posted on Sep, 17 2007 @ 11:47 PM
Personally I am almost fully invested with just a bit of cash on the sidelines to buy during dips. The markets are relatively cheap at this point. 15
times next years earnings or so. Because of GAAP accounting there are many expense items that are non-cash but still count against earnings. So the
reality is that the companies are doing much better than they show on paper. Plus they also have near record amounts of cash on the books.
The biggest fear i believe is a weaking dollar. When the dollar gets weak, foreigners can buy American assets very cheaply. That acts as support for
our markets. Like wise foriegn stocks held by Americans also experience increases due to the currency differential.
Lastly in times of higher inflation, corporations make more money while keeping margin % the same. Say something costs $10 and you can sell it for
$20. Lets say inflation hits 50%/ It now cost $15 to make and to keep the same 50% margin you now sell it for $30. You are now making $15 instead of
$10 on each item. Any debt they have also becomes cheaper in rewlative terms. Thus the stock price will rise.
I am of the opinion that you have to stay in the markets at all times. Anybody who has yet to reitre can count on at least a 30 year time horizon. If
you are 20 you better count on at least another 80 years. All 30 year+ periods since the beginning of public markets have boosted greater than 10%
average annual returns for a diversified index portfolio. During that time we have had depressions, recessions, assisinations, world wars, cold war,
etc. You name it we have gone through it, and always emerged better off than we were before. You have to take some lumps sometimes but if you are
trying to build financial wealth, you have to add when you want to sell. It is really that simple.