It has been some time since my last post - the result of a busy work schedule and a bit of indifference thanks to the rising stock market.
I think most of us spend too much time on the minutiae - the daily economic reports, earnings results, interest rate spreads, etc. - and too little time on the big picture. Putting events into their proper context is an important component to successful investing.
It is interesting to note, therefore, that despite $3 gas, rising mortgage delinquencies, terror attacks, slowing economic growth, the market has made a significant advance with the Dow Jones Industrial Average crossing 14,000 for the first time in history!
Now, of course, we have started to experience some choppiness in the past several days including a couple of triple digit declines. And all of sudden, market participants have come to the conclusion that the sub-prime market woes will spread to the rest of the economy. Bill Gross, the famous bond manager from PIMCO, was on CNBC yesterday talking about a five to ten percent correction thanks to a widening spread between high quality and "junk" bonds. We'll he's right - spreads have widened but no more than back in 2005. Lending is not going to come to a halt, and the economy will continue to move ahead.
So put let's put the past few days in context. The market has done fine so far this year - indeed more than fine and a little correction is probably a good thing. The economy is growing, earnings are rising and interest rates have stabilized (at least for good credits!). So relax, don't listen to all the noise, and perhaps look for some bargains.
