The stock market has been on a wild ride and tending more to the downside than upside this week. The Dow goes down several hundred points one day, up by approximately the same amount the next day, and so on. Today is shaping up as another disaster to the downside.
Energy stocks are being hit especially hard, as the cost of energy drops dramatically due to a combination of greater supply and lower demand resulting from lower worldwide economic growth.
As for today's market, next week's and the rest of 2014, who knows what will happen? Nobody, that's who and that is what makes the market the market. But over time prices will rise. They always have and always will. It's the risk reward principle at work, pure and simple.
But lest we get overconfident about what will happen in the near term, let's paraphrase what Hollywood mogul Samuel Goldwyn said long ago -- Predictions are dangerous -- especially those about the future. So while my crystal ball may be no better than most of the so-called experts out there, I'm sitting tight and prepared to wait out the market's downward spike and high volatility for one simple reason. Stocks outperform all other assets over the long haul and that's exactly why I invest --- for the long haul. My next move will be to buy more. And although I haven't decided exactly when those buys will occur, I'm pretty sure I won't be selling anything anytime soon.
In fact, several factors form the basis of my long term cheery outlook in this election, market and world affairs season of gloom. Let's try to connect the dots.
Chad's post yesterday about the difference between China and us includes a reference to our nation's "fissiparousness" (having a tendency to divide into groups or factions). Well, that fissiparousness is front and center this election season, as the political candidates and their sponsors attack each other relentlessly. It's absurd but it's American politics in all its ugliness (One especially stupid attack ad accuses an opponent of somehow being responsible for the Ebola outbreak).
I hope and believe that most of our fellow citizens are capable of recognizing the difference between political B.S. and fact. Heaven help us if we're not. It seems that the politicians are all clueless about this American common sense because based on what they say to us, starting with our President, they must believe that we don't have a clue.
They practice their chosen "profession," which more accurately can be called 'feigned public service,' with the sole purpose of getting elected and staying elected. Politics sucks. But I digress.
Let's look at five historical basics (there are more) that underlie my optimism about America's and the stock market's future:
(1) Our "fissiparousness" is a result of our individual freedoms as each and all of us are born with the opportunity to make "our own road as we go." That's a special birthright which is not enjoyed by most people in the world. We're unique. The fact that we continuously argue and debate about the future, and even the present, is based on our self interests and is a good thing, at least up to a point. That's part of being a free American;
(2) Our individual human freedoms, including immigration, have resulted in world leading private sector institutions with world leading productivity based on innovation and entrepreneurship. This world leading economic strength allows us to remain nationally and individually safe and secure, and to offer to one and all free speech and educational opportunities. These freedoms allow us to continuously have "our reach exceed our grasp" and strive to make things better for ourselves, our families, our communities and our nation. As these well founded beliefs are the hallmarks of our free and prosperous society, we must never lose our faith in America's future. We are the "city on a hill."
(3) We have an abundance of untapped North American energy resources which, due to our technological leadership and entrepreneurs, are there for the taking. All we need to do is get the politicians off their petards and the next several decades will be America's best days.
Energy independence can be ours, and energy prices are coming down rapidly. Our nation's and world's security will be enhanced as North American energy independence becomes a reality and as our economy outgrows those of the rest of the world, which it is now doing and will continue to do.
An abundance of North American energy assets (including those of the U.S., Canada and Mexico), contributing to low inflation, lower import prices and a strong dollar, will combine to make for a low interest rate environment and stronger U.S. domestic economic growth. That translates into relatively low, albeit gradually increasing, interest rates for a long time. And that in turn means our consumers will have more spending money (lower energy prices and lower import prices due to the stronger dollar) and more high paying jobs as the economy grows and our energy assets are developed.
(4) World peace won't come in our lifetime, but it never has in all of human history. That said, we are the strongest nation in the world, both economically and militarily. And the kindest and most moral one as well. And we're also the freest people in the world. Those things will never change, despite our "fissiparousness." We're the world's best "road builders."
And that's because we're free Americans, each and all endowed with the individual right to pursue life, liberty and happiness as we choose -- to make our road as we go. That's our unique and incomparable strength.
(5) Finally, the market will rise over time. That's a result of all of the above.
Summing Up
We the People are a blessed people. We are free to do as we choose and free to say what we believe.
There is no guaranteed road of the future.
We will continue to make the road as we go, so let's have fun doing just that.
And let's very much look forward with eager anticipation to the end of this market "volatility" and fall's election season.
Because it's more fun when markets rise and because politics really does suck.
That's my take.
Thanks. Bob.
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