Friday, February 27, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Market ups, downs hard to predict

stevenson column sig

By
From page B8 | June 08, 2014 |

As I sit down to try to say something half-way intelligent about the world of investments, I’m making the mistake of leaving the television on.

It’s hard not to be transfixed by the black and white films of the Normandy Invasion, but why not look back at what has happened to the stock market since that historic day? Talking about Normandy and the Dow Jones on the same page may seem irreverent, but if we hadn’t crushed the Axis powers, we wouldn’t have the most prosperous standard of living of any major country in the world.

When we made our landing on the beaches at Normandy, the Dow was around 100. As the market closed Friday, the Dow Jones industrial average was just a few points below 17,000. I suppose other investments have done even better, but 170 times in value isn’t bad.

You may have seen those charts that show all the events that took place as the market climbed, each of which might have done perhaps permanent damage to the market. As recently as Friday morning when the Bureau of Labor Statistics released the employment figures for May, there was worry that “the market” wouldn’t like the numbers.

Wrong. The Dow closed up almost 90 points to another record.

There was a big story on the online market reports. The headline proclaimed that Uber was raising $1.2 billion in the capital markets, putting the value of the five-year-old startup at around $18 billion. If you haven’t heard of Uber, it’s the San Francisco-based ride-sharing company. It has few employees and minimal equipment expense. What Uber – it’s spelled with that double-dot (‘umlaut’ in German) over the “U” – does is provide smartphone users the medium to find rides or passengers. It operates in 118 cities and is expanding at an astronomical rate – thus the evaluation of $18 billion.

I would think that the barriers to entry into Uber’s business would be pretty low, but true believers insist that their early start and smart management discourage competition. I suppose I’m suffering from the same antiquated thinking that I used to laugh at when I encountered it 45 years ago. After all, I thought the horseless carriage was just a fad, and people would never get used to using something called a telephone to talk to their mothers-in-law.

Successful investors can choose one of several strategies: they can turn their money over to a mutual fund, they can look for startups like Uber a couple of years ago, they can rely on a broker or money manager, buy an “old reliable” like Chevron or IBM and put it away, or they can try to beat the market by trading.

Unfortunately, human nature intrudes on the “buy and hold” strategy, as evidenced by how few investors have stayed with the market in spite of the headlines. Korea, Vietnam, Nov. 22, Watergate – there were dozens of reasons to be scared out of the market.

If my wife Clare has the patience to read this, she’ll say, “If you’re so smart, why aren’t you rich?” I would tell her that I never wanted to think that she married me for my money.

Bud Stevenson, a retired stockbroker, lives in Fairfield. Reach him at [email protected]

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