newsletter
Market Pattern
August 2009
It would appear this market is
following a familiar, logical and predictable pattern.
“Bull markets are born on pessimism, grow on
skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the
best time to buy, and the time of maximum optimism is the best time to
sell.” - Sir John
Templeton (February 1994)
If the current market continues, it would appear that we reached euphoria in the third or fourth quarter of 2007, saw maximum pessimism in early March of this year and the market is now growing on skepticism.
We don’t know of anyone or
any plan that can accurately predict when the maximum pessimism or the maximum
optimism is occurring.
- Sir John (August 1951)
“No method has ever been devised which
will predict the trend of the stock market with consistent success.”
Emotions all too often get the
better of us at the worst possible times and we react against the logic that we
have been taught. Our emotions and
the news media tell us to take money away from the manager you have confidence
in at the very time that they are finding great values forcing them to sell
rather than buy and then turn around and add money at the very time when the
managers are finding great values to be scarce. Unfortunately Wall Street and the big
banks could care less because they make money on trading volume and packaging
and selling their derivatives and the media gets ratings on bad news.
To quote Sir John again:
“To buy when others are despondently
selling and to sell when others are avidly buying requires the greatest
fortitude and pays the greatest ultimate rewards.” (August
1958)
So we keep reminding our clients
to stick with managers that buy quality companies at bargain prices and to stay
globally diversified. We also
encourage clients to stay focused on their long-term goals and not short-term
events. Not getting caught up in
the herd mentality is one of the most effective strategies an investor can
have. One’s desire to achieve
a quality retirement or send their kids to college doesn’t change just
because the “market” is up or down. Therefore, a portfolio allocation shouldn’t
change with the stock market’s volatility, nor should the decision of whether
or not to add to investments be based how the market
did yesterday. We know that’s
much easier said than done, but that strategy has served us well for many many years.
We know you’ve heard these
themes from us before and you’ll most certainly hear them again in the
future. If you have any questions
or think it is time for a review please give us a call.
P.S. As noted in a previous newsletter, we
recommend reviewing your estate plan and insurance coverages
at least every five years. If you are
due for a review, be sure to give us a call. We can assist your attorney and/or CPA in
the estate planning process. We can
provide independent trustees and as independent agents we can review and assist
with any of your life, health, disability, and long term care insurance coverages.
Securities
through KMS Financial Services Inc.
520.884.7550
jpw@financial-architects.com brienne@financial-architects.com
3971 E. Paradise Falls,