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Investment Analysis Clubs / The BMW Method
|Subject: Re: My view of the Current Market - Expensive!||Date: 8/26/2007 10:18 AM|
|Author: BuildMWell||Number: 26548 of 41614|
"But volatility can be our friend." - DanPoz
My friend, volatility is the name of the game. Volatility is what makes the BMW Method work so well. I have no desire to see volatility go away.
This post is about the market and what I am talking about here is market volatility. I want to see market volatility minimized because That is what spooks most investors.
I love volatility in individual stocks and that should naturally keep going forever. There will always be some catastrophe to report that will give us value choices. What I hate is a national catastrope that creates collapses. These hurt large numbers of investors and suck liquidity out of the markets. These create recessions and sometimes depressions. I will gladly give up those creators of volatility.
The smoother the S&P 500, NASDAQ and DOW market curves get, the more people will appreciate the "safety" of equity investing. Indezes will look good to the average guy.
Meanwhile, the underlying stocks can be just as volatile as ever. In other words, the game will be isolated to the speculators while the investor can buy and hold long-term with a level of confidence.
This can only exist with low interest rates, low inflation, high employment and a stable economy. Meanwhile, that stable economy will exist due to the first three. That is the job of the Federal Reserve and they seem to be doing a swell job the way I see all this. Mowever, I would like to see slightly lower rates. I think they over did the hikes two years ago and the Bond market is proving that to be so. There is no way that the overnight rate should be 5-1/4%....4 to 4-1/4%, maybe. Any cuts should help the stock market a little but I think the they are already priced in.
I believe that the Wall Street movers and shakers love big stories that move the whole market to disguise their individual stock plays. This large scale volatility is really harmful to the small investor, but the big boys could care less. They would be happy if most of the small investors did not exist anyway.
If you read Jeremy Siegle's book "Stocks for the Long Run," he has a chart that shows the decline in market volatility over time. This decline is hurting the ability of the big players to make the big bucks, but the decline in activity is created by an ever increasing influence of us small investors. I think this is a positive change and I hope to see it continue. I could care less if the big boys make money...I care that I can make money. That is the basus of the BMW Method and it works for us little folk. I think it is actually the game that the big guys are playing, but that is just my belief...I certainly have no real proof.
Anyway, that is what I meant by saying, "We have learned much in the last 50 years and I think we can do without the old volatility."
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