Magic Numbers?

What happened to the “news” story that was Dow 13,000?  Over the last few weeks as US stock markets rose and the Dow Jones Industrial Average flirted with 13,000 stories filled the financial media.  Their content was a typically breathless “will it or won’t it” close above that magical mark. Experts opined on the “psychological importance” of this and other market measures.

And then what? US financial markets have been up for 7 straight trading days, the Dow is solidly over 13,000 (13,200 as I write this) and it’s not a topic anymore. Why not? My view: it was never a legitimate topic in the first place.

I started in the investment business when the Dow was at 1,000 and can remember when some people predicted that the Dow would reach 5,000, or 7,000, or even 10,000 – some day.  I also remember the “experts” who denounced those predictions as crazy, impossible fantasies.  Marks don’t move based on the level of some arbitrary index. Markets move, in the long run, based on dollars and cents: sales, earnings, dividends. The rest is noise. I’m bullish on the US economy, and I’m bullish on our stock market. Ignore the noise; enjoy the ride.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

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• Did I Miss Something? (brightonsecurities.wordpress.com)

Did I Miss Something?

Apparently I did. Last week, while I was going about the business of business – analyzing & advising, mainly – the Dow Jones Industrial Average closed over 13,000 for the first time since before the financial crisis gripped the global economy back in early 2008. I was informed of the Dow crossing this “psychologically important level” by a radio broadcast in the evening.  That made me think: I’m up to my neck in the stock markets every day, have been for nearly 30 years, and hadn’t even noticed. 

Even when I finally did notice, my reaction was simply, “Great.” Since starting in the investment business when the Dow was around 1,000 I have seen many milestones reached.  In some cases, they’ve been reached again and again as the Dow would flirt with a level, over and back a few times before breaching it and moving to higher ground, in some cases permanently. But the fact that I didn’t know we were at Dow 13,000 isn’t the story. The fact is that the market doesn’t know what 13,000 means. Neither do individual stocks. It’s only a “psychologically important level” for people who consider it so, and those people are in the minority worldwide.

Long-term investors needn’t concern themselves with the level of an index like the Dow Jones Industrial or the S&P 500. Of genuine importance are the financial strength of your investments, prospects for growth, and let’s not forget: cash flow. Interest and dividends are tangible, meaningful results that come from investing your capital. An index is a good way to gauge the level of the broad market, but it’s easy to miss a market move. Cash flow is good way to enjoy life, and it’s hard to miss.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Blink and You’d Miss It

Exactly three weeks ago, Friday March 11^th, a magnitude 9 earthquake struck off the coast of Japan.  News and photos of the devastation have been extensive.  Since then the world has watched with concern as the Fukushima Dai-ichi nuclear plant has leaked steam and radiation.  Reaction in the financial markets was, at first, close to panic.  The Dow Jones Industrial Average closed at 12,044 on March 11^th, but when US markets reopened on Monday the selloff  began, culminating in a nearly 500-point slide over three days.

But panic is typically a result of hasty actions based on partial knowledge and little or no thought. That’s why on that Monday morning I counseled patience, not a flight to cash.  Today as I write this the Dow stands at 12,243, fully recovered from the knee-jerk selloff.  The “why” is straightforward: the economy keeps getting better, and the Japanese situation, difficult as it is, is just an event.  For long-term investors, events are best missed.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Really?

In mid-February the Dow Jones Industrial Average was just shy of 12,400.  As I write this the Dow stands at 11,700, a 5% selloff.  What merits the decline?  Typical economic concerns, profit taking after a 10-week rise of 12%, and of course the situation in Japan are all weighing on stock prices.

But will all the media noise affect earnings or dividends at First Niagara Financial, a mid-sized bank in Upstate New York?  How about Pepsi: other than people on Japan’s affected coast unable to get to a vending machine, do you think that soft drink consumption will be greatly altered by current events? AT&T?  Have high school students paused their texting frenzy?  Verizon?  Will their subscribers stop pining for the iPhone? Really?

You get the idea. Good companies with good business remain a reasonable risk.  With people scared and prices down, these are the times when profits are possible if you keep your eye on the long term.

Really.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).