| Have you been tricked or treated in the stock market
this year? by Mark Neil
Every year in our neighborhood we have 30-50 little goblins, ghouls and assorted other characters ringing our doorbell in search of handouts. There is always the deep voiced teenage boy making the rounds and I guess you can’t fault them for their efforts, as long as they are not running over the little ones in the process. The only tricks we seem to experience are the loss of our pumpkins off the front porch. Inevitably they end up smashed in the street and I get to toss the bigger chunks into the yard debris in time for our weekly pickup.
Halloween is the official day of trick or treat, but I find plenty of both to suit me in the stock markets on a daily basis. In the last few years it seems to me there have been more tricks than treats. Many of the tricks experienced in the stock market were self-inflicted by public investors who were looking for the big payoff, when they should have been more cautious. As a youngster out trick or treating I remember the older kids suckering
us into believing that the biggest candy bars were at the dark lonely house
at the end of town. Even though we usually had bags full of goodies,
we were still looking for the big hit and couldn't’t resist the temptation.
Our
In the end we found that there were no big candy bars at that house at the edge of town. In fact the house was empty and we had just wasted a bunch of time pursuing a non- existent reward. In the meantime the older kids were making a killing in the area of town where we should have been because we weren't’t there getting in their way. Today we investors are in a similar position. We are standing on the street corner and the “older kids” are telling us the big returns are just up the road. They tell us we have gone through 3 lean years and we are due for some big gains. For evidence they point to the cheap money that is awash in the economy and the inevitable expansion that will be taking place in the near term. Profits are improving and soon companies will be hiring workers back and putting them on the production line. An early indicator of an improving market is the activity in the temporary worker sector. Employment and temporary staffing agencies are seeing a rise in the number of companies looking for temporary production workers. In past recoveries that has been a promising early indicator of renewed economic growth. It stands to reason that if you are a manufacturer you will hire workers to produce and package the widgets when you see your order file starting to fill up. Instead of taking on permanent workers that are more expensive to hire, you take the cautious route. Hire them on a temporary basis and then put them on permanently if the rally proceeds. As an investor I am inclined to take the same cautious approach with my portfolio. I am holding a pretty nice sized bag of “goodies” right now and am feeling pretty good. Sure the investment bag isn’t as full as it was a few years ago, but it is a heck of a lot fuller than it was last year at this time. In the last several months I have been adding to it by “visiting” all of the investment neighborhoods. I picked up some nice gains in the small cap growth area over the last 5-6 months and while you have to be pretty quick on your feet in that area it can be very rewarding. I don’t spend a lot of time in those neighborhoods but I do like to visit from time to time. The big neighborhoods of large cap growth and value have been hot and cold, but I have been careful to make sure I visit each of them on a regular basis. Again they haven’t been as good to me as they have in the past, but I will take small consistent gains with an occasional big “Snickers bar” any time I can. Besides, I like the comfort of their big wide streets and clean sidewalks. I don’t usually have to worry about any big potholes or fast traffic when I am working those neighborhoods. I even spent some time in the retirement communities of bonds and dividend paying stocks. While the bonds were paying next to nothing for interest, I still managed to squeeze out a few small gains in there. They don’t pay a lot, but they don’t ask much from you in return. You can also feel reasonably sure that some big bully isn’t going to knock you down and take half of your candy from you. You can be pretty safe in the bond neighborhood. As this game of investing “trick or treat” wears on I know that I will be in it, because like Halloween it is a pretty good deal. I like the idea of filling up my bag of goodies every year and as long as I don’t listen too much to those “experts” who urge me to go for the big bars, I think I will do just fine. Some years I may end up with a bag of lifesavers and jujubes, and other years I may find more Almond Joys. In the end though I know my portfolio will be Good and Plenty! Contact Mark Neil at:
© 2003 Mark Neil Graphic links to its source, which is about Halloween pumpkins |
