recorded three hours ago onto the wall from their smart phone.

I am of a vintage whereby graduate school involved going to the "stacks," getting journals, and xeroxing articles that were months old.  Today, students with a laptop have access to the latest research in many areas and the ability, in many cases, to interact with the researchers.

Anyway, to help along these lines, I submit the following video found at Biz of Life's site.  As you watch this video, I suggest you free your imagination and think of the possibilities in the so-called "information age."

1 comment:

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