Back To The Grind...

Ahhh the holidays. Nothing is better than to recharge the battery's and look into the New Year thoughtfully, aggressively, meaningfully, and maybe a bit timidly...

Most of the time, being a financial advisor ranks among the very best careers around. Once you’re over the hump of building an initial client base, few jobs offer the unique combination of being able to make a positive impact on so many lives, the freedom to take lots of time off and an above average income. (in some cases way above average)

And then there are periods like 2008. Your response to those market events was the ultimate measure of discipline and fortitude - as the old cliché goes, it’s periods like 2008 that separate winners from losers.

So now what? The value side of the market, like much of the bond market, is priced for a depression. The growth side of the market is priced for recession. With dividend and other income vehicles yielding in some cases 15% to 20%, and a possible ballooning of the Government fixed-income market(bonds, T-bills, etc.), it seems that applying appropriate risk and re-establishing a long equity position seems justified. (If you have not already done so.)

From their lows, most stocks recovered nicely in December. Yet again proving that accumulating during weakness beats buying into strength, and that market timing is not an intelligent practice. I won't go into company specifics, as you can just as easily open any finance paper and see the performance up till now. It is not industry/sector specific either, however...

Almost everybody, retail investors and institutional investors alike, invests with their eyes in the rear view mirror, favoring what has worked best in the past. But there is a very powerful pattern of mean-reversion in the markets. What has done spectacularly well often takes a rest or it takes a bear market to get back to normal. So the notion of looking at markets and asking what has been hit really hard and, as a consequence, may be priced at really attractive levels is alien to most investors. That goes for highly sophisticated institutional investors as well. This temptation to buy what has done well is the single greatest pitfall in investing, and it is the single reason that a disciplined approach to asset allocation can actually work very, very well.

Something to consider.