It’s that time of year. The time of year we kick back and enjoy turkey, football and family. It is my favorite holiday and we all have a lot to be thankful for.
So, this week I am taking a look at things I am thankful for, which are market related. Here are five things I am thankful for (and they are in no particular order).
A Stock Market correction:
Back in mid-September through mid-October, fear within the stock market escalated. Headlines continued to be printed that showed markets falling. Looking back, they fell nearly 10% during that period. It was scary!
So why am I thankful for that? Because of two things: first off, it creates opportunity for people who have built up cash and are now able to invest. It’s not good to time the market but increasing the amount you invest during corrections tends to be a good idea.
Secondly, it creates a sense of normalcy. Nothing goes up forever and nothing goes down forever. The markets have been on a tear, a correction provides us that sense of normalcy.
Does this mean I am thankful for negative returns with stocks? Hell no! But given a diverse portfolio, a correction should be less impactful. And it should allow us to weather the storm and bounce back quickly.
I always choose a rising market versus a falling one. And I always average into new investments within a rising market. I just am thankful for this small correction this year (it could have been worse) that provided a good opportunity to enter some stocks.
Despite many of the doubters out there, this company continues to impress. Or at least impress me.
And it isn’t just the fact that the stock is up more than 2,378% over the past 10 years. It’s the fact that they have revolutionized the space. They changed the way we listen to music with the iPod. They took a dying idea, tablets, and made it rise from the ashes with the iPad. Oh, and they changed the way we use phones.
They are now moving into the wearable technology space with the release of an iWatch. They don’t change industries, they change the way that people live their lives.
I don’t know what I would do without my iPhone. And looking around me right now, I have a MacBook in front of me, with an iPad to my right and an iPhone to my left. Why do I use their products? They are intuitive and perform to the highest level. Have you ever wondered why Apple products don’t come with an instruction manual? It’s because they don’t need one. That’s how intuitively they have been designed. When you need to figure something out on an Apple product, go to where you think the answer/function would be and boom! It is there!
The doubters came in hoards when Steve Jobs died and many still question the future of the company. But even still, when they launch a product, people watch. And when they release a product, people still wait in line. This company has built a brand of creative genius, elegant design and ease of use. Because of that, they have made things simpler to access. And for that, I am thankful.
The talking heads:
What I am referring to here are all those people you see talking on CNBC, Fox Business or any of the other financial stations. This may be an odd thing for me to be thankful for, but let me explain.
The main reason I am thankful for these people is because they provide me great insights into what not to do—given their poor track record at predicting. Along with their strong desire to continue making incorrect predictions, these talking heads’ predictions provide me a sense of what the herd—the majority of investors—are thinking.
For me, I like to go against the herd, because they tend to be wrong. Warren Buffett puts it best. He says that when there is blood on the street it is time to buy. What that means is that when everyone is selling (or in my mind, freaking out) that is the time to buy. On the other side of the coin, when everyone becomes greedy, it is likely time to sell.
A story I heard in the past makes me think of the talking heads. It was a story of Mr. JP Morgan… you know that big firm. He was in the elevator to his office and they had an elevator operator at that time. The elevator operator thought it was appropriate to give Mr. Morgan a stock tip. Being very kind, Mr. Morgan asked to stop at a different floor than his office. It was the trading floor. As the story goes, he walked on the trading floor and told everyone there to sell the particular stock he was just recommended by the elevator operator.
Moral of the story: by the time the elevator operator is giving stock advice, the investment has likely run its course. The talking heads are my elevator operators. And for that, I am very thankful.
This is something that we have been talking about a lot over the past year. The idea that the U.S. is finally becoming independent when it comes to the energy resources that we need.
We used to be a huge importer of petroleum and now we have greatly reduced that dependence and are even looking to be a net exporter.
This has multiple benefits. One of the biggest ones is that we don’t have to be tied to the instability that is found in the Middle East. With our needs for energy being tied to the instability over there, we were constantly unsure of how their actions would impact our way of life. That is now less of a reliance.
This isn’t to say that we aren’t still impacted by their instability, but we are less impacted at least in the form of getting the energy resources we need.
And finally it creates a lower cost of gas here in the U.S. This allows for us to see our fixed expenses fall, thus freeing up monies for savings or other discretionary desires. And with regards to investments, the increased push on energy independence has led to a need for greater energy infrastructure. This provides more investment opportunities for people who are looking for such exposure.
And for this I am thankful.
The 10-Year Treasury:
This may be an odd one for some to read. Because the dang thing yields less than 3% and has for the greater part of the year.
But most importantly, this investment has done exactly what we, as investors, have asked of it. When there is global turmoil, yields have fallen. When there has been domestic equity pressures, yields have fallen.
What this shows is that Treasuries are again working as they should. The Treasury should be a safety outlet in times of volatility. And this year, we have seen that be the case. That means markets are working… and working efficiently.
Also, who doesn’t love an underdog? Everyone was writing off Treasuries this year and yet again they proved all those experts wrong.
And finally, the Fed exiting the bond buying arena was supposed to spell the end to the Treasury markets. But what we have seen is more normalcy within the space. The Fed’s exit wrapped up during a stock market correction and despite the billions of dollars coming out of the bond buying space, yields fell. They fell because people were looking for safety. And they continued to find it with the Treasury despite all the pessimism with regards to the outlook of the Treasury.
And because of the ability of the 10-year to provide safety in times of turmoil and prove experts wrong, I am thankful.