Home About Archives RSS Feed

@theMarket: Two Steps Forward, One Step Back

By Bill Schmick
iBerkshires Columnist

This week, for the first time all year the S&P 500 Index has sustained more than a 1 percent pullback. It needs to correct somewhat more, and despite the short term pain, this sell-off is a good thing.

Have you ever asked yourself why a tea kettle has a spout? It allows steam to escape so that the water within does not boil over. That's what periodic sell-offs accomplish in the stock market. Daily new highs, weeks of successive gains, chasing stocks — all of those indicators were out there. As I have written over the last month, it was just a matter of time before market discipline exerted itself. I'm hoping the decline will continue for a few more days and purge some of the excess exuberance out of the markets. So why not sell now and try to catch the bottom later?

If you can do that successfully, you're a better man than I, Gunga Din. But in the past, readers may recall, I have done just that. I have successfully told readers when to sell and when to buy back in 2007, 2008, 2010, 2011 and 2012, so why not now? The difference this time is the extent of the decline I am looking for.

In the past, each of my sell recommendations encompassed a correction in stocks of at least 10 percent. This time I don't see that. We may experience a decline that approaches the 10 percent level but, in my opinion, a decline of that magnitude is not warranted.

You see, unlike the last few years, I don't see the kind of market risk that precipitated big declines. The EU, Greece, Washington, U.S. debt downgrades, as well as fiscal and monetary uncertainty has been replaced with what — Cypress? Bumpy unemployment numbers? North Korea sabre rattling?

None of the above has the power to crater this market. The present concern over the last few weeks' jobs numbers should be put in context. Remember that a lot of construction jobs were created by Super Storm Sandy, however, those repairs are winding down. At the same time we are starting to feel some of the ill-advised (in my opinion) sequester cuts starting to show up in the data.

Clearly those cuts will do little good for the economy but they won't sink it. As long as the Fed keeps pumping dollars ad infinitum into this economy we are all sitting pretty. On the plus side, the recent decision by the Japanese monetary authorities to follow our central bank's lead and stimulate their economy to the tune of 7.5 trillion yen is truly unprecedented.

I was talking to a 30-year veteran of Japanese investing, Michael Longthorne, a managing director of Mizuho Securities, who described the move as "strapping a rocket onto a go cart." We concluded that after over 20 years of economic stagnation, there is the potential that the world's third largest economy (after the U.S. and China) could become a real factor once again in global economic growth in the years to come.

Bottom line, markets will use just about anything as an excuse when a pullback is overdue. My advice is to ignore the jibber jabber, ignore your short-term paper losses and look forward to a good year of double digit gains in your investment accounts.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

News Headlines
White Scores 16 to Lead Team to Adams PAL Playoff Win
Williamstown Zoning Board OKs Police Station Plan
Adams Selectmen See Preliminary Budget for Fiscal 2019
Lanesborough Elementary Class Size Leads to Broader Funding Discussion
Williams' Softball Team Rallies to Top Chicago in Extra Innings
Pittsfield's Lakeway Drive Bridge Set for 2020 Replacement
Northern Berkshire Youth Baseball Assigns New Players to Teams
VA Hosting Agent Orange Town Hall in Pittsfield
Gabriel Abbott Announces Second Trimester Honor Roll
North Adams Awarded State Grant for Eagle St. Business Development

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.




@theMarket (251)
Independent Investor (343)
March 2018 (2)
March 2017 (2)
February 2018 (7)
January 2018 (7)
December 2017 (8)
November 2017 (5)
October 2017 (5)
September 2017 (5)
July 2017 (2)
June 2017 (8)
May 2017 (7)
April 2017 (7)
Selloff Europe Euro Election Retirement Stimulus Crisis Debt Jobs Debt Ceiling Markets Metals Energy Currency Federal Reserve Fiscal Cliff Bailout Pullback Stocks Interest Rates Greece Deficit Stock Market Europe Wall Street Congress Rally Commodities Oil Housing Recession Banks Economy Japan Taxes
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
@themarket: Trump's Tariff Talk Trashes Global Markets
The Independent Investor: The Economy and What Could Go Right
@theMarket: Interest Rates and Stock Market
The Independent Investor: Is America Back in the Space Business?
@theMarket: Markets Have Best Week in Five Years
The Independent Investor: Time to Hedge Your Bets?
The Independent Investor: How to Handle a Pullback
@theMarket: Higher Wages Clobber Markets
The Independent Investor: Health Care and the 3 Musketeers
@theMarket: Bulls Barrel Through Another Week