The Stock Market: In the Long Run, It’s All About Earnings, Not Panic

Here we go again.  Panic in the stock market has set in, yet again, due to every direct or indirect domestic or international incident known to man.   Maybe Greece.   Maybe Senate-passed financial regulations.  Maybe unemployment.  Maybe somebody pressed the wrong button on their computer.  Or maybe somebody sneezed.  I was tempted to write a much lengthier blog on why panic is bad for retirement investments and resurrect every reason from everything I have ever written about retirement.  But alas, Wall Street Journal writer Evan Newmark saved me the laborious task with his Mean Street column.  Thank you, Evan. Since I was out of town yesterday my plate is full of other fish to fry.


When panic sets in, keep investments in perspective.  If a company’s stats are good (no long-term debt, potential for growth, for example), the rewards of buying now will show up in those quarterly earnings reports.  With 24-hour Internet and cable bombarding us with bad news and predicting dire long-term scenarios based on these radar screen blips, people will want to panic, sell off, hold cash (subject to inflation) and buy bonds with the undying belief that these investments are safer.  But look at Greek bonds which were at a BBB- rating a few days ago (one step above junk bonds) without the help of the European Central Bank.  There are no guarantees on any investment.


So calm down, practice deep breathing and ride out this rough period.


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