April 18, 2009

Freedom!!!! Oh, and the market has been good...

Well, I cannot even begin to explain how happy I am that tax season is over. You work 43 out of 47 days, and the freedom to lay around for a day suddenly becomes precious. For those that I promised to get back to after tax season... I am working on your questions.

The Market

As for the market, have you noticed the rebound? Yes, the market has rallied quite substantially, and while there will be some bumps in the road, expect the long term to be positive.

I know I have been saying it for a while, but you really never know when the market has reached the bottom until months later. On March 10, 2000, the NASDAQ hit its all time high... On March 10, 2009, the market started its upward move from a possible bottom. Now, I am a student of history, and there are numerous coincidences in history, but maybe this is a prediction of things to come. Nine years to the day after the NASDAQ's high, the market starts to rally? It is such a coincidence, it is somewhat scary.

As for investing, I continue to preach diversification. All sectors and market caps have been moving and some more than others. Trying to predict anything right now is a bit of a shot in the dark. There is still just too much to factor in. Retail sales, credit markets, housing, unemployment, etc. It will all move at different points.

If you look at growth stocks, the positives are companies with generally very stable balance sheets, lots of cash, and no debt.

If you look at value stocks, the positives are stocks that have been beaten down that could have stabilized and be turning the corner.

Do you pick the stock that has gone from $50 to $11 or the stock that has gone from $50 to $30? Which has the right upward potential? Which will return the most in a year? Five years? Ten years?

I think it is tough to say how long some stocks will take to rebound, so I am trying to spread myself and think long term. Over the next 6 months, who knows where the market will trend, but the long term is positive as we move away from the current recession.

By the way, today is the 20th anniversary of CNBC. Over that time period, a ton of things have changed and billions have been made and lost. One thing I thought was interesting though was the best performing S&P 500 stock over that time period... Danaher (Ticker DHR). It is somewhat out of left field, but you never know which ones will be the winners over the long term.

I hope everyone is doing well, and I thank you for your patience during tax season. It is a joy to see what the sun looks like from outside my office again.

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