Wall Street Steward Blog

Don't Miss the Forest for the Tree

Dow 3,000! The end is near!! Get out while you still have time!

Now that we have gotten the scare tactics out of the way, let’s have a knowledgeable conversation.  The long term performance of the stock market can be summed up easily:  upward trend, positive returns OVER TIME.  The over time part is key…don’t miss that. Short term pullbacks occur, of course….but o.v.e.r.t.i.m.e. the trend is positive.  Overwhelmingly so.  Assuming you agree, then why do you think there are so many “experts” calling for a crash at any given point in time?

Maybe they truly believe what they are saying, or maybe, just maybe, they are trying to increase their profile so they can appear on CNBC, or be quoted in the Wall Street Journal.  Their intention is not pertinent, but the damage their advice can cause IS!  Here are just a few recent examples (thanks to Financial Sense and Chris Puplava):

Dow Could Crash to 3,000 in 2013 – Harry Dent (9/12/2011)
Dow Dropping to 5,000 Starting This Year –  Charles Nenner (3/4/2013)
S&P 500 May Fall More Than 40% By Fall – Chris Martenson (4/10/2013)
Look Out! A 1987-Style Crash is Coming – Marc Faber (8/8/2013)
The Case for a Crash: And for Staying in Cash Until 2015 – Charles Hugh Smith (12/10/2013)
Next Two to Three Days Are ‘Extremely Critical’ For Stock Market – It May Crash 40% – Tom DeMark (2/5/2014)
Get Ready for the Dow at 6,000 by 2016 – Harry Dent (3/3/2014)

S&P 500 returns (price only) from each of those dates through 3/5/2014: +61.3%, +22.9%, +18.0%, +10.4%, +4.0%, +7.0%, +1.6%.

Not many negatives in there. Impressive forecasting, boys!  Even more entertaining are the time frames for each of the above listed returns:  2.5 years, 1 year, 11 months, 7 months, 3 months, 1 month, 2 days.

One more step, just to take it to the next level…I’d like to award Mr. Dent the doofus award!  He called for a crash in 2011 w/the Dow at 11k, and then called for one again 2 days ago w/the Dow over 16k. He REALLY means it this time, folks.

I will drop the patronizing sarcasm.  Eventually, we will have another correction, that much is inevitable.  However, and this is the point, that correction will not change your long term goals – you will still need to retire one day, would still like to educate your kids, still need your money to grow faster than inflation, etc…..

So, don’t miss the forest for the tree. Instead of focusing on headlines predicting the next 2k point move in the Dow, focus on the next 10k point move, because we have 100 years of history telling us which direction that type of move is likely to be. And the next time a market BEAR corners you and tells you every possible reason why the market will crash, silence them with this gem:

“Name me a stock market crash/correction that we didn’t eventually recover from.”


“No, seriously, start whenever you’d like.”