Fisher Investments Discussion Forum

Topic: Stock Market Misperceptions

Welcome to the Fisher Investments discussion forum on Stock Market Misperceptions. Fisher Investments believes reading financial media requires a critical eye and a willingness to challenge convention. In our view, to be a successful investor, one must weed through media hype, talking-heads, pundit prognostications, bloggers, and misconstrued data to disregard information that is either widely-known and therefore can’t impact markets much, or information that’s simply wrong or misunderstood. Only then can investors find information that is correct, interpreted more correctly, and then assess how it’s likely to impact markets moving forward. This forum is dedicated to challenging news stories that seem inaccurate, falsely hyped, or misleading. This forum is not a place for attacking specific media publications or journalists.

The following represents commentary by Fisher Investments’ staff members on the above mentioned topic. All comments are subject to the website disclaimers located here.

81 Comments

Don't Mind the Trade Deficit
Added by CRF on 11/13/2009
Economic data showed the US trade deficit widened in September as imports grew more than exports. Some folks worry a trade deficit means our nation is at a disadvantage to our trading partners. But as a Fisher Investments employee, I believe this is false. Trade is mutually beneficial, even to those that import more than they export because that means domestic citizens can buy goods for cheaper, allowing them to spend more money on education, health care, and other services. Also, the countries we import from benefit from employment and increased standards of living--down the line, they could become a market for our exports. Plus, history shows trade deficits do not hurt economies or dampen stock markets (for example, US and UK have had trade deficits for decades AND generally healthy economies and stock markets throughout).

Jump Markets, Jumpy Investors
Added by CRF on 11/5/2009
It's understandable for investor risk aversion to rise when markets are volatile. But as a Fisher Investments employee, I think trying to time around market moves is a loser's game. Trying to avoid losses or trying to get into the market for gains is extremely tricky, and no one has been able to do so accurately for long periods of time. Investors will be better served looking at the medium- and long-term fundamentals pinning markets, rather than daily movements to make investing decisions. Otherwise, it'd be like trying to invest based on the past and not the future.

Jobless Recovery II
Added by CRF on 10/30/2009
As a Fisher Investments employee, I agree with JM about the concerns over the "jobless" recovery. Historical data shows the labor market lags the economy both heading into and out of recessions. Typically, labor markets don't turn bad until after a recession is underway, and they don't turn up until after a recession ends. This is because it takes firms a little while to fully adjust to changing economic conditions. Every recovery is deemed "jobless" initially, but firms do start hiring again.

Jobless Recovery?
Added by JM on 10/30/2009
Now that GDP has turned positive for the third quarter, the seemingly endless concerns over a jobless recovery have again grabbed the spotlight. As a Fisher Investments employee, there are a couple reasons why this assumption is premature: First, positive GDP doesn’t indicate where the economy is in the recovery process—it doesn’t mean things will suddenly go from bad to good. Secondly, employment will only recover after business spending has picked up and employers are ready to face rising demand with larger workforces. I believe this will take time.

Don't fear the invisible hand
Added by LRD on 10/28/2009
It’s easy to blame last year's financial crisis on capitalism's failings and worry today's apathy is only planting the seeds of tomorrow's Armageddon. But capitalism is cyclical by nature. I believe there will be another financial crisis, and few will predict it ahead of time. Still, capitalism's benefits outweigh the costs. I feel as the heat of the moment cools, few will deny it.

Investor Concerns
Added by JM on 10/23/2009
I agree with CRF. Rampant concerns over the dollar’s fluctuating value have clearly grabbed investors’ attention. As a Fisher Investments employee, I believe many investors let the latest news story captivate their attention (and their fears)! Letting one concern after another interfere can lead investors astray, and cause them to abandon their long term goals. Don’t fall victim! It’s important to realize many concerns are just overplayed hype!

Dollar's Weak, So What?
Added by CRF on 10/22/2009
The US dollar has been falling in value vs. other currencies. Some worry the weaker dollar reflects the US' fading dominance in the global scene. As a Fisher Investments employee, I don't think a weaker dollar is cause for worry. From a global standpoint, currency fluctations are a zero sum game: A fall in the dollar relative to the euro means a rise in the euro relative to the dollar. It all evens out. There may be short-term effects from a currency's relative strength, but there are benefits and costs whether a currency is rising or falling. For example, a falling dollar can actually help the US--it makes our goods relatively cheaper, boosting our exports.

Savers and Spenders
Added by LRD on 10/20/2009
Recent mainstream media articles have reignited discussion about our personal savings rate. As a Fisher Investments employee, I believe the personal savings rate is an unreliable metric, particularly when it attempts to calculate retirement savings. The personal savings rate also doesn't account for the hard-earned money Americans are socking away in investment accounts and pensions. In my view, government figures are sometimes questionable and often delayed which limits their usefulness in making sound investment decisions.

Additional Stimulus?
Added by CRF on 10/15/2009
Some folks are calling for additional government stimulus in the US because the recovery seems slow and unemployment is still high. But only a small fraction of the existing $787 billion stimulus package has been disbursed. As a Fisher Investments employee, I think it's too early to decide whether additional stimulus is needed or not. The effects from the current stimulus will likely extend into the following years. A hasty decision to add more money into the economy could lead to inflation if it turns out the economy can't absorb the extra cash in a useful manner--that could really hurt the recovery.

Meaningless
Added by JM on 10/15/2009
DEzzat has got it right again. All this talk about the Dow reaching 10,000 is pretty meaningless. Some fear if the market doesn’t continue to rise above this “threshold”, that’s a bad sign for the bull market. As a Fisher Investments employee, I believe these concerns are completely unfounded. As the economic recovery begins to catch up with the stock market recovery, more and more investors will begin trading on fundamentals, and not just sentiment—meaningless marks like the 10,000 point will likely be quickly forgotten.

the Dow? Again?
Added by DEzzat on 10/14/2009
Just as several months prior, it looks as though we're back to reading plethora of headlines about the Dow reaching higher levels, like 10,000. What should investors do now? I don't think investors should do anything in reaction to this news. I think it only misleads investors, thinking this milestone means something when the truth is the Dow is a broken price weighted index. I think it's wise to ignore the Dow and look to a more helpful index for true measurement.

The US Department of Pizza
Added by LRD on 10/14/2009
Pizza is delicious. This Naples-born treat has enthralled most of the modern world with its cheesy, tasty goodness. One way to pay for that pizza is debt, which most people hate. In my view, it seems people hate government debt ever more! It's costly, insurmountable, and often owned by foreign countries. But is it really? If government debt was a tasty 12-slice pizza pie, less than 4 slices would be held by foreign countries. In my view, foreign-owned US Government debt is much smaller than many realize.

Market Timing
Added by JM on 10/9/2009
As stock markets continue to charge upwards, many investors who still have money on the side are waiting for the next correction to jump in. While it is likely that volatility will ensue, and possibly even a correction, trying to time the markets in the short term can be costly, and incredibly difficult. As a Fisher Investments employee, I believe long term investors would be wise to set goals and understand market moves will happen.

Rampant Inflation
Added by LRD on 10/7/2009
The Fed and other central banks flooded markets with liquidity to stem financial panic last fall�now folks worry they won�t reverse course quick enough to prevent rampant inflation. In my view as a Fisher Investments employee, inflation may become a valid concern down the road, but not yet. The current antidotes: low capacity utilization, constrained lending, and a generally weak economy. These items help keep a lid on prices, in my opinion. When appropriate, central banks have many monetary tools to rein in liquidity.

gold and currency? again?
Added by DEzzat on 10/6/2009
Gold discussions emerge once again! I've noticed investors are yet again turning to gold claiming it's the safest investment. Some folks are so concerned with the future of the dollar that they turn to gold as a safety net. I believe, if investors simply look to historical returns, they'll see gold's returns are usually hardly as strong as stocks. I think folks should ignore clamors over the dollar or currencies in general--they don't matter much for long term investors.

Natural Disasters?
Added by JM on 10/2/2009
With recent (and seemingly constant) unrest in the Middle east, as well as a couple natural disasters dominating headlines this week, some investors are worried about the potential impact on the stock market. While both geopolitical issues and natural disasters are impossible to predict, that doesn’t necessarily mean they have the potential to jolt a bull market right back into a bear. History shows stock markets have either reacted relatively neutrally to past events of this nature, or recovered the ground that is lost in a relatively short time. We can’t predict what can happen in the future, but it’s still worth remembering.

Employing reason
Added by LRD on 10/2/2009
The Labor Department was the bearer of bad news again when it declared yesterday the US unemployment rate has risen to 9.8 per cent (a 26-year high!). High unemployment is painful. No one likes to see fellow citizens out of work and under economic duress. But unemployment also often gets pigeon-holed as a road block to recovery. But let's think about that a different way. Why would a suffering economy hire more workers? Wouldn't hiring resume after excess capacity has worked off and labor is needed? For this reason, unemployment tends to peak AFTER the economy is already rebounding. It's a lagging indicator which - in my view - shouldn't receive the amply credence is currently begets.

Economy Before Employment
Added by CRF on 10/1/2009
Some folks fear high unemployment will derail the economic recovery. However, as a Fisher Investments employee, I believe a recovering economy drives improvements in labor markets, not the other way around. Historial trends show economies tend to bottom first, followed by a drop in unemployment. Some folks fear high unemployment will weigh on consumption, a major component of GDP growth. But even though unemployment has risen pretty sharply over the last year or so, consumption has only fallen a little and has remained more stable than expected.

consumer confidence
Added by DEzzat on 9/29/2009
Lately I've noticed a lot of discussions surrounding consumer confidence. I think it's important for investors waiting for confidence to increase to remember this is usually one of the last indicators to turn around in a recovery. A recovery can take place while confidence is still poor. I think it would be an awful mistake for investors to wait on the sidelines for an indicator like consumer confidence. I believe it's better to pay little attention to this as an economic indicator and focus on the market itself.

Don't Worry about the G-20
Added by JM on 9/25/2009
All eyes are on Pittsburgh this week for the gathering of the G-20. World leaders have undoubtedly all entered the 2 day meeting with their own agendas, but investors shouldn’t expect too much to come out of it. Agreements could happen, but the G-20 has no method of enforcement and after the meeting ends, individual national interests will again take precedence.

Stocks Before Data
Added by CRF on 9/25/2009
Folks worry economic data is still shaky, portending a slow or weak recovery--and translating into poor stock returns ahead. As a Fisher employee, I think people who are too focused on economic data, and think economic data will drive stocks, have it backwards. Most economic data either lag the real-time economy or reflect what has already happened. On the other hand, the stock market is a leading economic indicator and thus able to price in economic recovery before it's widely reflected in economic data. Investors trying to gauge if a recovery is in the fore should look to the market, not data.

cap on pay? no way
Added by DEzzat on 9/22/2009
Lately there has been a growing concern over Wall Street compensations and bonuses. While there is a strong push to cap pay, I think this action will likely do more harm than good. I don't believe Wall Street pay was the main culprit to the crisis and it won't do much to aid in the financial industry's growth. Instead, I think it will likely drive away talented job seeking individuals from the industry, which is simply a negative, unintended consequence. As a Fisher Investments employee, I think other, more pertinent, issues in the financial industry can be resolved before turning to compensation packages. In a time like this, I think it's best to have the most talented, top notch individuals carry out effective business practices.

Inflation Worries
Added by CRF on 9/17/2009
Some folks worry all the global monetary stimulus will lead to runaway inflation. However, as a Fisher Investments employee, I think it's too soon to worry about that. For now, stimulus is appropriate as many countries are only tentatively recovering from recession. Pull back stimulus too soon, and the recovery could slow or even be choked as liquidity pressures return. At some point, central banks will tighten monetary policy, and perhaps too-high inflation won't materialize. But we don't know when central banks will do that or exactly how their timing will shake out in terms of impact on the economy. To speculate now is fruitless.

free trade lives on
Added by DEzzat on 9/15/2009
In recent headlines, there have been countless claims made of US protectionism with China. Many believe a trade war could arise and stifle the global recovery. I think it's important to remember that protectionist talk will typically increase as recessions end but it's usually blown out of proportion. I think most nations realize the importance of free trade and investors shouldn't fear a trade war in our near future.

Markets, emerging
Added by LRD on 9/11/2009
The considerable rise in global equities since March has birthed skeptics. Some doubters protest the ability of all stocks to persist, while others declare "hot" market segments doomed. One such segment is Emerging Markets which is still vulnerable to old stereotypes. What many don't realize is Emerging Markets, in terms of combined GDP, is economically bigger than the US. Yes, you read that correctly. They are not the super-volatile fledglings of the past (although individually some remain volatile). So next time you hear a skeptic calling for a dramatic drop in the Emerging Markets segment, think twice. I believe they've emerged into formindable global partners.

Forget the Trade Deficit
Added by JM on 9/11/2009
Over the past couple days, news has circulated about the US’ widening trade deficit. As a Fisher Investments employee, I know the trade deficit shouldn’t concern investors. Rather, they should focus on the good news that both exports and imports have picked up on an absolute level, indicating increasing economic activity—a good sign for the recovery, in my opinion.

Misleading Gold
Added by CRF on 9/10/2009
Some investors think gold prices are correlated to stock prices, to the US dollar's strength, to oil prices, to inflation, etc. But gold is a commodity so its price is largely determined by supply and demand. Therefore, trying to invest based on gold prices and its relationship with other things can be misleading. As a Fisher Investments employee, I don't think rising gold prices mean stocks will necessarily go down or that they signal worse economic times are to come. History shows gold and stocks can rise and fall together.

too optimistic? no way
Added by DEzzat on 9/9/2009
There is plenty of talk lately about the markets being "too optimistic." As a Fisher Investments employee, I hardly think this is the case. In fact, I think media headlines and news sources made markets out to be too pessimistic in the past few months. Sure, times were anything but stellar, however, I don't think any of the overly dour end of the world talks or Great Depression comparisons were warranted. Things are turning around in the market and I believe investors will likely see some volatile times (typical in any time of the stock market), but there's plenty of positive news out there to be hopeful for.

Unemployment Woes
Added by JM on 9/4/2009
Unemployment is still a prominent concern in today’s economy, especially with today’s news the national unemployment rate climbed to 9.7%. Many are focused on the idea that the economy won’t recover until employment does—however, that reasoning is backwards. As the recovery gets underway, and business activity picks up, employers will begin hiring again to meet the growing demand. The recovery will eventually help boost employment, not the other way around.

Protectionism Hurts
Added by CRF on 9/3/2009
As a Fisher Investments employee, I think protectionism hurts more than it helps. But I think protectionism becomes appealing when economies aren't doing so well--the government wants to "protect" domestic jobs, so it imposes rules to buy domestically or to limit imports, outsourcing, etc. But ultimately, not only do these things distort markets (by distorting supply, demand, and prices), they can actually impose more costs on domestic companies and workers. Perhaps company A could have manufactured a stereo for cheaper in Indonesia, but because of protectionist policies, it must manufacture the stereo in its home country. So the stereo would be have to be more expensive, which could dampen demand (which hurts the business) and also people have to pay more for the stereo. Plus, the company would have a harder time exporting the high-costing stereo, limiting its customer base. Typically, any intervention that distorts markets leads to unintended, and often negative, consequences.

more news on the "next shoe to drop"
Added by DEzzat on 9/1/2009
It’s that time again where forecasters claim they know what the next “shoe to drop” will be. Most recently I’ve seen headlines expressing fear over the commercial real estate market. As a Fisher Investments employee, I think these fears are all overblown. When riding through the beginning of a bull market, I find it’s typical to see forecasts focusing on negative news to come—anything to drown out the positives. In truth, I think there’s a lot to be positive about and investors shouldn’t be concerned with the looming thought of crisis in our future. I think it’s always helpful to remember the market has likely priced in all of this news by this point anyway!

September
Added by JM on 8/28/2009
As DEzzat mentioned in her post from last week, seasonal investing myths abound this time of year. Is September really a horrible month for stocks. As a Fisher Investments employee I’ve learned to disregard these claims and others like them—so long as stock investors keep focused on long term goals, jumping in and out of the market to try to miss potential down months is unnecessary!

The brink of breakeven
Added by LRD on 8/27/2009
As the global bull market pushes forward, some investors are beginning to contemplate the "Breakeven" point, or the point at which their portfolios (and/or the market) will get back to even with the previous market highs. The breakeven point is mostly an arbitrary threshold, but some investors seem to give it too much credence without asking questions. Have your long-term goals changed? Does your portfolio have different objectives? Has the time horizon for the assets changed materially? Most investors will find themselves answering "No" in resounding unison. What does this mean? The breakeven point is purely psychological. It is not a point to exhale and "rethink" things. It's a line in the sand. It's just another milemarker on a long road trip. And while it may be tempting to pull off to the shoulder and "re-evaluate", try to focus on what really counts: making progress towards the horizon ahead.

too far, too fast?
Added by DEzzat on 8/25/2009
Many people think the market has gone up “too far, too fast” lately but as a Fisher Investments employee, I know this just isn’t the case. I believe there’s no such thing—sure, the market has seen dramatic upward movement but this is just the initial thrust of a bull market. I think this is very typical in bull markets and lately, investors are seeing the exceptionally strong period. I don’t think there’s ever a point where the market is going too far…shouldn’t this be a good thing for most global investors? I think investors should enjoy the ride and expect a few bumps here and there, but this is all very normal.

Expect volatility, it's normal
Added by ashmuth on 8/24/2009
I would agree with JM. Lately, there’s been a lot of unnecessary hoopla surrounding the volatility global markets are enduring. This is completely normal and characteristic during the early stages of a bull market and shouldn't send investors packing, in my opinion. Although, volatile times can be difficult it is often well worth weathering the storm and reaping the potential returns. As a Fisher Investments employee, I’ve learned that a few down days during the beginning of a bull are normal and nothing to be afraid of.

Digesting consumption
Added by LRD on 8/21/2009
Consumption—the single largest component of US GDP at 70%—receives a healthy dose of spotlight. And why shouldn't it? It's a HUGE portion of our economic output. Therefore, it's natural for investors to fear Consumption's GDP impact should it decline. But here's what most investors don't fully appreciate: Consumption is actually a very stable component of GDP. It typically varies only several % points up or down. The real % swings are attributed to Business Investment, Government Spending, and Net Exports. So next time you’re in line at the store pondering Consumption's role in the recession -- relax. You're much more reliable than you think.

Patience
Added by JM on 8/20/2009
As global stock markets endure more volatility this week, many are worried of a relapse, or even a “double-dip” to new lows. The current rally in US equities has been going strong since the March 9th lows, and I don't believe a few bad days should scare investors away. Volatility is entirely normal, and expected even, in a new bull market.

Contemplating the Q
Added by jd on 8/19/2009
Anyone notice all the creatively described recovery scenarios out there? V, L, W...Q?? Yup, Q. The letter exactly between L and V, but not, apparently a composite of the two (confusing!). And as if such abstract explanations weren't puzzling enough, there's often little done to distinguish economic recovery from stock market recovery. But that's key! Especially for investors. Stocks look ahead, finding recovery before almost any other indicator. They can recover in a V (steep down, steep up) just as the economy continues deteriorating or appears to stutter. That means no matter what the economy does (and though forecasts abound, it's by no means certain), stock markets can make quick gains after a bear bottoms. As a Fisher Investments employee, I think if investors forget stocks bounce first, little relying on the exact shape of economic recovery, they could be left in the dust.

no month is the "perfect month"
Added by DEzzat on 8/19/2009
I’ve seen several headlines lately warning investors about September’s historical trend of weak stock returns and others clamoring numbers in August are rising solely because investors are vacationing. Let’s not forget the adage “sell in may, then go away.” In my opinion, there’s no real truth to any of these arguments. I don’t think there’s a such thing as a perfect month, day, or year for stocks being that the stock market is naturally volatile. Volatility is always around and I think it’s hard to say this month will be better or worse than others just because last August was stellar or disappointing for stocks.

grabbing for headlines
Added by LRD on 8/3/2009
With many fiscal years now closed, and eager vacationers on the get go, August is traditionally one of the slowest months for financial news. This isn't necessarily a bad thing, however many media outlets rely on hot new stories to vie for our attention. Be wary of this. Sometimes the expectation - even the need - for fresh news is a misperception in itself, and can blur investor judgment.

don't mind the milestones
Added by DEzzat on 7/31/2009
I agree with evec. When indexes hit a “milestone” in the market, this tends to rile investors and spark high emotions (both good and bad) but this means very little to the market and investors should put aside their urge to act based on a supposed “milestone.” For more on this, I found the article on Marketminder.com, “Misleading Milestones,” to be very informative.

GDP
Added by JM on 7/31/2009
Building off what DEzzat said about GDP – I agree that it’s only one of many indicators of how the economy is faring. New GDP numbers were released today for the second quarter of 2009, and as usual, one number was reflected in many different lights. Some saw it as a good sign (not down too far)! And some saw it as a reminder that the US economy is still contracting. It’s important to remember that it is just one statistic, among many, and does not tell the whole story on its own.

Milestones, Schmilestones
Added by evec on 7/28/2009
What's all this about the Dow hitting 10,000 or 15,000 or whatever other nice round number out there? What's the big deal? So will the world suddenly be a utopia when the Dow hits that mark? Nope. Other than the fact that the Dow shouldn't be used as a reliable benchmark for the global stock market, a nice round number tells us nothing about how the market will move in the future. Milestones mean essentially nothing to markets in my opinion.

shrinking GDP? not to worry!
Added by DEzzat on 7/24/2009
I believe recent discussions in the media surrounding shrinking GDP figures (in the UK, for example) shouldn’t worry investors. As a Fisher Investments employee, I know that GDP numbers are backward-looking and therefore don’t indicate much about the economy on a forward-looking basis. Many investors are quick to rely solely on GDP, but it’s important to look past these numbers. I find they only tell us what has already happened but not necessarily where the economy is headed. I think it’s important for investors to remember this when searching through the news.

Volatility is normal
Added by JM on 7/17/2009
It was mentioned a while back, but worth focusing on again after a great week in the market like we just had. There will be up weeks and down weeks, especially during (hopefully) the beginnings of a longer term recovery. Such volatility is normal in the stock market, and should be expected and then ignored. Investors should remember to focus on their long term financial goals, and look out to the horizon—not to the day’s up or down indicators!

unemployment? still?
Added by DEzzat on 7/17/2009
It doesn’t come as a complete surprise to me unemployment is still being discussed in the media. While unemployment numbers continue to increase, I don’t think long term investors should worry. As noted earlier, historically, unemployment lagged an economic recovery while stocks led it. I believe unemployment may get worse before it gets better, but I don’t think it should be of any concern. I think folks should be prepared to hear about this topic in the media for quite some time into the future.

The dollar will do
Added by jd on 7/15/2009
There's been an awful lot of bellyaching over the dollar lately--powerful emerging economies like China seem to view the recession as a great opportunity to assert their clout. China is especially interested in what happens to the dollar because it pegs its currency to the greenback and thus holds a couple trillion dollars in foreign reserves. So, when US financials imploded last year and Washington launched its deficit-financed spending campaign--China opened the PR floodgates. It's time we move away from the dollar as a reserve and trade settling currency they said. Time we had a world currency, something strong and reliable. But since then? China's continued purchasing as many dollar-denominated US Treasuries as they ever have. US debt continues to find an eager market worldwide. And if anything, it's China having trouble drumming up a market for their own debt. What does it all mean? Maybe someday we'll have a world currency--but don't count on it anytime soon. And for now, the dollar will do just fine in my opinion.

Patience is a virtue
Added by evec on 7/14/2009
There's a well-known saying: Patience is a virtue. If we ever needed patience, this is the time. I agree with what jd, JM, and DEzzat said: To enact a second round of stimulus now would be premature. Prior and current stimulus hasn't even had the chance to work its way through the system yet. There are billions of dollars left waiting to be allocated. So why all this foolishness about a second stimulus?

a second stimulus? not needed!
Added by DEzzat on 7/10/2009
To piggyback off of what jm and jd have said, I also think it’s a little too premature to discount the current stimulus plan and label it as a failure. After all, in my opinion, we still have a long way to go and plenty of funds left to spend! Patience is necessary and I believe it would be a waste of resources to execute yet another stimulus plan without seeing the effects of the initial funds.

More Stimulus?
Added by JM on 7/10/2009
I’m with you jd. Piling a new stimulus plan on the existing one would only muddy the waters. Clearly the problem isn’t a lack of funds, here—there is still plenty of money to be disbursed from the first stimulus. The problem here seems to be a lack of patience—the stimulus can’t be spent over night, and the economy will take time to feel the effects of the money as it is spent.

Beltway claptrap
Added by jd on 7/8/2009
Anyone else hear the latest political claptrap from the Beltway--plans for a second round of stimulus? Unbelievable. Committing more funds right now is putting the cart before the horse. We’ve barely begun spending the current package. And think of the massive fiscal response so far--$700 billion for TARP, an already massive deficit, and oh yeah, what about that $152 billion in tax rebate checks last year? Doesn’t that actually make this the second round and anything forthcoming the third round? And don’t forget the recession is already showing some promising signs of better health--imagine what happens when the huge amount of pending fiscal stimulus actually hits! (Never mind the wall of monetary stimulus still rolling through markets.) As a Fisher Investments employee, I say let’s rein in talk of a so-called “second” stimulus until we see what the "first" one can do.

Long-Term Strategy
Added by evec on 7/7/2009
Jd, I agree with you too; I also think sticking with a long-term strategy is best. As pointed out before, history shows stocks will go up and down on a daily basis. That's just the way markets move. It's trying to time those moves that can hurt people the most (unless they actually have a crystal ball that works). As a Fisher Investments employee, I think just doing due diligence and sticking with a long-term strategy is the best bet for the long run.

Just sit tight
Added by jd on 7/1/2009
Good stuff, evec. With so many market drivers in the economy, it�s impossible to link a single event to broad market movement. (Basically the same reason many market forecasters get it wrong so often.) Though many paranoid pundits try to spin a compelling narrative, making investment decisions based on breathless banter is insanity. Each day�s performance is representative of a large number of different fundamental developments. Or toward the end of bear markets and the beginning of bulls, movement can be mostly irrational--wildly swinging on little or no new material information. In fact, stocks irrational or inscrutable nature over short time periods is one reason market timing is a fool�s errand. This is especially true toward the end of a bear market when steep losses turn into steep gains in the blink of an eye, leaving plenty of pundits in the dust. As a Fisher Investments employee, I think worrying too much about short-term developments results in high transaction costs and subpar returns. Better to just sit tight and stick to a long-term strategy.

Daily Stock Movements
Added by evec on 6/30/2009
Every day, we see reports about stock market movements. Today, it could be "Oh no, stocks are dropping because of this-and-this report!!!" And the next day could very well be, "Stocks are rising because of this-and-this report"--WHY must we track the daily movements of stocks? Do daily movements tell us where stocks are going to be one year, ten years, or twenty years from now? No. And as a Fisher Investments employee, I just think it's ridiculous to try and invest based on these daily gyrations.

Educated decisions
Added by JM on 6/26/2009
JD makes a good point about market forecasting. The complexity of our economy prevents any one individual or one institution from getting it right every time. If that was possible, he or she would certainly have quite the advantage. In the absence of this perfect forecast, I believe investors must instead do their best to make educated decisions regarding their investments and the stock market or find someone they trust to help them make those decisions. Following market predictions simply because they sound too good to be true is a potential recipe for disaster.

what debt?
Added by DEzzat on 6/26/2009
Many investors these days are concerned with government debt and fear we are driving ourselves further and further into a downward spiral. In my opinion, I think most of these fears are unfounded. As a Fisher Investments employee, I think debt shouldn’t be a legitimate concern for long-term investors. In terms of debt and deficits, historically, stocks have fared well following these high points. I believe a long-term investor who thinks globally shouldn’t even concern themselves with such worries.

Fickle forecasting
Added by jd on 6/24/2009
In this time of economic uncertainty, forecasts abound! One authority lowers growth expectations while another equally prestigious institution tells the opposite tale. So which is it? And why can’t economists consistently get it right? Why?? Simply: The economy is far, far too complex for any one human mind (or group of minds) to grasp. And even more confounding, such forecasts are intricately linked to the very economy they’re forecasting—some folks will agree, others disagree, most will have to make a decision one way or the other. The result is likely never to be exactly as expected, sometimes nowhere near. Economic forecasts have been known to be downright, embarrassingly wrong, wrong, wrong. But luckily investors needn’t exactly predict the economic future—just guess whether the outcome outstrips average expectations, or vice versa. These days, some fearful folks accept stagnation or even all out depression as inevitable—the apocalypse is nigh! Other worriers believe hyperinflation is the only likely scenario going forward. But such extremes are likely off-base. When such incredibly dour outlooks flourish, I believe the likelihood markets will surprise us to the upside in the foreseeable future increases—as a Fisher Investments employee, I think that’s bullish for stock investors.

Sizing things up
Added by LRD on 6/23/2009
Bear markets often compel investors to rethink things. One definition that may be worth reconsidering is "small cap". Some trend-watchers have noticed "small cap" stocks tend to outperform in the beginning stages of a new bull market. But what is a "small cap" stock anyways? An industry ritual would be to apply an arbitrary market cap figure (say $200 million) and deem everything below that level "small cap". But does this really make sense? After a prolonged bear market, does that nominal value really apply? As a Fisher Investments employee, I've learned it’s better to think of "small cap" and "large cap" relative to the market. First step would be to identify the average market cap of your chosen index. Then, simply determine if the stock's market capitalization is smaller or larger than the average. Presto! No more arbitrary buckets or pigeon holes for investing styles. Simply put, an accurate definition of investing "style" should be as dynamic as the stocks they describe. Think relatively.

Patience...patience
Added by evec on 6/23/2009
Aristotle once said (or wrote): "Patience is bitter, but its fruit is sweet." I believe this is especially true when it comes to the stock market, and I agree with JM and DEzzat that stock market volatility is normal. After all, history shows stocks never move in a straight line, and there's no reason why this time is any different. I believe that inorder to get positive long-term returns, staying in stocks is the best option.

increased volatility
Added by DEzzat on 6/19/2009
I agree with JM. I've seen the news take a turn for the negative in the last few weeks just after a positive run. It's important to remember that pullbacks in the market after an advancement are to be expected and in my opinion, that doesn’t mean investors should worry these pullbacks will stall the recovery. I think volatility is a normal part of the stock market and to echo what JM as said below, patience is the key!

Patience
Added by JM on 6/18/2009
With stock market returns seeming to stagnate a bit this week, investors are once again tempted by the calls of impending drastic declines! While it is entirely possible, and maybe even likely, that the stock market will correct a bit after such a positive run, this is no reason to necessarily assume that we are still stuck in the throes of a bear market. There is a common misperception that is championed at moments like this stating that any downward movement means we’re headed all the way back down. The beginnings of any bull market are typically marked by volatility, and as a Fisher Investments employee, I believe that successful investors have the patience to see the light at the end of the tunnel.

New Week, New Fears
Added by evec on 6/16/2009
It seems there are new things people find to fear each week. This week, it seems many are scared we're still in the middle of a bear and that the bear is going to get worse. What exactly is the basis for this fear? Seems to me it's purely conjecture. Fact is, hindsight is 20/20. We won't know whether we're in a new bull market or still in the midst of a bear until after it's all over. As a Fisher Investments employee, I think it's foolish to pay so much attention to baseless fears. After all, the market has always recovered in the past to reach new heights, and there's little to no reason why it won't do so in the future.

No way to win
Added by jd on 6/11/2009
Evec, you’re right on—inflation fears are showing up everywhere. Particularly as long-term government bond yields are on the rise. Granted, inflation could get nasty down the road. But for now, as a Fisher Investments employee, I think rising rates are more likely indicative of the panic ending than anything else. I mean, during the financial crisis, government rates were so low, some folks were accepting NEGATIVE yields—there was virtually nowhere to go but up. And even though they’ve risen, yields remain historically low. But some bears remain resolutely negative—earlier, low rates were bad because they portended a deflationary spiral, and now, only months later, higher rates are bad because they mean runaway inflation’s in the offing. There’s just no way to win!

Premature inflation fears
Added by evec on 6/9/2009
Inflation fears are rearing their ugly heads. Many who feared deflation are now saying the massive stimulus efforts will spark massive inflation--it appears some can't be happy no matter what. As a Fisher Investments employee, I believe any possible inflation danger is far off down the road. Also, if the Fed acts quickly enough to absorb the extra money, massive inflation may never happen. A healthy dose of fear is well and good; after all, it's what makes us humans avoid dangerous things and keeps us alive. But in this case, I believe fearing inflation well before stimulus has even taken full effect is a tad premature.

Doing the tango
Added by LRD on 6/8/2009
You may have heard a dusty stockbroker proclaim "Democrats are bad for business and markets". Conversely, your wise old uncle might have declared “Republicans are good for business and markets.” If you’re basing your investing decisions on either, you might be in for a shocking surprise. As a Fisher Investments employee, I’ve observed the following fact: Since 1926, of the six Democratic first years in office, FIVE of them show double-digit gains. Take that uncle! In my view, the underpinning to this phenomenon is a tango between the politician and investors’ expectations of that politician (and, of course, his party). Simply put, politicians can’t stay elected if they uphold all promises. Once elected, they twist away from their power base and spin towards the center. Mid tango, investors start to realize their pre-election fears aren’t manifesting, and stocks react accordingly. Don’t count this as one of your misperceptions!

more on deficits
Added by DEzzat on 6/5/2009
Awhile back, evec mentioned trade deficits and their effect on a country’s economy. As a Fisher Investments employee, I would have to agree with her argument. I’ve noticed most investors assume surpluses are good and deficits are bad for an economy when, historically, it’s usually quite the opposite. Historically, economies with deficits are largely healthy, growing economies while those with a surplus are typically stagnant (just as Germany and Japan once were during their surpluses a few years back). In my opinion, investors have nothing to fear in deficits!

Market Hype
Added by JM on 6/4/2009
As evec said last week, many concerned investors are still fearing an impending sharp stock market downturn, to follow closely on the heels of recent significant gains. Whether or not this happens, trying to time the market is a thankless task! Each pundit or market expert has his or her own theory on what will happen next and how far the market will rise or fall in the next day, week, or year. Investing for the long term and sticking to firm goals helps investors overcome the hype and sleep well at night.

Covered Calls? Think again.
Added by LRD on 6/1/2009
Uncertain times often yield speculation which can steer investors off course. In my view, one such disaster waiting to happen is the notion of "covered calls". Brokerage houses like to sell this thinly-veiled strategy as safe or "conservative", but a discerning eye reveals otherwise. A covered call combines a long stock position and a written call. The investor gains instant income (premium received) with limited option risk. However, the option's upside is fixed and the investor is still exposed to the stock's downside, less the premium income. This payout is equivalent to selling a naked put (another option strategy most consider "risky"). Said another way, I feel covered calls are tricky business with horribly misunderstood risks.

weak dollar?
Added by DEzzat on 5/29/2009
In the media, I've noticed several publications putting fear in investors about a declining dollar. As a Fisher Investments employee, I've learned how to avoid such news. I think a weak or strong dollar shouldn't mean much to a global investor and says nothing about the stock market. Historically, the dollar isn't predictive of stock performance. I think it's important to remember a weak or strong currency is not an indicator for the stock market. Instead, the stock market itself is the true leading economic indicator.

Is this a sucker's rally?
Added by evec on 5/26/2009
We’re currently in the middle of a massive stock market rally, and yet doomsayers are still calling this a sucker’s rally. Will the negativity ever stop? Remember, there are always those who are known as “perma-bears,” who believe the world is coming to an end. Pay attention to the fundamentals, not just investor sentiment, when attempting to forecast future stock market movements. Also, if this does indeed turn out to be a sucker’s rally, then it’s the second highest one of all time.

The misunderstood bubble
Added by JM on 5/28/2009
An interesting misperception is the common notion of the “bubble.” Over the past decade or so, this concept has gained significant publicity, with tech and housing leading the charge as prime examples of bubbles that popped and left devastated investors in their wake. Interestingly enough, a true bubble is not considered such until after it has occurred. If people were walking around in 1999 fearing an end to the dominance of tech in the stock market, wise investors would have gotten out of the market, rather than ride their holdings right over the top. This common misperception confuses investors, as they only remember the aftermath, when they assume they must have feared it on the way up—rather, euphoria dominates investors and they don’t see the end before it pops—thus the name “bubble.”

Confirmation bias
Added by JM on 5/21/2009
Many of the market misperceptions that we read about in the media today, and often believe ourselves, are propagated by confirmation bias. As any moderately aware member of society can tell you, there is always something to worry about in the news! Some story in your local paper describing the horrid state of the economy and the certainty that it will be bogged down in recession for years to come only serves to confirm the fears that you already had lurking in your head. Don’t fall prey to this confirmation bias, which allows you to weed out information to confirm that which you already believed. This is exceptionally prevalent in stock market news and information, and can be exceptionally damaging to investors as well.

Misperceptions Abound
Added by evec on 5/19/2009
Markets have stopped freefalling lately. Economic news, though not necessarily improving, no longer harbor any surprises. However, even in the face of what some may deem as encouraging signs, there are still people who claim the economy will never recover, the US as a superpower is doomed, the US dollar will soon be worth less than the Chinese renminbi. I believe all those dour predictions are false and will be proven so in time. The economy goes through cycles of booms and busts, and this is no different from past cycles. As for the US losing its status as a superpower, what strong evidence is there of that? And finally, the world shows little to no desire in removing the US dollar as the global reserve currency; therefore, the likelihood of the renminbi being worth more than the dollar is minimal at best. Remember: Read all news with a grain of salt.

Just plain wrong.
Added by LRD on 5/18/2009
I've noticed the seemingly perpetual news headlines about oil have taken a breather. With oil prices far below their highs, the media has diminished their coverage of this once-ubiquitous topic. I believe oil prices and their effect on the stock markets to be one of the most grossly misunderstood investing topics. In my view, let's cut to the chase and dismantle this terrible argument once and for all: Oil prices and the stock market are minimally correlated meaning their price movements--relative to one another--are pretty much random and insignificant. So the next time you read an article saying high (or low) oil prices are hurting stocks, take the article for what it is in my opinion: terrible, non-sensical garbage.

oil prices
Added by DEzzat on 5/15/2009
Many fear rising oil prices will negatively affect stocks. This is a long running myth and as a Fisher Investments' employee, I believe stocks won't suffer due to high oil prices. If you were to look at a chart comparing the rise and fall of oil prices and the stock market, it’s very apparent there is no correlation between the two. Free markets don’t work this way. Supply and demand largely govern the stock market. I believe there is little to fear from rising oil prices.

Government Spending
Added by JM on 5/14/2009
Similar to the frequent concern evec brings up about trade deficits, many seem to be exceedingly concerned about the recent increase in government spending, especially the measures detailed in the stimulus plan. What I’ve learned as a Fisher Investments employee is that these concerns are largely misplaced. Regardless of where the spending originates – be it with a government program or an individual investor – it will eventually make its way into the hands of the spending public, who will help get it moving in the economy.

Trade deficits are not bad
Added by evec on 5/12/2009
There's been talk recently about the US' increasing trade deficit. As a Fisher Investments employee, I believe those worries are for naught. Historical data shows trade deficits don't hinder a country's economic growth, in fact, the US' economy had grown during past deficits!

Don't fear rising unemployment rates
Added by DEzzat on 5/8/2009
In current times, unemployment rates have become a very popular topic in the media. While some investors worry about the repercussions of these increasing rates on the market, I know this shouldn’t be a concern. The stock market is the leading economic indicator and unemployment data are backward looking. Whatever these numbers are showing is likely already priced into the market and should therefore be ignored. As a Fisher Investments employee, I have educated myself on this and several other lagging indicators and have learned that although unemployment may continue to increase (and possibly will), the market has likely already discounted this information.

Waiting for the next shoe to drop
Added by JM on 5/7/2009
Many articles in recent weeks have highlighted the assumption that the current market rally is doomed to fail. This negative thinking centers on the argument that the economy is still in dire straits and unemployment is still on the rise - so how could the market possibly be on the rise for good? While no one can know for sure when a new bull market is beginning, it's important not to get trapped in a downward spiral of pessimism! History shows that new bull markets start fast and steep, similar to the rally of the past couple of months. History also shows that the stock market is a leading indicator, and typically recovers months before the economy or unemployment begin their turnaround. As a Fisher Investments employee, I am wary of overly dour news reports intended simply to drum up headlines and scare investors. Don't fall into this trap.

Political Moderation Isn't a Pipe Dream
Added by jd on 5/6/2009
I’ve noticed lots of hollering and hullaballoo in the press concerning the new Obama administration’s political agenda. As a Fisher Investments employee I don’t prefer either party—just what’s good for markets (and both parties can be damaging). It’s early yet, and those assuming today’s words will translate perfectly into tomorrow’s actions are just flat out wrong in my view. The recent ill-conceived rhetoric on everything from tax hikes to cap-and-trade schemes seems to me to be proof positive the administration is risking alienating the political center. That’s a sure fire way to limit their stay in Washington to a one-term dud. Markets will likely view extreme policies as fertile soil for unforeseen future errors. But politicians being politicians, reelection is all that matters. Question is how long will it take for this administration to move closer to center? Hopefully it’ll happen sooner than folks think. Midterm congressional elections aren’t too far away, and sensing their political necks on the chopping block, congressional Democrats should start stepping back from the edge—likely bringing the administration with them.

Is gold a good, long-term investment?
Added by evec on 5/5/2009
In times of market turmoil, much like what we've experienced lately, voices emerge from the woodwork, claiming gold is the best long-term investment, gold never loses its value, it's a great hedge, etc., etc. This is a commonly held belief, but erroneous. A simple look at data shows that over the long term, stocks handily beat gold's returns. The lesson? Read the news, but take a good, hard look at the facts and data underlying the information presented.