Guest Post: A Subscriber Argues for Optimism

March 22, 2012

Ken Cohen is a NoLoad FundX subscriber and a self-described “FundX cheerleader” who leads a FundX investors group in Texas. In a recent email, he explained that some of the investors in his group are fearful. “Some think that the market has peaked, it’s near its all time high, and for that reason, it’s headed down,” he wrote. “Some think that that all the current and potential problems in the world will crush the market. Some constantly fret about every sell-off or correction.”

But Ken is upbeat about the market and to help his group, he wrote down some of the reasons why he’s an “eternal optimist.” We don’t normally publish submissions but in this case, we thought it might be worth sharing with others in a guest blog post.

Why It Makes Sense to be an Eternal Optimist about the Stock Market

As a “long term” investor (minimum 5+ years) it makes absolutely no sense not to be an eternal optimist about the stock market. When you start getting scared and down on the market, you are much more likely to do something foolish. The #1 foolish thing I’m referring to is this type of thinking: “Things look bad. I’m going to totally get out of the market, and get back in later, when things look better”.

You may laugh, but I personally know several people who did exactly this, and of course, they’ve never gotten back in. They “sold low”, and missed out on the major post-crash rally. Even if you do eventually get back in, what you’ve done is “sell low” and “buy high” —  a great way to throw away a lot of money.

What good can come from fretting about the economy/future? Seriously, how many of you really think that the long term future of the world economy is in doubt. If you do, I have to ask you why. Look at all the major disasters that occurred in the last 100 years: depressions, recessions, wars. Yet the stock market continually goes up, although of course, not in a straight line.

The stock market continually goes up because stock prices are based on earnings, and major companies reinvest profits and continually grow their earnings, for the most part. With the world population continually growing, the market for goods/services continually grows, and let’s face it, most people in the world (particularly the US) like to spend money! Let’s not forget inflation. It’s always going to be there, causing corporate revenues and profits to increase continually, even though the dollars become inflated (making stocks a great hedge against inflation).

What could stop this continual growth in earnings? A reduction in the world population (not likely), the spreading of communism/socialism as was found in Cuba and the former Soviet Union (not likely — just the opposite is happening in the world), or deflation in the world (not likely — just the opposite is happening and is likely to continue happening).

I doubt that a major war would have a lasting negative effect on the world economy. It never has in the past. Many say that WWII is what pulled us out of the Great Depression. I also doubt that the President has enough power to stop the forces of capitalism, even though the voters normally hold the President responsible for the economy/jobs.

So BE POSITIVE, in good times and bad. You are sure to be winners in the long run if you stay in and be patient.

Ken Cohen, NoLoad FundX subscriber

 

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