Friday, August 7, 2009

Beach Balls

Pathways Advisory Group, Inc.
David L. Williamson, CFP®

Hey, it’s summer! Let’s go to the beach. Look at that beautiful ocean, blue skies, and sea gulls. I’ve got a couple of beach balls. The water’s warm. Let’s wade out and have fun.

Some of you know where I’m going with this. It’s my lame metaphor for the stock market. I trot this one out in client meetings now and then. I know I’ve mentioned it to a few clients more than once, but you are too polite to remind me.

So if you’ve heard it before – sorry.

Well, we each have a big, bright, multi-colored beach ball. If I gently push my ball just one inch below the surface and then release, what happens? It pops up nicely to the surface. If you push yours as far down as you can, using all your muscle, then release, what happens? It flies up and jumps out of the water.

This is what often happens to the stock market. Push stocks far down, they roar back. Since 1926, this has been true. Push down an “excessive” amount, they bounce back royally.

One client (not my favorite client) said “Hey, David, what if you push down right over a sea urchin & pop your damn beach ball? What then, huh?”

I told this wise guy I would kick sand in his face, steal his beach ball, and then run away as fast as I could…

That should teach him to mess with my metaphor.

Enjoy the summer (rally)!!

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