Wednesday, 9/25, Market WrapUp (Why DID The Markets Rally?)

Don't lose track of the thread. The complaint was that I said that the market was a good investment over the long term, which is absolutely true. The response was, "What about the last two years?" and my response is the same: What about the last 25? You can prove anything by STARTING a timeline where you choose. There is no rational reason to begin a market analysis from 2000, any more than there is to start it at the lowest point of the Great Depression.

I've been in longer. But I also sold some stocks in the mid-1990s when they were WAY up (America West Airlines, for ex., I bought in bankruptcy at $1 per share. It split, 3:1, then rose to about $18-20, when I sold. Zenith was at $1 per share. I bought, then sold in 3 weeks after it went to about $3. But there are many other stocks I've just held. Albertsons, GE, yes, Intel, some banks.)

On the other hand, you have a COMPLETELY solid company like Southwest Air, which I held in the 1990s---all the while it was winning awards as the best airline on the planet---and it did not go up at all or pay significant dividends. I finally sold it, after holding for about 5 years at the same price. But this is the thing: some VERY healthy companies NEVER pay dividends, because they plow everything back into the company (see: Carnegie).

The quote was actually from Keynes, proving that a broken clock is right occaisionally.

The story in the medium term, IMHO, will be debt. Our economic "boom" of the 90's was based on borrowing, hype, and shadowy accounting. Just like the boom 70 years previous.

When the american consumer decides to start paying off their debt, and not keep writing checks off of the HELoC, we will see in this country exactly what Japan has been going through for the last 13 years.

What is "the market" -- !Where are all those shares of General Atomic, all the shares of RCA, of Pennsylvania Railroad. All great shares to buy for some time, but nothing lasts forever!

There was a fad in the sixties "One Decision Stocks" -- buy them and never sell them. Ri-i-ght. No portfolio doesn't need to be tended and weeded. And you can't buy a basket that's immune either. Baskets do bust too -- a fund that's doing well for ten years might drop like lead in one more.

Being in for the long term doesn't mean always being fully invested or high-percentage invested in stocks, nor even holding beaten down stocks without a reason more than "well I bought it for the long term." Actaully I think that avoiding the hassle of selling and what goes with it, is a good and honest reason to hold -- far more honest than the "Well I bought in for the long term." That honest reason allows a alarm to be heard at some point at least, and the desire to rescue remaining value supasses the desire to avoid hassle. Harder to surmount the pyschological barrier that the motto "in it for the long term" throws up.

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