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Will 2003 be the year the market moves forward?

Man, I hope not! I voted 'yes', because I think that interest rates are so low that bonds are now becoming very risky and making stocks that much more attractive in comparison.

I, for one, am hoping that the stock market drops and continues to drop like a stone. I love sales. I especially love sales on goods that continue to pay dividends, year after year after year after year. :-)

Why is it, the day after Christmas, when everyone is packing the malls, looking for after-Christmas sales, that people can't put the same logic to their stock market purchases as they do to their other purchases? Why do people applaud overpaying for stocks in a way that they loathe overpaying for automobiles, personal computers, or toilet paper?

The lower the price, the better the value. The better the value, the happier the purchaser. My retirement savings method is to buy quality companies with a long history of growing their dividends and a business model that indicates that they can continue to do so for the forseeable future. Then, I take those dividends and compound them (tax deferred or tax free, in 401(K) and IRA plans, whenever possible, of course). The dirty little secret of this methodology is that, when the stocks tank, the regular purchases buy more, as do the dividend reinvestments.

So while the stocks in question get cheaper and cheaper, the dividend payments get richer and richer. Each dollar buys more dividends, each dividend reinvested compounds that much more quickly, and as the companies continue to raise their dividends as their business improves, without regard to the stock market or their valuation, the whole snowball gets that much bigger, that much more quickly.

When these stocks go up, the current paper value may be higher, but the future compounding rate actually drops. Each purchase buys less and less, the compounding rate slows down, and the dividend boosts only add their punches to a smaller pile of stocks.

Like I said, I believe that 2003 will be an up year for the U.S. stock market. It just won't bother me any if it isn't; absent a catastrophical melt down in the U.S. economy, my investment goals will be more easilly met if stocks go down.


Just some food for thought...

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