Market Bottoms
It is frustrating to hear talk of market bottoms. Today that was the topic du jour, as in, “Are we at a market bottom in terms of the September drop?” and “Is it safe to start buying yet? The answer is: In the long run it does not matter. It is great to get a stock on sale, and you should always try to buy stocks you like when the market is down. Just be sensible and don’t buy a full position all at once. Buy a little and see how things go, buy more if it falls more, and then a little more if it falls even more. The market may not be at a bottom, it may go down more, but it is now down enough to be an attractive entry point. Take advantage of it.
In the long run, just be in the market and stay there. If you sell in a down turn, you will never get a perfect signal that you have reached the bottom. Chances are good, you could misread the cues and hesitate getting back in so long that you miss the swing back up (like we have started to have). You will be worse off. Trying to time the market is a fool’s game. The market goes up over time, a nice neat line from left to right trending upward at a rate of 8-10% per year. But if you zoom in on that line you will see that it swings up and down, sometimes a lot, while it is getting there. Statistically, if you miss the upswings from down turns (say the top ten up days of the year) you will gut your overall performance.
We have had a 5-15% pull back in a lot of good stocks. A 15% drop in a solid stock with a sound balance sheet, good earnings, a reasonable growth plan and, ideally, a nice dividend will always attract my interest. And my dollars, regardless of whether it will fall more. Independent of whether we are at a bottom. Sure, I would like to get in at a lower price. But 15% down is generally enough to get me started buying. The drop should be tweaking your interest too if you have cash you can put to work.
Market Today: Up day so mostly selling calls and closing a few puts. Tomorrow we have a jobs report so we could be anywhere - good numbers could spook the market (Fed worries), bad numbers could spook the market (economic slowdown?). No way to know. Given the interest in riskier stocks today, I began some tax loss harvesting in some weaker defensive stocks I own (they were down). I bought stocks that were roughly equivalent to stocks I have losses in (for example, I bought Verizon (VZ) to cover losses in AT&T (T)). If T is up tomorrow I will sell it and take the loss. Since T and VZ trade in tandem, if the telecoms go up, I will have VZ to cover the rise. Meanwhile I can harvest my loss in T. I waited to do this until today as it was the ex-dividend day for T, this way I know I will get my quarterly dividend. T is not my favorite stock for a number of reasons, but I own it for its dividend. It is a bond equivalent for me. Like Chevron (CVX), Kinder Morgan (KMI), and Medical Properties (MPW), etc. There are stocks I own to trade options, and others that quietly sit back and earn dividends. Best to have a mix.