Earlier this week, a reader asked me as to whether anyone could have predicted our current morass. I replied to him today -- admittedly later than I would have liked to respond -- but I thought the response was decent enough to warrant the attention of the regular readers of the blog, rather than be relegated to the comments section and get buried by future blog entries.
I think the concept I write about is extremely important -- thinking. Now, people might view it unfavorable that I label the term thinking -- in that if they have not followed the action I write about, I am saying there is some unfavorable quality about them that they don't particularly enjoy being pointed out. Nothing could be further from my intention.
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No economist can really predict these type things, but a good economists with a knowledge of markets and capital structure could have predicted that an economic contraction would have a large impact on equities.
Things don't change just because they seem to have changed. Housing issues surfaced long before the market tanked. People just were not looking for it. People need to critically think -- think -- about developments and their impacts going forward, and take the time to look around. The days when someone could just buy dips and comfort themselves with trite phrases such as "stocks are on sale" weren't doing this -- they weren't thinking. They were just adhering to the norm. After all, those sayings must be true, because so many people said it -- smart people, wise people, educated people, well-compensated people. But the adages of the masses is no substitute for thinking.
The economy leads the market, contrary to how things seem right now. The economy will continue to slow as a natural consequence of credit destruction -- but this too shall pass. We will be stronger because of it -- perhaps as a society we have too few Charlie Buckets and too many Veruca Salts. But the only thing we have to notice right now is that there is a bias toward decreasing values for equities due to the economic contraction. There is nothing we can do can change it so -- especially when the paternal TSP system provides only limited "index choices" -- we must just get out of the way. We have to look for the opportunity for the economics to improve before the markets -- but take notice of the economics without an observational bias toward that improvement, as "jumping the gun" can prove very costly.
I think the concept I write about is extremely important -- thinking. Now, people might view it unfavorable that I label the term thinking -- in that if they have not followed the action I write about, I am saying there is some unfavorable quality about them that they don't particularly enjoy being pointed out. Nothing could be further from my intention.
---------
No economist can really predict these type things, but a good economists with a knowledge of markets and capital structure could have predicted that an economic contraction would have a large impact on equities.
Things don't change just because they seem to have changed. Housing issues surfaced long before the market tanked. People just were not looking for it. People need to critically think -- think -- about developments and their impacts going forward, and take the time to look around. The days when someone could just buy dips and comfort themselves with trite phrases such as "stocks are on sale" weren't doing this -- they weren't thinking. They were just adhering to the norm. After all, those sayings must be true, because so many people said it -- smart people, wise people, educated people, well-compensated people. But the adages of the masses is no substitute for thinking.
The economy leads the market, contrary to how things seem right now. The economy will continue to slow as a natural consequence of credit destruction -- but this too shall pass. We will be stronger because of it -- perhaps as a society we have too few Charlie Buckets and too many Veruca Salts. But the only thing we have to notice right now is that there is a bias toward decreasing values for equities due to the economic contraction. There is nothing we can do can change it so -- especially when the paternal TSP system provides only limited "index choices" -- we must just get out of the way. We have to look for the opportunity for the economics to improve before the markets -- but take notice of the economics without an observational bias toward that improvement, as "jumping the gun" can prove very costly.
